Whatever your marketing budget may be, investing your hard-earned capital in strategies which may not even prove to be beneficial for your business may deem to be pointless. Performance Marketing aims to solve this very problem.
With so many online media channels and ever-increasing competition, Performance Marketing helps you invest money only in those channels that perform.
What is Performance Marketing?
Performance Marketing is a broad term that falls under the large umbrella of Digital Marketing and Advertising. It is primarily focused on the measurable outcomes of a particular marketing or advertising campaign.
Due to its measurable and result-oriented attributes, Performance Marketing has now become a prominent approach to running marketing campaigns.
In 2021, marketers around the world invested more than $450 billion in digital advertising. According to a report by Statista, this amount is expected to increase to more than $600 billion by 2023-24.
How does it work?
In Performance Marketing, advertisers usually associate and engage with other advertising agencies or publishing companies in order to create, design and publish adverts for their brand on multiple digital marketing and online advertising platforms such as Facebook, Instagram, TikTok, Pinterest, etc. These ad campaigns may include images, videos, embedded content, and much more.
Now, rather than paying for these advertisements in a traditional way, advertisers actually pay according to the performance of the advertisements, by measuring the number of shares, clicks, etc.
Let us take a look.
How is Performance Marketing measured?
As mentioned above, advertisers pay according to how an advert performs once it is published online. Here are a few methods of calculating it:
1. Cost Per Click (CPC)
In CPC, advertisers pay according to the number of times their advert is clicked on. This is an effective approach to generate more traffic toward your brand.
2. Cost Per Impression (CPM)
Here, impressions basically refer to the number of views of your advertisement. In CPM, the advertiser pays for every thousand impressions. For instance, if your advert gets 20 thousand views and total cost of a campaign is $1000 , then-
CPM = 1000 × cost / impressions
CPM = 1000× 1000$/20000 = $50
3. Cost Per Sale (CPS)
Frequently used in Affiliate Marketing, in CPS, the advertiser pays for every sale that was acquired through an ad.
4. Cost Per Lead (CPL)
In CPL, you pay when someone signs up for subscriptions, webinars, newsletters, etc. This helps in lead generation through which you can follow up with your prospects and derive sales.
5. Cost Per Acquisition (CPA)
CPA is akin to CPL (Cost Per Lead) and CPS (Cost Per Sale) but is a more generalized term. Here, advertisers pay when consumers performed particular actions such as visiting their website, giving their contact details or email, etc.
What are the main channels of Performance Marketing?
Advertisements may perform differently on different Performance Marketing channels. Some channels may derive more traffic as compared to others.
Let us take a look at some of the main channels of Performance Marketing.
1. Affiliate Marketing
Affiliate Marketing refers to an advertising model which involves promoting a brand’s products in return for a fixed commission for each sale completed.
When it comes to Performance Marketing, advertisers affiliate themselves with advertisement publishers and outsource their advertising campaigns to advertising agencies. In return, these advertising agencies get a fixed commission in exchange for each measured result (Cost Per Click, Cost Per Sale, Cost Per Impression)
2. Native Advertising
This type of advertising seamlessly coordinates with the visuals and functions of the media platform on which they appear. Advertisements appear ‘natively’ on your website.
For instance, if you search for CRM (Customer Relationship Management), your SERP (Search Engine Results Page) will automatically show ads of platforms which provide CRM services or SaaS.
3. Social Media Marketing or Advertising
With a growing number of people spending more and more time on social media sites, Social Media Marketing is steadily replacing traditional Marketing and Advertising campaigns.
Here, advertisers pay according to advert performances that are published on social media sites. Two main examples of such are- Facebook Advertising and Instagram Advertising.
4. Content Marketing
Content Marketing helps you to showcase deep knowledge to your target audience about your product/service or niche. It is also an effective approach to making your audience aware of your product or service. This content can be in form of blogs, whitepapers, case studies, ebooks, etc.
For instance, if you are a SaaS company, you can post content on company-related services such as Customer Relationship Management (CRM), Cloud Services, etc.
Why should you opt for Performance Marketing?
As the Digital Marketing industry grows rapidly, Performance Marketing has proven to have a high ability to scale your business, helping it to grow and flourish to its full potential.
It helps companies to track results which helps them make calculated and informed advertising decisions in the future.
Here are its 3 main benefits:
1. You can track the performance of your advertisement
Trackability is the most significant and distinctive attribute of Performance Marketing. As mentioned above, tracking the performance of your adverts can help you analyze where you should invest your capital to get optimal results.
2. Increases brand awareness
Posting advertisements of your brand on various social media platforms helps you to make your target audience aware of your brand. Not just your target audience, but this can also help to reach new audiences and increase your website traffic.
3. Low risk- high returns
As your affiliates get their commission only after a favorable action takes place, it results in a high ROI (Return on Investment) and low CPA (Cost Per Acquisition) rate.
Summing it up
It is no surprise that the future of Digital Marketing looks bright and promising year by year.
Performance Marketing is an ingenious and prolific way to grow your brand by outsourcing it to professionals, whether or not you might be on a tight budget. Not only does it help you reach your target audience, but it also helps you to understand the market and where your brand stands.
It not only helps your business flourish and expand but also helps you make significant connections and engage with your audience.
