Understanding Performance Marketing

Measuring Marketing? Let’s start with the old ways

Back in the day, no one spoke of performance marketing. It used to be that an advertising agency created and ran an ad campaign, sales improved, and everyone was happy. That was the only measure. Marketing is always challenging, but it was certainly much simpler. If it sells, it works.

What else is new? The question may be trickier than it seems.

All marketing ultimately revolves around boosting sales, so it all pretty much still boils down to that, but when we talk about digital marketing actions there is a deeper level of complexity. There are more channels, more possibilities, and a great advantage, which is the fact that everything can be measured. You have more, you get more.

Technology allows us to identify patterns and draw insights from data to increase ROI and get the most impact with the smallest investment. How? 

Leveraging data, analytics, and digital channels to optimize marketing efforts, in an approach known as Performance Marketing.

Traditional Marketing vs. Performance Marketing

It could be argued that Marketing can never be traditional, but what might be generally understood as traditional marketing relies on brand-building and long term, less measurable strategies. The success of traditional marketing is often challenging to measure directly, as it relies on factors like brand recall, perception, intangible metrics.

On the other hand, performance marketing is a more data-driven approach, focusing on achieving specific, measurable results like sales, leads or conversions. It often involves short-term, quick impact campaigns.

Performance marketers leverage data and analytics to track the effectiveness of campaigns in real-time. This allows for precise measurement of key performance indicators, which is another way of saying finding out how well you really did and whether your efforts did pay off.

Also, the mechanics are entirely different. Traditional marketing, including print ads, billboards, and TV commercials, among others, requires a prior investment, and one that is not connected to the result. In other words, you pay before and even if the ad does not get you one single sale. You could say it’s more of a bet than an investment.

In 2021, worldwide digital advertising spending (including desktop, laptop and mobile devices) amounted to $455.3 billion. Statista estimates this figure will steadily increase over the next couple years, reaching a whopping $646 billion by 2024.

Sources: BigCommerce & Statista

No gain, no payin’

Performance marketing is an approach that emphasizes measurable results and ROI.  Unlike traditional advertising, with fixed costs, it operates on a dynamic payment structure. With this pay-for-performance model, advertisers only pay when specific actions, such as clicks, conversions, or sales, are achieved. That is, tangible outcomes.

Advertisers set clear goals, and payment is tied directly to the achievement of these objectives. The fact that businesses don’t have to pay until after the conversion or transaction makes performance marketing a convenient approach, particularly useful for smaller businesses unable to afford riskier, longer, less measurable efforts.

Another thing about Performance marketing is that it leverages various channels, including digital advertising, search engine marketing (SEM), affiliate marketing, and social media advertising. 

Performance Marketing Channels

Performance marketing includes various channels that businesses leverage to drive measurable results and optimize campaigns for maximum return on investment (ROI). These channels provide businesses with diverse avenues to reach and engage their target audiences, each offering specific metrics for evaluating campaign success and optimizing future strategies.

Affiliate Marketing

Often confused with Performance Marketing itself, this channel involves partnerships aimed at promoting products or services. Advertisers compensate partners for driving traffic or generating sales. Metrics for assessing success include affiliate-generated sales, conversion rates, and the commission earned from these collaborations.

Digital Advertising

 Businesses utilize online platforms for targeted advertising to specific audiences. The success of digital advertising campaigns is measured through metrics such as clicks and conversions, providing insights into user engagement and campaign effectiveness.

Search Engine Marketing (SEM)

SEM involves paid efforts to enhance visibility on search engine results pages. Measurable success in SEM campaigns is gauged through metrics like clicks and conversions, reflecting the effectiveness of strategies to capture audience attention in search engine environments.

Social Media Advertising

This channel focuses on targeted ads across social media platforms, emphasizing measurable engagement and conversions. Key metrics include engagement levels, reach, and conversion rates.

And of course email marketing

Which we cover in detail here.

The Mechanics of Performance Marketing

No matter what your business or vertical, if you operate digitally you have a series of principles, tools, and concepts that can help you track performance of your marketing actions. Here are the key aspects of Performance Marketing.

Performance Marketing is all about ROIs, with every action measured against key performance indicators. KPIs are vital to gauge the success of marketing efforts and enhance performance. For example, in email marketing, key metrics include open rate, CTR, clicks per unique open, or bounce rates.

Another component of Performance Marketing is Search Engine Optimization (SEO). And a fundamental one too. It focuses on optimizing online content for search engines, which involves enhancing website visibility, organic traffic, and user experience. Measurable elements include keyword rankings, organic traffic, and backlink quality.

And then there’s the players. First, the brand or merchant seeking to improve performance. That’s the advertiser. Then there’s the publisher or affiliate partner doing the promotion and finally the third party system connecting both groups, tracking performance and managing payments, the affiliate tracking network. 

Measuring Performance Marketing

Finally, since performance marketing is all about measures and results, another key aspect of this approach is the metrics, or what you measure. Here’s a brief list:

One crucial metric is Cost Per Acquisition (CPA) or Pay Per Sale. If the primary aim is to drive sales, success is gauged by the number of actual sales attributed to a partner, with compensation based on every sale directly linked to their efforts.

Another key metric is Cost Per Click (CPC) or Pay Per Click. When the goal is to channel traffic to your page or offers, you compensate your partners for each click they generate. Tracking URLs is vital to distinguish ordinary traffic from the clicks inspired by your partners, ensuring a clear understanding of their impact.

Moving on to Cost Per Lead (CPL) or Pay Per Lead. This metric involves paying for each acquired piece of user information, typically obtained through form submissions. 

Additionally, there's Cost Per Impression (CPM), also known as cost per mille. This metric bases payment on the number of impressions generated by an ad shared by a partner or displayed elsewhere. CPM pays  out every 1,000 impressions.

The key to successful performance marketing campaigns

The magic of Performance Marketing is measuring results. Monitoring results allows marketers to identify what is working and what is not, and decide to repeat, iterate, or expand successful actions and stop, reconsider or change less successful ones. 

Choosing the Right Tracking Tools

To navigate the intricate world of performance marketing, marketers rely on a suite of tracking tools tailored to different aspects of their campaigns:

CRO tools

Conversion Rate Optimization (CRO) tools are applications designed to optimize websites and digital platforms to enhance user experiences and increase conversion rates. These tools leverage data and insights to identify areas for improvement, helping businesses maximize their online effectiveness. They track visitor behavior with other digital analytics software to identify ways to optimize conversions. There are different types of CRO tools. 

A/B testing software allows marketers to deploy different content versions and test pages and experiences to track which performs best. This also allows to personalize experiences by using segmented data. 

Customer journey mapping software focuses on creating a comprehensive visual representation of the customer's expectations, objectives, and interactions. It acts as a dynamic storyboard,or visual map of all the touchpoints in the customer journey. 

Finally, heatmap tools are instrumental in reporting how visitors engage with a web page or mobile interface. These tools create dynamic visualizations of clicks, hovers, and scrolls, providing a detailed map of user engagement. Deployed on top of existing web development infrastructure and web content management software, heatmap tools offer in-depth data for analysis by visually representing the recorded actions.

Analytics

Robust analytics tools provide in-depth insights into user behavior, campaign performance, and website interactions. Platforms like Google Analytics offer comprehensive data to inform strategic decisions.

UX tools

User Experience (UX) tools such as Hotjar and Clarity offer heatmaps, session recordings, and user feedback to optimize website usability and enhance the overall user experience.

Hotjat tracks visitors' data such as where they come from, which landing page they land on, and what actions they take on the landing page once they arrive.

In turn, Microsoft’s Clarity instant click heatmaps allow marketers to see the areas of a page that drive the most engagement.  Scroll maps show how far users scroll and area heatmaps show the total clicks within any chosen area.

Aggregator tools

Aggregator tools are software solutions designed to consolidate data from various sources into a unified platform. This enables marketers to obtain a holistic view of their performance metrics and streamline reporting processes. These tools eliminate the need to manually gather data from disparate sources, saving valuable time and reducing errors.

Some popular tools include:

• Supermetrics: a powerful data aggregation tool that consolidates data from almost 100 marketing platforms into a unified dashboard.
• The Google of business data, Looker, is a business intelligence and data exploration platform that enables users to analyze and visualize data from multiple sources.
• Dom: a cloud-based business intelligence platform that allows users to connect, visualize, and share insights across the organization.
• Tableau: a data visualization and business intelligence tool that helps turn complex data into interactive, shareable visualizations.

These provide a unified view of campaign performance and enable informed decision-making.

In the Eye of the Beholder

While data-driven insights are invaluable, the human touch remains essential. Marketers should not neglect their intuition and creativity. Data can help identify patterns, but your human intuition can spot unique opportunities and solutions that metrics alone may not reveal. Measuring performance marketing success involves a combination of sophisticated tracking tools, data analysis, and human insight. 

The Role of a Performance Marketing Manager

What Does a Performance Marketing Manager Do?

Strategic Planning: Performance Marketing Managers are responsible for devising comprehensive strategies to enhance brand visibility and drive conversions. They plan and execute paid acquisition campaigns.

Data Analysis and Optimization: Managers interpret data, identify trends, and make informed adjustments to optimize campaigns for better outcomes.

End-to-End Management: Performance Marketing Managers manage digital accounts and oversee the end-to-end management of performance marketing activities, especially across Paid Social channels. 

What a performance marketing agency can bring to the table

All of the above, plus more expertise and resources. Perhaps you don't need a Performance Marketing Manager, just a good marketing agency that can do all this but much better and go the extra many miles.

Expertise Across Channels: Agencies often have specialized marketing teams with expertise in various channels, providing a comprehensive approach to marketing strategies.

Cost-Effectiveness: Engaging an agency can be more cost-effective than hiring a full-time manager, especially for businesses with fluctuating marketing needs.

Continuous Innovation: Agencies stay updated on industry trends, ensuring that your marketing strategies benefit from the latest innovations and technologies.

Performance Marketing Strategies and Tactics

Here’s our quick and dirty cookbook. Through the years,  we've honed our expertise through numerous marketing sprints and although we know there’s no such thing as one size fits all in Performance Marketing, here are a few tips that we’ve found helpful

Planning your Performance Marketing Strategy

1. Choose the Right Channels

There are several marketing channels and selecting the most suitable ones for your goals is key. Google Ads for targeted searches, platforms like Facebook, Instagram, or Amazon, choosing what channels to test  to understand where your audience engages is key to success.

2. Set KPIs

How can you know if you did well if you don’t decide what well means? Establishing Key Performance Indicators (KPIs) is fundamental in measuring the success of your marketing endeavors. From click-through rates to conversion rates, having clear metrics allows for informed decision-making and strategy adjustments.

3. Dynamic Ads

Dynamic ads that adapt to user behavior and preferences are powerful tools to enhance engagement and boost conversion rates. Personalizing content based on user interactions can significantly impact the effectiveness of your advertising campaigns.

4. Remarketing Campaigns

Tailoring remarketing campaigns to individual user behavior increases the likelihood of conversion. By delivering targeted content to users who have shown interest, you stay top-of-mind and drive them towards making a purchase.

5. Conduct Competitor Keyword Research

Analyzing competitor keywords provides valuable insights to refine your SEO and advertising strategies. Stay informed about industry trends and adapt your approach to stay ahead of the competition.

Effective performance marketing requires a strategic approach that combines channel selection, KPI tracking, dynamic content creation, and a deep understanding of your audience's journey. By implementing these strategies, you can not only boost your visibility but also drive meaningful engagement and conversions.

The Future of Performance Marketing

Who knows what tomorrow brings?

We can’t really know for sure, but here are some trends very likely to continue and increase in the near future.

Keep an eye on these Performance Marketing Trends

Third-Party Cookies are going bye bye

With increasing concerns over privacy, the imminent demise of third-party cookies is transforming how advertisers target and track users. Marketers are adapting by exploring alternative methods to deliver personalized experiences without relying on traditional tracking tools. In a related story…

Rise of contextual advertising  

Also with increasing concerns about data privacy, advertisers are gravitating toward this method to deliver tailored content without compromising user trust. Contextual advertising does not target individual consumers. Instead, it uses Machine Learning technology to categorize pages according to their content and metadata and then serve ads to visitors based on that data. 

For example, contextual advertising on a blog about fitness might showcase ads for sports apparel or workout equipment. This is less invasive than ads targeting users and also circumvents the need for personal user information or historical browsing data, so it’s safer for brands concerned about data privacy issues and compliance with regulations like GDPR and CCPA.

AI everything

Artificial Intelligence is becoming ubiquitous in performance marketing and virtually everywhere else. And it doesn’t seem to be going away anytime soon. From personalized recommendations to predictive analytics, AI will be used to enhance campaign effectiveness by enabling data-driven decision-making and automation

What if the future of performance marketing is performance branding? 

Back to the old, but enriched with the new. 

Performance Marketing is a powerful approach, but nothing is perfect. It does have its limitations.

For example, Performance Marketing is great for short term goals. For your overarching business goals, it is not the best approach. It is not the best thing for more general goals. Or goals that cannot be tracked because their success depends on multiple factors. Or those that will inevitably take a long time.

Fortunately, this is not really an either/or scenario. Quite the opposite. Successful marketing strategies often involve a balance between performance and brand marketing, addressing both short-term goals and long-term brand building.

The separation between brand and performance marketing is increasingly blurry. Marketers are rethinking their approaches, and the era of treating brand and performance as isolated entities might be coming to an end. Performance branding isn't just a buzzword; it's a strategic approach that intertwines brand awareness with conversion rates.

This shift is influencing strategies, emphasizing the importance of synergy between brand initiatives that focus on long-term value and performance strategies geared towards more immediate results.

After all, we cannot forget good ol' marketing basics. Yes, performance marketing is all about the numbers, and some marketers might get carried away, But it’s not all about the numbers, and it’s not all about the now. Long term branding, good content, the golden rules always work. With performance marketing, you just know how well.