What is Performance Marketing?

What is Performance Marketing?

Digital marketing is an umbrella term for all the strategies used to market products and services online. Campaigns can appear anywhere including laptops, computers, phones, tablets, etc., and can take many forms—text, videos, ads, social media posts, and email, to name a few. 

The massive success of digital marketing translated into $521.02 billion in digital advertising spending in 2021. Besides time-proven channels such as search engine marketing and social media advertising, digital marketers are also allocating their budget to new forms of online marketing, the most remarkable of which is performance marketing.

Here, let’s look further into performance marketing: how it works, why you should use it, and what channels are most likely to deliver significant results. 

In this Guide:

A Complete Guide to Performance Marketing 

Performance marketing is exactly as it sounds—marketing based on performance. It is a type of digital marketing whereby brands pay a marketing service provider, whether an affiliate or a company, when specific objectives are met or specific actions are completed e.g. a click, sale, or lead. 

What makes performance marketing different is that it presents a win-win opportunity for the involved parties. It gives power to the brand because they only pay for the service after the set goals are achieved, not just for the effort exerted—not even the upfront fee for ad space. It guarantees that your marketing budget is spent only on successful campaigns. Marketers, in return, use data to make decisions, create highly-targeted campaigns, and deliver a higher success rate overall. 

Performance Marketing in 2022: Statistics 

Digital marketing is on the heels of the major shift in consumer behavior which resulted in the meteoric rise of e-commerce and the reallocation of ad budget toward digital formats. As such, performance-based advertising will play a large part in marketing strategies in 2022. 

In a 2020 survey, 69% of respondents reported that social media is the most effective channel for performance marketing. It is followed by search engine marketing (49%), e-commerce marketplace advertising (37%), partnerships/sponsorships (34%), and display advertising (27%). 

More than 16% of e-commerce sales in 2017 are attributed to performance marketing. It goes to show that this strategy isn’t slowing down any time soon and is likely to take a larger share of the projected $876 billion in digital advertising spending by 2026. 

• In a 2018 survey of 2,300 marketers in the US, it is revealed that 62% of their marketing budget is spent on performance marketing. Of the 2,300, 128 said that all of their marketing budgets were going straight to performance. 

All these figures show that performance marketing isn’t going away any time soon—not when brands are reaping from its benefits. Businesses allocating much of their budget to this approach is an indication of how effective it can be in delivering results. If you’re looking to tap into this relatively new form of marketing, working with a reliable digital marketer can provide you with solutions tailored to your brand.

How to Get Started with Performance Marketing 

A crucial thing to know about performance marketing is that it’s a broad term under which several digital marketing strategies fall—that is as long as the pay is based on performance or tangible results. It works when a brand connects with either an agency or an affiliate to create campaigns on various channels, including but not limited to the following. 

1. Social Media 

Social media channels such as Facebook, Instagram, Twitter, Linkedin, and TikTok offer various marketing opportunities beyond sponsored content. Users can share your organic content, widening your reach far beyond the original post. You can also tap influencers in your industry to promote your brand, offer discounts, or host a giveaway, and compensate them based on the results. 

2. Affiliate Marketing 

Affiliate marketing is a form of performance marketing where brands place ads on other sites relevant to their products/services. It potentially gives them exposure to an entirely new audience and an opportunity to drive them to their site. 

3. Sponsored Content 

Sponsored content involves working with influencers or other brands to advertise your business. Aside from monetary compensation, the payout can also be in the form of free products or services. This strategy is most effective when you work with prominent figures or companies that target your audience and already discuss topics relevant to your brand. 

4. Native Advertising 

Native ads look very much like organic content, except that it is tagged as sponsored content. In other words, it matches the form and function of the rest of the content in the medium it is published on—structural, visual, and tonal-wise. It is designed to be as unobtrusive as possible and the idea is to promote your brand more naturally than with banner ads. 

5. Search Engine Marketing 

Keyword research is at the core of any SEM strategy. It allows you to understand the language of your target customers and bid on keywords they use when searching for your products, services, and content. It then involves constant analyzing, testing, and monitoring to prioritize the keywords that bring traffic to your site and ultimately, conversion. You can 

6. Content Marketing 

Content marketing is a cost-effective strategy—it costs 62% less than outbound marketing and generates 3x as many leads. It works because the objective here is to educate your audience by providing them with valuable information and putting your brand in context. For example, as a clothing brand, you may publish a series of content including blog posts, videos, etc. about style guides and trends, and include links to or feature products that you sell. 

Traditionally, performance marketing is only tracked and measured by CPC (cost-per-click). But, today, it goes beyond engagement or CTR (click-through rates) and includes other metrics such as impressions or views on a CPM (cost-per-thousand).

How to Measure Performance Marketing

The success of any digital marketing strategy can be measured by ROI (return on investment). You can track, measure, and analyze your campaign performance against preset KPIs, and from there, optimize your campaigns for better results. 

A wide range of performance tracking tools are available to generate data and insights based on the key metrics often used in performance marketing: 

  • CPM – cost per thousand 
  • CPC – cost per click 
  • CTR – clickthrough rates 
  • Conversions – e.g. complete an online purchase, sign-up for newsletters, or contact your business. 

Conclusion

With the future of digital marketing looking brighter each year, performance marketing can help scale your advertising efforts. All these while making sure that your marketing budget is spent on campaigns that deliver tangible results—and the benefits just don’t stop there. 

When done successfully, performance marketing can help expand your reach, diversify your audience, and gather data that will grow your business exponentially and in ways that you will otherwise not achieve with other strategies. 

Start your performance marketing efforts by finding the right partner to help you set clear and realistic goals, and plan the best strategy that delivers results.