Performance Marketing

Imagine that you run your own business. You are trying out new digital marketing tactics to increase your brand awareness and gain new customers. You have tried specific measures in the past, failed, and run out of ideas. You outsource the job to an advertising agency but cannot spend too much on advertising because of your budget. What do you do? This is where performance marketing can help you. Using this method, you pay the marketing agency only after achieving the desired results. Interesting, isn't it?

Performance marketing is an engaging digital marketing strategy used in business nowadays. Read further to find out more about this topic!

Performance Marketing Definition

Performance marketing is a digital marketing strategy followed by brands that are result-driven. A performance marketing strategy means that the brands will only pay their marketing agencies once they see the agreed-upon results or when specific actions have been carried out.

This strategy suits companies that are planning to reach out to new customers. The companies only have to pay their marketers based on the new engagement they generate due to the marketing campaign. The company measures engagement in terms of the following:

• clicks,

• leads,

• shares,

• impressions,

• comments,

• completed surveys, or

• purchases.

Performance Marketing Channels

Performance marketing channels are the platforms where advertisers or publishers place a company's advertisement to increase customer engagement. Marketing agencies use five main performance marketing channels, and they are:

1. Display Advertising,

2. Native Advertising,

3. Search Engine Marketing (SEM),

4. Content Marketing,

5. Social Media Marketing.

Performance Marketing Channels: Display Advertising

Display advertising uses a combination of texts, images, or videos to advertise a product or a brand. Marketing agencies publish these advertisements on websites to catch the user's attention. The ads are strategically placed on the "right" websites, meaning that the marketing agencies will look into the type of website and traffic it might welcome before publishing the advertisement. This way, they can ensure that placing the brand's advertisement on that particular website can bring in more engagement for the brand.

Display advertisements are usually seen on the different sides of a website.

Fig. 2 - Banners, texts, and videos are an example of display marketing

Performance Marketing Channels: Native Advertising

Native advertisements do not take the form of traditional advertisements. They are masked within the nature of the platform (e.g., website or social media).

They usually appear to the viewer as a suggested video or article. Customers often encounter them on social media platforms or websites.

Search engine marketing (SEM) is a type of marketing often combined with native advertising and other kinds of advertising. SEM focuses on improving the visibility of a website on the Search Engine Results Page (SERP).

The websites or webpages shown on the top of the SERP are paid to appear there to bring in more engagement. This form of marketing is called pay-per-click (PPC), as the company pays the advertiser once a user clicks on the webpage.

Marketing agencies can also use SEO (search engine optimization). This method focuses on finding relevant keywords to include on the webpage so that it can rank at the top of the SERP.

SEO brings organic clicks to the website. Marketers can measure both organic and inorganic clicks to evaluate their performance.

Performance Marketing Channels: Content Marketing

Content marketing focuses on creating and distributing valuable and relevant content regarding the product, service, and customer. It focuses on educating the target audience about the product or service. In content marketing, the advertisements are brought to the user's attention by linking the brand in context to what the user is reading or viewing. Content marketing can take the form of blogs, e-books, podcasts, etc.

Performance Marketing Channels: Social Media Marketing

Social media is a booming platform for performance marketing agencies, providing them with many opportunities and possibilities to reach a customer and increase engagement.

Companies can reach customers who, if interested in the product or service, will share or engage with the product, bringing in more traffic and recognition to the brand. Paid and sponsored content is critical on social media. On social media, brands mainly use the CPM method, or the cost-per-mille, which means that the brand pays a third party for every thousand views on their advertisement.

Fig. 3 - Social media marketing is an example of performance marketing

Performance Marketing vs. Digital Marketing

Performance marketing is a type of digital marketing. Despite sharing similarities, such as the platforms and target audience, digital marketing and performance marketing differ.

Digital marketing consists of a wide array of digital marketing platforms and channels. While digital marketing focuses on promoting a product or service, performance marketing is result-oriented and focuses on increasing engagement.

Performance marketing strategies use specific key performance indicators (or KPIs) to measure performance. This makes it possible to track the progress in performance marketing, whereas other digital marketing techniques might not be as easily measurable.

While performance marketing focuses on short-term goals, digital marketing strategies are for longer-term ones.

The main difference between digital marketing and performance marketing is that digital marketing encompasses all the digital channels and the strategies used for digital marketing (including performance marketing). In contrast, performance marketing strategies enhance digital channels and strategies.

Performance Marketing Examples

The company's budget and goals determine its performance marketing channels and strategies. Below are a few examples of how marketers can use performance marketing to achieve different goals.

Performance Marketing Examples: Social Media Advertising

A new online retail clothing store is trying to increase engagement on its website. The company chooses social media platforms such as Instagram and Facebook to run advertisement campaigns. Using the platform's algorithm, the advertisements can target people who have shown interest in similar products. Based on their search data, customers who have exhibited related interests will be better attracted to the ad, leading to more clicks and engagement.

Performance Marketing Examples: Search Engine Marketing (SEM)

A new business webpage is trying to bring in more traffic. The webpage will have to rank highly on the SERP to achieve this. Therefore, the advertising agency has been optimizing the website and taking steps to keep the webpage relevant and consistently top-ranked. This way, more users will click on the webpage as this appears first on the search pages.

Performance Marketing Examples: Display Marketing

A new makeup brand trying to gain more visits to its web page chooses to test its display marketing strategy. The brand advertises on YouTube before makeup tutorials to ensure that the right customers are targeted. This way, the brand can guarantee that almost all viewers show some interest in makeup and might be willing to check out the new brand. This will lead to higher engagement on the brand's website.

Performance marketing is increasingly gaining popularity among brands as it helps them understand which marketing methods have worked and which have not. Brands can identify which marketing strategies appeal to which group of people and which do not.