Performance Marketing in 2022 – What It Is and How does it Work?
Gone are the days of advertising and marketing were arrows shot in the dark. With the proliferation of social media and the internet, advertisers have many digital marketing tools and platforms available today to run tailored campaigns and achieve measurable results. Moreover, the performance data generated makes attribution and optimisation easy.
This is what broadly constitutes performance marketing – a strategy that is only set to grow exponentially in 2022 and beyond. In this blog, we will demystify everything you need to know about performance marketing:
- What it is
- How it works
- Which channels does it operate in
- What are its advantages
- How is it different
Let us get started!
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What Is Performance Marketing?
Performance marketing is a results-driven digital marketing strategy. Advertisers and brands can reach the desired audience and generate measurable results by using this strategy. In performance-based marketing, advertisers only pay when the marketing company or platform generates specific results. These are shares, impressions, clicks, conversions, leads, sales, etc.
Additional Read: Increase Conversion Rate of Your Website
For example, consider pay-per-click (PPC) ads where the cost of your PPC campaign is dependent on how many clicks the target URL generates. With PPC ad spending set to reach $132 billion globally in 2022, one can only imagine how massive performance marketing is.
Performance marketing ads run on multiple platforms and channels – social media marketing, search engine marketing, native ads, affiliate marketing, videos, etc. Thus, performance marketing is not a typical organic marketing strategy. Instead, it drives, tracks and measures specific outcomes or audience interactions on digital. Since everything is measurable, brands can gauge the RoI of each asset, campaign, or activity accurately.
How Does Performance Marketing Work?
At its core, the working principle of a performance marketing strategy is simple. Advertisers put out various ads on various platforms and then pay based on the performance of every ad. Advertisers utilize publishers, affiliates, networks and performance marketing agencies to execute the ads.
Here are the main stakeholders in performance marketing:
These are the brands, merchants and retailers who want to promote specific products and services and reach specific marketing targets through performance marketing. These targets could be lead generation, product views, sales, etc.
Publishers or affiliates
These are the service providers whose channels are utilized by advertisers for performance marketing. As such, publishers own and operate blogs, websites, e-commerce stores or social media accounts where they can publish and run various performance-based ads on behalf of brands. Search ads, display ads, etc., are the usual tools of the trade.
Platforms and networks
These are the various third-party channels that provide advertisers and publishers with the platform and tools to strategize, run and monitor multiple digital ads. These include text links, banners, campaign performance tracking, etc. With the help of such platforms, it is easy to observe and track performance ads and KPIs.
Performance marketing agency
Another way brands and advertisers can run a performance marketing campaign is by outsourcing it to a performance marketing agency. Such agencies carry out end-to-end performance marketing, including strategizing, devising the campaign, optimizing it on the go, ensuring the best practices in the performance marketing industry, and improving results using value-added services like SEO.
Now that we know how a performance marketing campaign works.
Let us look at how advertisers pay for the ads:
Cost Per Click (CPC)
As the name suggests, payments are based on the number of times an ad is clicked. To enhance website traffic, CPC ads are the way to go.
Cost Per Leads (CPL)
The publisher charges the advertiser based on the number of leads generated. A lead is registered in the form of the number of registrations received.
Cost Per Impression (CPM)
The payment is based on every 1000 views i.e., impressions of an ad.
Cost Per Acquisition (CPA)
This payment model is action-specific. Hence, the advertiser must pay whenever the audience completes an action such as visiting a website, sharing personal information, filling out a form, etc.
Cost Per Sales (CPS)
Associated mostly with affiliate marketing, CPS ads are paid for whenever an ad leads to the completion of a sale.
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Top 5 Performance Marketing Channels
There are five broad performance marketing channels that you can utilize for your campaigns.
Search engine marketing (SEM)
Search engines and keywords form the crux of successful digital advertising – and it is no different when it comes to performance marketing. In SEM, advertisers can bid on keywords on search engines like Google for their sponsored native ads to appear in the results. Here, for every ad click, the advertiser must pay. This is also called paid search or pay-per-click advertising.
When it comes to retargeting customers and providing them with contextually-relevant ads, performance marketers use native advertising. As the name suggests, native ads are tailored to the content with which and the medium on which they are published. This way, drive the reader to action while immersing oneself in the information provided. Native ads are measured in pay-per-click or pay-per-impressions.
Additional Read: Remarketing vs Retargeting
Social media marketing
With social media channels and influencers all the rage these days, advertisers can run paid marketing and influencer marketing campaigns through these mediums to target different audiences. Every social media channel has a specific USP and helps engage a specific user intent through native ads. Likes, shares, follows, subscriptions, comments, purchases, etc., are some of the performance indicators that are targeted.
Sponsored content is a performance marketing medium in which celebrities, influencers, content sites, PR sites, etc. publish sponsored posts to market a brand and its products or services. These posts are usually highly contextual and allow brands to access the prominent reach of the influencers/channels to gain a wider audience. Once again, CPC, CPM, CPA or free goods are the costs that a brand can pay here.
Affiliate marketing is another great medium for performance marketers to generate sales, subscriptions or website traffic. Here, affiliates are influencers and channels that promote the ads through their marketing efforts and earn a commission. Some examples include influencers directly posting product links and ads on their channels or the use of banner ads on websites.
Did you Know: Techmagnate also offers complete expertise in Affiliate marketing
4 Benefits of Performance Marketing
So, what does performance marketing bring to the table? A great degree of control, planning, precision, and cost-effectiveness for the advertiser.
There is always some amount of certainty involved in a performance marketing campaign, as advertisers can track and attribute the metrics easily. This means more cost-effectiveness and RoI. So, what are its benefits?
Performance marketing campaigns can be easily tracked, monitored, measured and optimised using sophisticated analytics and tools. It enables you to gauge how successful a campaign has been and what exact tweaks are needed for the ads to perform better.
Performance marketing cuts through the gimmicks and is almost exclusively result-driven. With such a laser-focused purpose, such ads help increase the RoI continually and provide a boost to all brand attributes in tandem.
Performance marketing is completely transparent and measured. It means that advertisers always know what they will achieve through a specific campaign and how much budget they need to allocate for the same. Ultimately, you pay for the results achieved. This reduces risk and enables marketers to achieve brand objectives quicker and as per their liking.
Given that performance marketing utilises several channels, it is easy to shift your attention from a medium that is not working to one that is. This diversification of RoI streams allows marketers to continue delivering results no matter what.
4 Tips For the Success of Performance Marketing
Whether a brand or a performance marketing agency, follow certain tips to ensure the success of performance marketing campaigns:
Experiment and optimise
With great control comes great power. Tinker and test new performance marketing strategies and continuously optimise your campaigns to achieve the perfect fit for your brand. This way, you will know exactly what kinds of tactics deliver the results for your business.
Review omnichannel performance
Comb together all the performance data from different channels to gauge audience behaviour on each. This way, you will continuously find new opportunities to maximize your performance marketing campaigns.
Follow all the rules
Using performance marketing, enables you to reach a huge spectrum of audiences and turn them into your customers. This comes with the responsibility to use ethical practices, avoid deceptive messaging and follow all platform guidelines.
Implement good UX
Simply churning out one performance marketing ad after another is not enough. Ensure that your website, target landing pages, offers, native content, etc., provide a contextual and engaging user experience. It will encourage more publishers and platforms to showcase your ads and entices users to take desired actions.
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How is Performance Marketing Different From Digital Marketing?
It is time to address the performance marketing vs digital marketing debate.
- Digital marketing is a broad-spectrum marketing strategy done using online channels. However, performance marketing is just a subset of digital marketing where an advertiser on pays for certain results achieved in a campaign.
- Additionally, digital marketing deals with broad and long-term metrics such as driving awareness and reach. On the other hand, performance marketing is more short-term in nature and is focused on RoI-specific, action-driven metrics that can be easily measured, such as clicks, impressions, leads, sales, etc.
When used effectively, performance marketing is a powerful tool in 2022 and beyond. Successful marketers are now going beyond simple brand building to increasingly focus on data analytics and performance marketing strategies that deliver proven RoI.
Connect with us today to learn more about the latest in performance marketing and how it can benefit you.