Performance Marketing: How Does it Work?

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    It seems like every day there is another new way to advertise your business or service. What does it take to get noticed? How do you stand out from the crowd?

    As you might expect, recently, the trends of digital advertisements have dramatically changed. With the rise of smartphone and tablet computer ownership, people are increasingly using these devices for e‑commerce or online purchases. By 2021, the mobile segment was expected to grow by an estimated $331.2 billion. Globally, online marketing reached a total market value of $468 billion in 2021(BusinessWire,2022). 

    Definition of Performance Marketing

    Performance Marketing is a term used to describe online marketing and advertising programs that focus on driving sales through increased brand awareness and loyalty. The goal is to create a lasting impression on customers, rather than simply selling them something.

    There are several different methods for increasing your company’s online presence through performance marketing. This article will teach you how to improve some of the performance marketing strategies for your company, how to use KPIs and key metrics to track performance, how to create an optimal performance marketing campaign, and finally, there will be examples provided so you can understand better.

    What are affiliates?

    Affiliate marketing is one of the more popular form of performance marketing to make money online today. It’s a great way to use existing customers to generate new sales opportunities for your business. According to WebTribune (2022), affiliate marketing spending is expected to increase by 10 percent in the coming years, with it already being worth 12 billion dollars. Affiliate marketing programs give you the chance to increase your revenue by up to 30%. So, why not take this as a valuable investment for your business?

    Below is a list of types of affiliates to consider:

    Affiliate Partners

    First and Foremost, the retailers or commonly known as advertisers, promote their products and services through affiliate partners. By referring through an affiliate partner, retail businesses can efficiently meet their campaign goals.

    They provide a platform for brands to attract meaningful traffic through various channels including social media, mobile applications, blogs, and more. By doing so, your brand gains more recognition, organic traffic, and increased sales as they are influential. Nonetheless, brands must understand how to leverage this partnership by creating campaigns that meet the needs of each partner.

    It is important to keep your budget in check when it comes to advertising through affiliates and whether your brand already has a large consumer base, but it is not impossible to grow an audience without any money at all.

    Affiliate managers

    An affiliate manager or an Outsourced Program Management (OPM) is a person who is responsible for the management of an affiliate network. The OPM will be in charge of managing and growing the affiliates, as well as ensuring that they are getting paid commissions.

    Here are some quick pointers for finding the right one to match your business requirements:

    1. Choose a reputable affiliate manager or outsourced provider. Look for agencies with a proven track record of delivering quality work at fair prices.

    2.Be specific. Make sure you understand exactly what you’re getting yourself into. What does the contract say? Who owns the rights to the content? Will there be any restrictions on the types of products or services you can offer?

    3. Check references. Contact previous clients and ask them for feedback based on their expertise and experience to check if they align with your business goals.

    Affiliate Networks

    Affiliate networks provide a single location for affiliates to manage their campaigns. They include features like banner ads, text links, product feed, promotional offers, payment options etc. Many of these services are free to use, while others require paid subscriptions.

    Once you’ve sought out reputable affiliate management companies to create your performance marketing strategy, you’ll need to know how to run a successful campaign.

    How to run a successful Ad Campaign?

    You should always set clear goals for your campaigns. For example, Who is your Target Audience? What niche are you aiming for? Also, where are you placing your ads? Ultimately, they should be strategically placed where they’re most effective at driving traffic.

    Other specific questions for you to think about:

    How much website traffic do you think you’re going to get?

    How many prospects do you expect from this ad?

    How much revenue do you want to generate?

    Performance Marketing Channels

    Once you’ve established your campaign goal, you can decide on the channels in which you will run your ads. Remember that the more channels you’re using, the more diverse and exposed your campaign will become.

    Native advertising is a type of content marketing where advertisers create ads that appear in places where users would naturally be looking for information. This includes blogs, news sites, social media platforms, search engines, email newsletters, etc. These don’t necessarily appear like ads and are more effective at attracting high-quality traffic as they fit cohesively within the page content and design.  Examples of common native ads could be Twitter hashtags, Instagram and Snapchat story filters, Social In-Feed Ads, or sponsored social media posts. Typically, the payment model for this type of advertising is CPM.

    In the world of direct marketing, CPM stands for Cost Per Mile. It is a way to measure how much it costs you to reach one thousand ad impressions with your message. 

    Paid search marketing (PPC)

    When someone searches for a product or service online, advertisers bid on keywords associated with those terms.

    Advertisers can pay using either Pay Per Click (PPC) or Cost per impression when someone clicks on their sponsored ads on Google for instance. 

    Social Media Marketing (SMM)

    Performance marketing leverages Social Media Marketing or Search Engine Marketing (SEM) to drive traffic and build brand awareness. Merchants or Retailers use different ad formats and targeting options to connect with their audience on these platforms.

    Search Engine Optimization (SEO)

    Search Engine Optimization relies on Google’s algorithms to determine which content or websites should be listed first. Moreover, it is important that website owners and webmasters make their sites easy for search engines to read.

    For example, landing pages are important because they’re the first impressions visitors get so you want to make sure they’re enticing enough to keep people coming back. You can also use A/B tests to determine which website designs, contents, functionalities, or user experiences are most friendly for users. You’re essentially testing different aspects of your web page to see which ones get the best response from your audience.

    If you want to learn more about how to get ahead of your competitors by using benchmarking to see how well your website ranks against others, have a look at our post here.

    You can also use our SEO services to help you optimize to the best standard.

    How to track Performance Marketing?

    After you launch your campaign, you will have to track and monitor its performance using various key metrics and KPIs. 

    Some of the most important ones are listed below:

    Cost Per Click (CPC) vs Cost Per Mile (CPM)

    Cost per click (CPC) refers to how much money you spend on advertising each time someone clicks on your Google Ads. The higher the CPC means the conversion value will also be higher. Whereas, CPM or Cost Per Mile is the amount advertisers pay for every 1,000 times their ads appear online but not necessarily have been clicked. For example, if an advertiser spends $5 per click, then he would be paying $0.05 per impression. Advertisers use this metric to determine how much money they should spend. However, the majority of companies prefer to use CPC as it is a more efficient measurement of performance and click through rate (CTR).

    Pay Per Sale (PPS) and Cost Per Action (CPA)

    Pay Per Sale (PPS) and Cost Per Action (CPA) are two ways to measure how much money you make from each visitor to your site. CPA or Cost-per-action means that you get paid every time someone clicks through to a specific page on your site. Pay Per sale (PPS) means that you get paid when someone buys something after clicking through to your site.

    Pay Per Lead (PPL)

    Pay per lead is one of the best ways to generate leads for your business. When you send out emails that offer free information about your product or service, you may be able to convert some of those prospects into lead customers. In that case, your Cost Per Lead (CPL) will increase too.

    Pay Per Click (PPC)

    Pay per click is a form of paid search where advertisers bid for keywords and display ads based on how much they want to pay per click. Advertisers usually use PPC when they don’t know what words or phrases their target customers are searching for. The advertiser pays only when someone clicks on his ad. This key metric also combines native ads through sponsored search results with other types of marketing.

    Lifetime Value (LTV)

    LTV is one of the most powerful metrics available to online businesses. It measures how much money each customer would have spent over his lifetime had he been loyal to your business. In addition to helping you understand what kind of revenue you can expect from new customers, this metric also gives you insight into which existing customers are worth more than others.

    What are the major advantages of using Performance Marketing?

    When it comes to performance marketing, there are both pros and cons.

    Some of the reasons why you should use performance marketing are for improved brand visibility. As previously discussed, when using affiliate marketers, you’ll be able to draw in more customers to your brand. Moreover, you can use KPIs to track performance using various data analytics, and you’ll be able to monitor and clearly see the gaps in your digital marketing strategies.

    One of the major advantages is that Performance Marketing has less risk because you’re constantly updating and monitoring your ad campaigns’ effectiveness. Plus, you only pay affiliates or marketing companies after they’ve delivered results for you, which means your return on investment (ROI) will be higher and the CPA(Cost Per Acquisition) will be reduced.

    On the contrary, this has been criticized by some performance marketers because it can be expensive and time-consuming. 

    Although they’re an effective way to target your customers, there are some safety and privacy regulations to be aware of. Such issues raise concerns such as safety and privacy regulations, Click fraud and bot traffic, Publisher fraud, and placement transparency amongst others. However, if you focus your resources on high-quality advertising networks and platforms, where issues like brand safety and data privacy are handled responsibly and reliably you will not encounter any problems. General Data Protection Laws (GDPR) vary from one region to another, so check out the specific regulations in your own jurisdiction before proceeding with your ad campaign to ensure they fall within the legal requirements.

    Nonetheless, there are many benefits to using this type of marketing strategy. For example, it allows businesses to target specific audiences with more precision than other types of marketing strategies.

    Final thoughts

    With so many companies investing heavily in digital advertising, performance-based online advertising has become one of the most promising ways to connect with consumers. By partnering with publishers and affiliates, you can create a powerful network of sites that can help drive traffic to your site.

    Performance Marketing is an umbrella term used to describe any type of marketing campaign where you can track results and optimize them based on what works best for your business. From social media ads to email marketing, performance marketing gives you the tools to make every dollar count. Start measuring your success and optimizing your efforts so you can see immediate returns on your investment.

    To get started, figure out which methods work best for you and how to connect with people who share your passion. Then, once you’ve got your specific objectives set, dive right in and start meeting them. 

    In addition, there are data analytic tools your business can utilize today such as Refersion, Post Affiliate Pro, Tapfiliate, LeadDyno and more which help track leads, user click-throughs, conversions, and overall campaign success.

    By following these tips and suggestions, it will help you create an effective performance marketing plan for your advertising campaign. Contact TBS Marketing today for more solutions and let our team help you reach your goals and take them further than ever before.