Performance marketing has grown in popularity for being effective in achieving specific results. But, what exactly does performance marketing mean? And how can companies use this approach to achieve their own business objectives?
In this article, we’ll tell you everything you need to know about performance marketing, including how it works and how to use this approach.
What is Performance Marketing?
Performance marketing can be defined as a results-driven strategy, and the allocated budget is only paid out when tangible results are achieved. For example, this could be anything from sales and engagement rates to clicks or lead generation.
It’s an ideal approach for small to medium-sized businesses that want to see where their budget is going and ensure it’s working hard to grow their business.
How Does Performance Marketing Work?
See below for an overview of how the performance marketing campaign works:
- Setting clear objectives: Performance marketing starts with advertisers setting clear goals for what they consider to be a successful outcome. This could be sales, acquiring leads, or a specific action taken on their website.
- Choosing the right performance marketing channels: Many different channels can be used for performance marketing (which we’ll get into later). You’d typically choose channels based on where the target audience is most active and the specific objectives they want to achieve.
- Partnerships: Marketers will need to form collaborations and decide who will promote the product or service. Collaborations with bloggers, influencers, content creators, or even other companies are common practice. Typically speaking, this sort of partnership is based on the agreement that payment is made on a commission basis for the specified actions their marketing efforts generate.
- Tracking and attribution: For performance marketing to be effective, tracking and monitoring actions is really important. This involves using cookies, pixels, or other tracking methods to attribute sales, clicks or leads to the specific marketing initiative. This data also ensures that other parties involved are fairly compensated for the outcomes they generate, as well as being able to measure the effectiveness of the campaign.
- You pay for results: Payment is made for results, not for the potential of results. You’ll only pay commissions based on the agreed-upon actions completed, such as a percentage of a sale or a fixed amount for a lead. This makes performance marketing cost-effective and reduces risk.
- Continuous Optimisation: With access to real-time data and analytics, it’s easier to adapt and optimise campaigns. This involves analysing which strategies are most effective, which channels are getting the best return on investment (ROI), and how customer behaviour impacts the success of their marketing efforts. Optimisation can mean anything from slightly adjusting the messaging to trying our different channels or even testing the waters with a small group from a new audience you want to appeal to.
Growth Marketing Vs Performance Marketing
Growth marketing and performance marketing strategies are similar, but they do have their differences.
Growth marketing is more focused on long-term strategies that increase reach, engage customers at every stage of the funnel, and build loyalty over time. Performance marketing, on the other hand, is the approach that drives immediate results and measurable success.
Core Types of Performance Marketing
Performance marketing strategies can be used across loads of different online channels, but it’s best to choose wisely. This is because each has its own unique advantages for engaging with target audiences and driving measurable results.
The most common methods include affiliate marketing, social media marketing, pay-per-click (PPC) advertising, email marketing, and search engine marketing (SEM).
Affiliate marketing is more of a collaborative strategy that involves partnerships with influencers, content creators or other websites to promote products or services.
These partnerships are based on the ability to extend market reach and credibility, which typically involves introducing products or services to new audiences. Who you collaborate with is then compensated through commissions for sales generated from their referrals, which is an incentive to promote actively.
If the goal is to find cost-effective ways to expand the customer base and increase revenue without upfront expenses, this would be a great approach.
Social Media Marketing
Social media marketing involves engaging directly with audiences through content creation and interaction on platforms such as Facebook, Instagram, and Twitter.
This approach focuses on building relationships and establishing brand authority by providing value as well as product promotion. Effective social media marketing requires tailoring content to specific audience demographics and monitoring analytics continuously, in case engagement strategies need to be tweaked.
Real-time feedback tools found in many social media platforms really come in handy for this, as businesses can change certain aspects (e.g. messaging) if it’s necessary in order to maximise the overall impact of their marketing campaigns and efforts.
Email marketing can be used as a direct and personalised communication channel, and it’s ideal for maintaining existing customer relationships (or those who have signed up but are yet to make a purchase). This approach allows for the delivery of targeted content, promotions, and updates directly to the inboxes of a defined audience.
If you get it right, it can be a really powerful type of performance marketing because it allows companies to personalise their messages. You can divide audiences into groups and send them tailored messages that align with their interests and actions. It’s also more affordable than other strategies, and it can lead to improved customer loyalty, better engagement, and increased sales through direct communication.
Search Engine Marketing (SEM)
Search engine marketing (SEM) focuses on actions that bring in measurable results, which could be (for example) more people visiting your website or buying your products right after they click on your ads.
What makes SEM really stand out is its ability to show your ads to people at the exact moment they’re searching for something you offer, making it more likely they’ll take the action you want. Plus, you can quickly see how well your ads are doing and make changes on the fly to get better results, ensuring you’re getting good value for your money.
PPC campaigns are a great example. Businesses have control over advertising spend, targeting, and ad performance optimisation. This approach is particularly effective for driving targeted traffic and conversions due to their ability to reach potential customers at the moment they are searching for related products or services.
If you’re interested in knowing more about PPC campaigns and want to know where to begin, we’ve recently published a blog on the essential factors to consider.
Need Help With Your Performance Marketing Strategy? Get in Touch!
Whether you’re looking to work on making your existing strategy work or starting from scratch, getting professional help can make all the difference.
For expert guidance on performance marketing campaigns tailored to your business, contact us on 0151 652 4777 today.
Posted on Friday, February 2nd, 2024 in Latest News.