Performance Marketing: Benefits, Types and Strategies

In 2023, global digital advertising spending reached 585.96 billion USD and is expected to increase to 646 billion USD in 2024. New trends include performance marketing, social media advertising, affiliate marketing links, and email.

Performance online marketing combines paid advertising and branding, paying only when the desired action is completed such as lead completion, or sale. This opportunity benefits both merchants and affiliates, creating effective campaigns based on high performance and ROI.

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Performance Marketing examples
Performance Online Marketing Explained: All the latest knowledge in 2024

Performance marketing definition & example

Performance Marketing is a digital marketing strategy that focuses on measuring and optimizing the results of marketing efforts. In there, marketers only pay when a specific action is performed, such as clicking a link, filling out a form, or making a purchase.

The main goal of Performance online marketing is to increase advertising and marketing effectiveness by focusing on creating actions that are effective and contribute to business goals. Businesses often set specific goals, such as the number of website visitors, the number of mobile app downloads, the number of purchases, or the number of registrations. Marketing campaigns are then designed to generate these actions and measured to determine effectiveness.

Example: The Growth Marketing team at Outbrain is one of the performance marketing examples that applied effective strategies to launch a branded search campaign in Italy, including paid search ads shown to users searching about Outbrain online, leading to a sales landing page. The performance of this campaign was incredible with a click-through rate (CTR) of 18.47%, a conversion rate (CVR) of 13.39%, and an ROI of up to 2028. This means that every dollar spent on a search campaign brought a profit of up to $20.

>>>> Learn more: Models of internet advertising

Performance Marketing examples
The Growth Marketing team at Outbrain applied paid search ads shown to users searching about Outbrain online

Online performance marketing & Affiliate marketing

Performance online marketing is affiliate marketing on a large scale. The key difference is that the performance strategy has the broader purpose of improving a company’s performance. Instead of only paying a marketing agency when a specific product is sold like affiliate marketing; In performance marketing, the retailer pays when the affiliate achieves the desired results, which is the goal for that campaign.

Specifically, the differences between them are presented in the following table:

Criteria Marketing Performance  Affiliate Marketing
How it works Businesses cooperate with advertising channels (such as Google Ads, and Facebook Ads) to display ads to potential customers. Businesses cooperate with marketers (publishers) to promote products/services.
Payments Businesses pay for advertising channels based on campaign performance (such as CPC, CPM, and CPA). Businesses pay commissions to marketers when they successfully refer customers to make purchases.
Level of control Businesses control advertising content and target audience. Marketers have the freedom to create advertising content.
Risk Businesses may have to pay a lot of money if the campaign is not effective. Marketers may not earn commissions if there are no purchases.
For example Google Ads, Facebook Ads Banner ads, product review articles

Forms of Performance in Marketing

There are four main marketing methods you need to know:

Affiliate Marketing

Affiliate Marketing is a form of performance-based marketing in which distributors (Publishers) will receive commissions from suppliers (Advertisers) when performing specific actions, such as:

  • The customer clicks on the distributor’s link and visits the supplier’s website.
  • Customers purchase products or register for supplier services through the distributor’s link.
  • The customer completes other specific actions as determined by the provider.

Social media advertising

Social media marketing includes running ads on platforms like Facebook, Instagram, Twitter, LinkedIn, and others. Typically, these campaigns are set up with a funnel structure that includes at least one campaign to reach new people, called prospecting, and at least one campaign to reach existing people. visited their website but didn’t convert, for retargeting. Not all forms of social media advertising are performance marketing strategies – when not used to drive conversions, they can also be applied for branding or market validation.

performance marketing strategy
Social media marketing includes running ads on platforms like Facebook, Instagram, Twitter, LinkedIn, and others

Search engine marketing (SEM)

Search engine marketing strategy refers to implementing advertising campaigns aimed at increasing traffic from search engines such as Google or Bing. These campaigns are often built around the types of keywords their target is searching for. For example, a business can design campaigns for the products they offer, their competitors’ brands, and their brand.

Social Media

Social Media in Online Performance Marketing is using social networking platforms to reach a business’s potential audience and create effective advertising campaigns. This platform allows Marketers to quickly interact with potential customers and customize ads to the right potential customers. This helps increase engagement, build brand awareness, and increase sales.

Native advertising/sponsored content

Native Advertising is a type of paid advertising designed to blend with the content of the website or app where it appears. Native ads are typically displayed as sponsored posts, in-stream posts, suggested ads, or other content formats that align with the user experience.

For example, when we are reading an article on a news website, we may see native ads appearing in the form of sponsored posts at the bottom of the page. This sponsored article will have a clear label indicating it is an advertisement, but it is also written in a similar style to other articles on the site, making it look like part of the site’s content.

How Marketing Performance Works?

Marketing performance operates on a pay-for-performance model, meaning businesses only pay when potential customers take a specific action. This action can be anything from a click on an ad to a completed sale, depending on the campaign’s goals. Here’s how it works:

  • The first step in the process of building a Performance campaign is determining the goal of the campaign. Businesses should adhere to SMART goal setting, which is specific, measurable, achievable, relevant, and time-bound. Some common Performance goals include Increasing website visits, conversions, and revenue.
  • Next, the team proceeds to select the appropriate deployment channel. Evaluate factors like budget, reach, and measurability to choose the most effective channel. Conduct tests to evaluate the effectiveness of different channels.
  • Campaign implementation: Set up campaign goals, budget, targeting, and tracking. Create content, ads, and other marketing materials that are relevant to your target audience.
  • Measure and optimize campaigns: Regularly analyze and track metrics and statistical data, Marketers can determine which traffic sources are delivering the best results and allocate resources to advertise effectively.
  • Handling potential risks: Every marketing campaign has potential risks, such as fraud, data breaches, and competition. The business’s Marketing team needs a plan to handle these risks.
Performance Marketing
How Performance Online Marketing Works?

Pros & Cons of Performance In Marketing

Performance marketing strategy offers a results-oriented approach to advertising, but like any strategy, it has its advantages and disadvantages.

Advantage:

  • Allows businesses to measure the effectiveness of marketing campaigns accurately and easily.
  • Often costs less than traditional forms of marketing. Because businesses only pay for specific results, it is only necessary to invest in marketing channels and campaigns that are likely to bring profit.
  • Allows businesses to target marketing campaigns to specific target audiences.
  • Can be applied to many different types of businesses and marketing goals.

Defect:

  • Requires continuous analysis and data tracking to measure effectiveness. Without accurate data or not enough data, marketers may have difficulty evaluating and optimizing campaigns.
  • 0ften focuses on driving short-term actions, such as purchases or service subscriptions. This can unintentionally undermine long-term strategic vision and build sustainable relationships with customers.

The important thing when using Performance strategy is to clearly understand your business’s business goals, ensure you have the right data and tools to measure effectiveness and consider short-term benefits and long-term strategies.

Indicators to measure the effectiveness of Performance Strategy

CPC – Cost Per Click

Cost Per Click is the price paid each time a viewer clicks on an ad. CPC is a better engagement metric than CPM because the viewer has already taken the action of clicking on the ad. A higher CPC usually means a higher conversion value.

CPC = Total advertising cost / Total clicks

online performance marketing
Cost Per Click is the price paid each time a viewer clicks on an ad

CPM – Cost Per Impression

CPM stands for Cost Per Mille, which means cost per thousand impressions – Source: Wikipedia. In other words, it’s the cost per 1000 times the ad is shown to viewers. CPM does not measure viewer actions; it only determines the price for displaying ads. Some performance marketers are focusing less on CPM and more on specific, action-based, meaningful metrics.

Calculation formula: CPM = (Advertising cost) / (Number of impressions) x 1000

CPS – Cost Per Sales

CPS stands for Cost Per Sales, which means cost per sale. In Performance Marketing, this is an index used to measure the effectiveness of an advertising campaign, based on the amount the advertiser must pay for each successful order.

Calculation formula: CPS = Total advertising costs / Total number of successful orders

CPL – Cost Per Leads

CPL stands for Cost Per Lead, which is the cost per potential customer. CPL is an important index in marketing, used to measure the effectiveness of online advertising campaigns. The lower the CPL, the higher the effectiveness of the marketing campaign. A reasonable CPL will depend on many factors such as industry, product, customer,…

Calculation method: CPL = Total advertising cost / Total number of leads

CPA – Cost Per Acquisition

CPA is a metric that measures campaign performance in terms of a specific desired action a business wants its target audience to take, such as downloading an e-book, subscribing, purchasing an item, etc. The actions of potential customers are considered the most important tangible and measurable results, so CPA is also one of the important and popular metrics.

What is a performance marketing strategy for success?

To be successful, you can implement the following strategies from us:

  • Google Ads: Use paid search (PPC) campaigns to target keywords related to your product or service. Optimize landing pages to increase conversion rates.
  • Facebook Ads: Target ads based on potential customers’ interests, behavior, and demographics. Use diverse ad formats like images, videos, carousels, etc.
  • Email marketing: Send emails that attract and provide valuable content to potential customers. Use automated emails to nurture leads and motivate them to buy.
  • Affiliate marketing: Partner with affiliate marketers to promote your products or services. Offer attractive commissions to attract effective marketers.
performance marketing strategy
Some performance strategies for success

Future Trends of Performance in Marketing

Marketing Performance has improved over time thanks to technological developments and consumer behavior changes. In fact, in 2024, Digital Marketing has set its sights on reaching the target audience precisely, through identifying the right people, devices, and the right time. Some Online Performance Marketing trends that may develop:

  • Growth of new marketing channels: New marketing channels such as TikTok, Metaverse, virtual reality (VR), and augmented reality (AR) technologies are increasingly popular. Create many new opportunities for marketers to reach and interact with customers.
  • Development of AI and Machine Learning: AI and machine learning are being used more and more to automate tasks, analyze data, and optimize the effectiveness of campaigns. Helps marketers save time and effort while improving the effectiveness of campaigns.
  • Enhance personalization: Marketers are using data to create personalized messages and experiences for each customer. Increase the effectiveness of your campaigns and create stronger relationships with customers.

In short, Performance Marketing has now become an extremely important tool in the modern marketing industry. From increasing efficiency and optimizing costs to measuring detailed results and encouraging creativity, this method has proven its effectiveness. With the continuous development of technology and data analysis capabilities, this strategy promises to continue to play an important role in building successful marketing campaigns in the future.

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