Performance Marketing Explained

Performance marketing is not a new concept, but it has gained increased popularity in recent years with the growth of digital advertising and the availability of more advanced tracking and measurement tools to driving specific actions and achieving measurable results. Performance marketing has a wide range of online advertising channels, including search engine marketing, display advertising, affiliate marketing, and social media advertising. These channels allow advertisers to reach highly targeted audiences and track their advertising performance in real-time.

Performance marketing and traditional marketing are two different approaches to advertising that have distinct characteristics and goals. Here are some key differences between the two:

1. Performance marketing is highly measurable, with campaigns optimized based on specific performance metrics such as clicks, conversions, and return on ad spend (ROAS). Traditional marketing, on the other hand, can be more difficult to measure, with success often evaluated based on less specific metrics such as brand awareness and customer engagement.
2. Performance marketing campaigns are typically cost-per-action (CPA) or cost-per-click (CPC), meaning that advertisers only pay when a specific action is taken, such as a click or conversion. Traditional marketing, such as TV or print ads, is often cost-per-impression (CPM), meaning that advertisers pay for the number of times their ad is viewed.
3. Performance marketing is highly targeted, with campaigns designed to reach specific audiences based on demographics, interests, and behaviors. Traditional marketing, on the other hand, often relies on mass media channels to reach a broad audience.
4. Performance marketing campaigns can be quickly adjusted and optimized based on real-time performance data. Traditional marketing campaigns, on the other hand, often require a longer lead time and are more difficult to adjust once they are launched.

What is performance marketing?

Performance marketing is a type of digital marketing where advertisers pay for specific actions taken by consumers, such as clicks, leads, sales, or downloads. In performance marketing, advertisers work with affiliates, influencers, or advertising networks, and pay them only when a specific action is completed, rather than paying for ad impressions or clicks.

Performance marketing is highly measurable, allowing advertisers to track and optimize their campaigns based on the results they generate. Advertisers can set specific goals and target audiences, and pay for only the desired results.

Examples of performance marketing campaigns include affiliate marketing, influencer marketing, pay-per-click advertising (PPC), email marketing, and social media advertising. The success of performance marketing campaigns is typically measured by metrics such as conversion rate, return on investment (ROI), cost per acquisition (CPA), or customer lifetime value (CLV).

Performance marketing purpose and goals

The primary purpose of performance marketing is to help businesses achieve their marketing goals more efficiently by focusing on measurable outcomes. By paying only for specific actions that align with their business objectives, companies can improve their return on investment (ROI) and maximize their advertising budgets:

• Increase sales: Performance marketing can help businesses increase their revenue by targeting consumers who are more likely to make a purchase. By paying for only the desired results, businesses can optimize their campaigns to drive more sales.
• Generate leads: Performance marketing can also be used to generate leads by encouraging consumers to sign up for a newsletter, fill out a form, or request more information about a product or service.
• Boost website traffic: Performance marketing can drive more traffic to a website by targeting specific audiences who are more likely to be interested in a company’s products or services.
• Improve brand awareness: Performance marketing can be used to improve brand awareness by targeting consumers who are not yet familiar with a company’s products or services.
• Increase customer engagement: Performance marketing can help businesses engage with their customers by encouraging them to take specific actions, such as downloading an app, following a social media account, or leaving a product review.

Types of performance marketing

There are several types of performance marketing that businesses can use to achieve their marketing goals. Each type of performance marketing focuses on specific actions or outcomes that advertisers pay for, rather than simply paying for impressions or clicks:

1. Pay-per-Click (PPC) advertising

PPC advertising is a type of digital advertising in which advertisers pay each time a user clicks on one of their ads. These ads are typically displayed on search engine results pages (SERPs) or social media platforms, and are targeted based on specific keywords, interests, or behaviors.

Performance marketing is used to optimize these campaigns based on specific performance metrics, such as the cost per click (CPC), click-through rate (CTR), or conversion rate. By measuring these metrics and adjusting their campaigns accordingly, advertisers can improve their conversion rates and ROI, while reducing the cost per click or acquisition.

One of the key benefits of using performance marketing in PPC advertising is that it allows advertisers to track and measure the effectiveness of their campaigns in real-time. By using tracking and measurement tools, advertisers can monitor the performance of their ads, identify which keywords or targeting options are driving the most conversions, and adjust their campaigns accordingly.

Performance marketing is also used to test and optimize ad creatives, landing pages, and targeting options in PPC advertising. By conducting A/B tests and analyzing the performance of different ad variations, advertisers can improve their click-through rates and conversion rates, while reducing the cost per click or acquisition.

2. Cost-per-Action (CPA) advertising

Performance marketing and cost-per-action (CPA) advertising are closely related, as CPA is a pricing model used in performance marketing.

CPA is a type of digital advertising pricing model in which the advertiser pays a fee each time a specific action is taken, such as a sale, lead, or download. This type of pricing model is commonly used in performance marketing, as it allows advertisers to pay for measurable results rather than just clicks or impressions.

In CPA advertising, the advertiser sets a specific goal or action that they want users to take, and they only pay when that action is completed. For example, if an advertiser wants users to sign up for a free trial of their product, they would only pay the publisher or affiliate if a user signs up for the trial.

CPA advertising is typically used in conjunction with affiliate marketing or other performance marketing strategies. Advertisers work with affiliates to promote their products or services, and they agree to pay a fee for each conversion that the affiliate generates.

Overall, CPA advertising is a popular pricing model in performance marketing because it allows advertisers to track and measure the effectiveness of their campaigns and pay only for the results they achieve.

3. Retargeting advertising

Retargeting is a common strategy used in performance marketing to target users who have previously interacted with a brand or visited a website, but did not complete a desired action. Retargeting allows advertisers to reach out to these users with personalized ads and offers, encouraging them to return and complete the desired action.

Retargeting is often used in conjunction with other performance marketing strategies, such as search engine marketing, social media advertising, and display advertising. For example, a user who visited a website but did not complete a purchase may see retargeted ads on social media or display ads on other websites, reminding them of the product they were interested in and encouraging them to return to complete the purchase.

Retargeting works by placing a tracking pixel on a website, which allows advertisers to track user behavior and create custom audiences of users who have interacted with their brand or website. These custom audiences can then be used to create retargeting campaigns that target these specific users with personalized ads and offers.

Overall, retargeting is an effective strategy in performance marketing because it allows advertisers to target users who have already shown interest in their brand or product, increasing the likelihood of conversion and improving ROI. By combining retargeting with other performance marketing channels, marketers can create a comprehensive and effective digital marketing strategy.

4. Email marketing

Email marketing is a type of digital marketing in which advertisers send promotional messages or newsletters to their subscribers via email. These messages are typically targeted based on specific segments, interests, or behaviors, and may include calls-to-action (CTAs) that drive specific actions, such as website visits, purchases, or sign-ups.

Performance marketing is used to optimize email marketing campaigns based on specific performance metrics, such as the open rate, click-through rate (CTR), conversion rate, or revenue per email. By measuring these metrics and adjusting their campaigns accordingly, advertisers can improve their conversion rates and ROI, while reducing the cost per acquisition.

One of the key benefits of using performance marketing in email marketing is that it allows advertisers to track and measure the effectiveness of their campaigns in real-time. By using tracking and measurement tools, advertisers can monitor the performance of their emails, identify which subject lines, CTAs, or segments are driving the most conversions, and adjust their campaigns accordingly.

Performance marketing is also used to test and optimize email creatives, subject lines, and CTAs. By conducting A/B tests and analyzing the performance of different variations, advertisers can improve their open rates and click-through rates, while reducing the bounce rate and unsubscribe rate.

5. Affiliate marketing

In affiliate marketing, advertisers pay affiliates (publishers, bloggers, influencers, etc.) a commission for driving specific actions, such as clicks, leads, or sales. Performance marketing is used to optimize these campaigns based on specific performance metrics, such as the cost per click (CPC), cost per lead (CPL), or cost per sale (CPS).

One of the key benefits of using performance marketing in affiliate marketing is that it allows advertisers to optimize their campaigns for maximum results. By measuring specific performance metrics and adjusting their campaigns accordingly, advertisers can improve their conversion rates and ROI, while reducing the cost per action.

Performance marketing is also used to track and measure the effectiveness of affiliate marketing campaigns. By using tracking links and cookies, advertisers can track which affiliates are driving the most traffic and conversions, and adjust their commission rates and partnerships accordingly.

6. Influencer marketing

In influencer marketing, advertisers collaborate with influencers (social media personalities, bloggers, vloggers, etc.) to promote their products or services to their audience. Influencers are typically compensated with a fee or commission based on the performance of the campaign.

Performance marketing is used to optimize these campaigns based on specific performance metrics, such as the cost per click (CPC), cost per engagement (CPE), or cost per conversion (CPC). By measuring these metrics and adjusting their campaigns accordingly, advertisers can improve their ROI and ensure that they are getting the most value from their influencer partnerships.

Performance marketing can also be used to track and measure the effectiveness of influencer marketing campaigns. By using tracking links and cookies, advertisers can track which influencers are driving the most traffic and conversions, and adjust their partnerships and compensation accordingly.

By measuring specific performance metrics and adjusting their campaigns accordingly, advertisers can ensure that they are getting the most value from their influencer partnerships and achieving their marketing goals.

What are performance marketing channels?

Performance marketing channels are the different types of digital channels that are used to execute and optimize performance marketing campaigns. These channels are often used in combination with each other to create a multi-channel performance marketing strategy that maximizes reach and conversion potential:

• Search Engine Marketing (SEM): SEM includes paid search campaigns, such as Google Ads and Bing Ads, which display ads on search engine results pages based on specific keywords.
• Social Media Advertising: Social media advertising includes paid ads on popular social media platforms such as Facebook, Instagram, Twitter, LinkedIn, and Snapchat.
• Display Advertising: Display advertising includes banner ads, pop-up ads, and other forms of digital ads that appear on websites and mobile apps.
• Email Marketing: Email marketing involves sending targeted emails to a list of subscribers to promote a product or service and encourage conversions.
• Affiliate Marketing: Affiliate marketing involves partnering with affiliates or publishers who promote your product or service to their audience in exchange for a commission on sales or leads.
• Retargeting: Retargeting involves targeting users who have previously interacted with your brand or website with personalized ads to encourage them to return and complete a desired action.
• Mobile Advertising: Mobile advertising includes ads that are displayed on mobile devices, such as in-app ads or mobile web banners.

Performance marketing platforms

There are several performance marketing platforms that businesses can use to execute and manage their performance marketing campaigns. These platforms provide advertisers with the tools and resources needed to create and track campaigns, as well as access to a network of publishers or affiliates who can promote their offers:

1. Google Ads
A pay-per-click advertising platform that allows businesses to display ads on Google’s search engine results pages and partner websites. Advertisers can target specific keywords, locations, and demographics to reach their desired audience.

2. Facebook Ads
A platform that allows businesses to create and display ads on Facebook and Instagram. Advertisers can target specific audiences based on demographics, interests, behaviors, and more.

3. Affiliate Networks
Affiliate networks like Commission Junction, ShareASale, and Rakuten Advertising connect advertisers with a network of publishers who promote their offers. Advertisers pay a commission to the publisher for each sale or conversion that is generated through their referral.

4. Programmatic Advertising Platforms
Platforms like AdRoll and The Trade Desk use data and algorithms to automate the buying and selling of digital advertising. Advertisers can target specific audiences across multiple channels and devices, and optimize campaigns based on real-time data.

5. Email Marketing Platforms
Platforms like Mailchimp and Constant Contact allow businesses to create and send email campaigns to their subscribers. Advertisers can track opens, clicks, and conversions, and optimize campaigns based on subscriber behavior.

Performance marketing tools

There are many performance marketing tools that businesses can use to create, execute, and optimize their performance marketing campaigns. These tools help advertisers track performance, manage budgets, and make data-driven decisions to improve campaign results:

• Google Analytics: Google Analytics is a web analytics tool that allows businesses to track website traffic, user behavior, and conversion rates. Advertisers can use this data to optimize their campaigns based on user behavior.
• SEMRush: SEMRush is an SEO and digital marketing tool that allows businesses to track their search engine rankings, conduct keyword research, and analyze their competitors. Advertisers can use this data to improve their search engine optimization (SEO) and pay-per-click (PPC) campaigns.
• A/B Testing Tools: A/B testing tools like Optimizely and Google Optimize allow businesses to test different variations of their campaigns to see which version performs better. Advertisers can use this data to optimize their campaigns for better performance.
• Heat Mapping Tools: Heat mapping tools like Crazy Egg and Hotjar allow businesses to track user behavior on their website, including where users click and how far they scroll. Advertisers can use this data to improve website design and user experience.
• Conversion Rate Optimization (CRO) Tools: CRO tools like Unbounce and ConvertFlow allow businesses to create landing pages and forms that are optimized for conversion. Advertisers can use this data to improve their conversion rates and generate more leads or sales.

Performance marketing strategies

Performance marketing strategies are focused on achieving specific outcomes, such as clicks, leads, or sales, rather than simply increasing brand awareness or website traffic:

• Audience Targeting: Involves identifying and targeting specific audiences who are most likely to be interested in a product or service. Advertisers can use data such as demographics, interests, and behaviors to target their campaigns more effectively.
• Conversion Rate Optimization: Involves optimizing landing pages, forms, and other elements of a website to increase the likelihood of conversion. Advertisers can use A/B testing and other techniques to improve the user experience and increase conversion rates.
• Remarketing: Involves targeting users who have already interacted with a brand or visited their website, but have not yet converted. Advertisers can use targeted ads or email campaigns to bring these users back to their website and encourage them to convert.
• Influencer Marketing: Involves partnering with social media influencers to promote a brand or product to their followers. Advertisers can work with influencers to create content or provide discounts or other incentives to their followers to encourage conversions.
• Mobile Optimization: Involves ensuring that a website or landing page is optimized for mobile devices, such as smartphones and tablets. With more people using mobile devices to browse the web and make purchases, mobile optimization is becoming increasingly important for performance marketing.

How to leverage performance marketing?

Leveraging performance marketing requires a strategic and data-driven approach. By following these tips, you can create effective campaigns that drive results and improve ROI:

• Set clear goals and KPIs: Clearly define the desired outcome of each campaign, such as clicks, leads, or sales, and set specific targets for each goal. This will help to focus the campaign and track its success.
• Use data to make informed decisions: Collect and analyze data from campaigns to identify what’s working and what’s not. Use this information to optimize campaigns, adjust bids, and make data-driven decisions.
• Test and experiment: Test different ad copy, landing pages, and targeting options to identify the most effective combination. Use A/B testing and other techniques to improve conversion rates and overall campaign performance.
• Identify your target audience: Identify your target audience and create buyer personas to understand their needs and interests. This will help you create targeted campaigns that resonate with your audience and increase the likelihood of conversion.
• Be Relevant: Make sure that ads and landing pages are relevant to the user’s search query or interests. This will increase the likelihood of a conversion and improve the overall user experience.
• Choose the right performance marketing channels: Choose the performance marketing channels that best align with your goals and target audience. For example, if you’re targeting a younger demographic, social media advertising may be more effective than search engine marketing.
• Focus on customer retention: Don’t forget about customer retention! Retargeting and email marketing can be effective strategies for retaining customers and increasing lifetime value.
• Monitor budgets: Monitor campaign budgets and adjust bids or targeting options as needed to ensure that budgets are used effectively and efficiently.
• Work with trusted partners: Work with reputable affiliates or publishers who have a proven track record of success. This will help to ensure that campaigns are promoted to the right audiences and that conversions are legitimate.
• Stay Up-to-Date with trends and best practices: Stay informed about the latest trends and best practices in performance marketing to stay ahead of the competition and ensure that campaigns are optimized for maximum success.

Performance marketing metrics

Performance marketing metrics are used to measure the effectiveness and success of performance marketing campaigns:

• Clicks: Clicks refer to the number of times that an ad is clicked on by users. This metric is used to measure the effectiveness of ad targeting and relevance.
• Impressions: Impressions refer to the number of times that an ad is displayed to users. This metric is used to measure the reach of a campaign and to optimize targeting.
• Cost-per-Click (CPC): CPC refers to the cost of each click on an ad. This metric is used to measure the efficiency of a campaign and to adjust bidding strategies.
• Cost-per-Impression (CPM): CPM refers to the cost of each impression of an ad. This metric is used to measure the cost-effectiveness of a campaign and to optimize targeting.
• Conversion Rate: Conversion rate refers to the percentage of users who take a desired action, such as making a purchase or filling out a form, after clicking on an ad. This metric is used to measure the effectiveness of a campaign and to optimize landing pages and user experience.
• Return on Ad Spend (ROAS): ROAS refers to the amount of revenue generated for each dollar spent on advertising. This metric is used to measure the profitability of a campaign and to adjust bidding strategies.
• Customer Lifetime Value (CLV): CLV refers to the total amount of revenue that a customer is expected to generate over their lifetime. This metric is used to measure the long-term profitability of a campaign and to optimize targeting and retention strategies.

Performance marketing benchmarks

Performance marketing benchmarks can vary depending on the industry, target audience, and advertising platform. Here are some general benchmarks for common performance marketing metrics:

• Click-Through Rate (CTR): The average CTR for search ads is around 2-3%, while the average CTR for display ads is around 0.05%. Source: WordStream Google Ads Benchmarks.
• Cost-per-Click (CPC): The average CPC for Google Ads varies depending on the industry, but generally ranges from $1-$2. Source: WordStream Google Ads Benchmarks.
• Conversion Rate: The average conversion rate for ecommerce websites is around 2-3%, while the average conversion rate for lead generation websites is around 10%. Source: HubSpot Marketing Statistics report.
• Return on Ad Spend (ROAS): A good ROAS for ecommerce businesses is generally around 4-5x, meaning that for every dollar spent on advertising, the business generates $4-$5 in revenue. Source: eMarketer Digital Ad Spending 2021.
• Customer Acquisition Cost (CAC): The average CAC varies depending on the industry, but generally ranges from $50-$100. Source: MarketingSherpa Email Marketing Benchmark Report.

Performance marketing stats and trends

Here are some performance marketing statistics and trends to keep in mind:

• Mobile Optimization: With more people using their mobile devices to browse the web and make purchases, mobile optimization is becoming increasingly important for performance marketing. In fact, according to Google, 70% of all web traffic comes from mobile devices.
• Social Media Advertising: Growing in popularity as a form of performance marketing, with spending on social media ads expected to reach $102 billion by 2023.
• Video Advertising: Becoming more popular, with spending on video ads expected to reach $22 billion by 2023. In fact, video ads have been shown to have higher engagement rates and lower cost-per-click (CPC) than other forms of digital advertising.
• Programmatic Advertising: Uses automated systems to buy and optimize ad inventory, is becoming more common in performance marketing. In fact, programmatic advertising is expected to account for 88% of all display ad spending in the US by 2021.
• Influencer Marketing: Growing in popularity, with spending on influencer marketing expected to reach $15 billion by 2022. This trend is being driven by the growing use of social media platforms and the increasing importance of authenticity and transparency in marketing.
• Data Privacy: Data privacy concerns are becoming more important in performance marketing, with regulations such as the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA) requiring companies to be more transparent about their data collection and use practices.

The future of performance marketing

The future of performance marketing is expected to continue evolving as technology advances and consumer behavior changes. Here are some potential trends and developments that could shape the future of performance marketing:

• Increased use of artificial intelligence and machine learning: AI and machine learning technologies are already being used in performance marketing to optimize campaigns and personalize ad experiences. In the future, these technologies are expected to become even more sophisticated, allowing for more precise targeting and better campaign optimization.
• Greater emphasis on data privacy and security: With growing concerns about data privacy and security, performance marketers will need to ensure that they are collecting and using consumer data in a responsible and transparent manner.
• Growing importance of voice search: As more consumers use voice assistants like Alexa and Siri to search for information and make purchases, performance marketers will need to adapt their strategies to optimize for voice search.
• Increased focus on omnichannel marketing: As consumers move seamlessly between different channels and devices, performance marketers will need to develop campaigns that provide a consistent and personalized experience across all touchpoints.
• Rise of video advertising: Video advertising is already a popular format for performance marketing, and is expected to continue growing in popularity as more consumers turn to video for entertainment and information.

More information

Rock Content: The Complete Guide to Performance Marketing Strategies for Your Brand

Firepush: A Simple Guide to Performance Marketing

Google Ads Benchmark Tool: Google Ads provides a benchmark tool that allows you to see how your ad campaigns are performing compared to industry benchmarks.

Facebook Ads Benchmark Tool: Facebook Ads also provides a benchmark tool that allows you to see how your ad campaigns are performing compared to industry benchmarks.

WordStream Benchmark Report: WordStream, a digital advertising platform, publishes an annual benchmark report that includes industry benchmarks for Google Ads and Facebook Ads.

HubSpot Marketing Statistics: HubSpot, a marketing platform, provides a collection of marketing statistics that includes benchmarks for email marketing, social media advertising, and more.

eMarketer Reports: eMarketer, a market research company, provides reports on digital advertising and ecommerce trends that include benchmarks for various performance marketing metrics.

MarketingSherpa Benchmark Reports: MarketingSherpa, a marketing research company, provides benchmark reports that include data on email marketing, social media advertising, and more.