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What is Performance Marketing – A Know How



The world of advertising and marketing is constantly on a churn. Marketers are looking for newer ways to attract, imbibe & plan strategies that will help garner even more ad spends. The traditional methods of marketing allow us certain things but adapting to a changing technology is inevitable. That is where the traditional models of advertising are giving away to newer forms. One such marketing tool/model is termed performance marketing.

What is Performance Marketing?

Performance marketing is when you do not have to pay for an estimated amount but rather for the desired response of action such as a click, sale, or lead. This form of collecting money post generation of interest or response is termed Performance Marketing.

For example, once you click or subscribe to any given ad, only then does the publisher gets paid for it. This is what is effectively called Performance Marketing.

In this era of digital boom, Performance marketing is the tool that marketers are betting on. Creating an interesting mix and array of options, it is considered a newer and more rational way of addressing marketing spends than the traditional methods.

In traditional advertising, a brand would pay for an ad space irrespective of the performance of the ad and the payout would be fixed whereas, with Performance marketing, the advertisers would only pay when there are results arising out of a particular campaign.

Types of Performance Marketing

Performance-based Marketing can be categorized into:

Goal-Based Campaigns:

This is when the advertiser has set a specific goal for the campaign. The numbers of leads generated or the amount of sales made through it are the criteria’s that are considered as the parameters.

Action Based Campaigns:

This is when the advertisers pay for a specific action taken by the customer such as a click, sign-up or a sale. It can also be a lead generation that will surmount to payment. To measure performance-based marketing, one needs to know the parameters on which it is based. 

Parameters of measurement in Performance-based Marketing:

Cost per click– Payment happens when a user clicks your ad.

Cost per mille – Payment happens when an ad reaches 1000 impressions. It doesn’t require taking any specific action though.

Lifetime value– Revenue you generate from a customer’s ongoing activity. Requires predictive analysis.

Conversions– Payment when a prospect turns into a customer.

Click-through rates– Total clicks your ad got through impressions leads to a pay.

Channels/Platforms Used for Performance-based Marketing:

Social Media Marketing:  The commonly monitored metrics for social media marketing are clicks, likes, shares, comments, checkouts & sales respectively.

Native Advertising: The common metric used is pay per impression or pay per click.

Sponsored Content: The common metric used is the cost per click, cost per mille & cost per action.

Affiliate Marketing: The common metric used is registrations here.

Search Engine Marketing: The common metric used is organic and paid search keywords.

What type of companies delve into Performance-based Marketing:

Advertisers, merchants, retailers, networks, publishers, agencies and solution providers understand and implement practices that are directly related to Performance-based Marketing.

Benefits of Performance Marketing:

Easy analytics and data tracking- Track your advertising performance and monitor and adjust your campaigns accordingly.

ROI-driven marketing- Adjust and reallocate your budget as per real-time data and need.  

Diversification of revenue streams- Effective spread out of budget made possible.

Tapping new and hard-to-reach audiences- More effective than traditional methods.

Pay only for results- Fits the rationale of today’s marketer.

How to effectively plan a performance marketing strategy

Identifying your audience:

Knowing who your target audience is will immensely help you understand what sort of habitual wondering they do digitally so as to plan an effective marketing mix for them.

Choosing the right platform/channel: If you are a nascent marketer or a young brand, it makes more sense to do the job yourself rather than hiring an agency. Thus, choosing the right platform for right messaging is the utmost required criteria for the same. Choose the platform that addresses your brand perfectly and also design your campaigns as per the aspiration and usability of the users whom you are targeting. The good part about performance based marketing being that you will be able to track and assess instantly how your campaign is reacting and make changes accordingly.


Tying up with a digital agency:

Performance marketing being a specialized domain, calls for an industry expertise. A digital marketing agency that understands the pulse of the audience is an utmost need if you are looking for results instantaneously. The agency will also help you decide not only campaigns or ad spends, but how to re-direct the budget to a specified area where there’s more traffic or reach for your brand. Measuring results can be more cost effective when you know exactly how a model is sustaining or reacting to your advertising content. Digital agency experts will help you understand and delve more into analytics that measure and spend budgets accordingly.

How much will performance marketing cost you?

It is difficult to delve into numbers of how much it will cost exactly but if we compare it with traditional forms of advertising spend, it would come out to be much lesser. 43% spend online means there are plethora of opportunities for digital marketers to walk that extra mile with performance based marketing. Also, the share of pie versus traditional advertising is significantly increasing every year, thus emphasizing our need to shift. The main advantage being the results that you can directly see through, and that too instantaneously.

Are you ready for, pay as you go marketing approach is something that you need to ask yourself? If you are a marketer who is already established and looking for newer audiences, Performance Marketing can be your key.  If you are a newer entrant into the world of advertising, then it is imperative that you used metrics that involve Performance Marketing as it is the way to find and retain newer audiences who are digitally scouring all over the internet.

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