With the increasing use of technology, advertisers have more and more control over advertising campaigns. Due to the breakthroughs we have experienced over the last decade in cookies and tracking pixels, advertising spending has become more transparent and cost-effective.
For this reason, performance marketing has experienced a dramatic rise. Marketing agencies are now beginning to work for results, hand in hand with the advertiser. Read this article to find out everything you need to know about this unique and innovative concept.
Summary
- Within a performance marketing strategy, we are moving from paying for clicks or the number of impressions to paying for conversions. In other words, the cost of advertising will now be determined by results.
- Currently, the marketing departments of companies prefer to trust those marketing agencies that apply performance marketing in their projects. Since they manage to optimize their advertising budget.
- To improve the optimization of performance marketing actions, it is essential to collect as much data as possible. This allows marketers to improve the performance of the strategy and increase conversions.
What is performance marketing?
Performance marketing covers all those actions where clients only pay for the results they get.
In other words, marketing agencies are paid according to the number of conversions they have achieved.
As you can see, this approach seeks to guarantee concrete results for the client. Therefore, in performance marketing, you no longer pay for the number of clicks on an ad or the number of impressions. But rather for the number of conversions achieved.
Now the advertiser will pay based on how well the campaign has performed. And, to achieve this, it is necessary to design a performance marketing strategy.
Main features of performance marketing
To really understand what performance marketing is, it is necessary to know its characteristics. Below, we will tell you a bit more about the features of these advertising techniques:
- Based on data analysis. All decisions during a performance marketing campaign are made based on the data obtained. In fact, retailers who make use of a digital analytics system, significantly increase their conversions.
- Constant monitoring. In order to optimize results, it is necessary to constantly monitor the information produced by the marketing actions carried out.
- Use of a tracking system. In short, to make it possible to record the actions that users carry out along the sales funnel, we need to use famous cookies and tracking pixels.
- Real-time analytics. Marketing managers and specialists need to make decisions quickly and effectively. And, to do so, they need to receive real-time feedback on campaign performance.
- Campaign optimization. Thanks to the measurement and analysis of the information collected, it is possible to make any necessary changes. So it is possible to optimize the performance of the actions carried out.
- Focus on conversions. The advertiser no longer has to pay for clicks received on a banner or ad. Instead, he will only pay for the number of conversions that have occurred.
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Performance Marketing: Everything you need to know
According to a Forrester survey of 152 marketers, those who invested in performance marketing campaigns increased their return on investment.
Technology has enabled advertising investment to be more transparent about the performance of marketing actions. So much so that marketing agencies are now moving away from traditional marketing practices towards performance marketing.
What is the objective of performance marketing?
When designing a performance marketing strategy, it is important to be clear about the objective to be achieved.
The objective of performance marketing is to ensure that the target audience performs the desired action for which the campaign was created. Whether it is to capture leads, achieve sales or anything else.
This means that the advertiser will only invest its marketing budget according to the results obtained. Therefore, he will pay for the amount of actual conversions produced by the online advertising campaign.
What does a performance marketing campaign consist of?
The purpose of launching a performance marketing campaign is to achieve a specific response from the target audience. As an example, some of these actions can be: a subscription, leaving data in a form or making a purchase.
In a performance marketing strategy we move from pay per click or impressions to pay for real conversions.
When signing a contract with an advertiser, performance marketing agencies must agree on the objectives to be achieved. Depending on the results achieved, the company will receive the established compensation.
How to measure performance marketing actions?
To measure the performance marketing actions we have put in place, it is important to make a brief clarification. When monitoring the results obtained, we have to emphasize conversions.
We have to use cookies or tracking pixels to measure the tactics carried out more accurately. By doing it, we will be able to know how many users have gone through the sales funnel and performed the desired action.
- Reach. This is the number of people we have impacted with our marketing tactics.
- Impressions. Refers to the number of times your ad has been shown to the public.
- Clicks. Here we will count the number of clicks received by the ad. It will help us to know if the ad is touching the consumer’s pain point and leads them to click.
- Engagement. This index translates how many interactions users have had with the publication. For this, we take into account the number of likes, comments, clicks, and shares.
- Leads. A lead is a potential customer, i.e. someone who showed interest in our offer.
- Conversions. A number of people who performed the desired action for which the campaign was created.
What are the advantages and disadvantages of applying performance marketing?
In short, performance marketing is an excellent option if you are looking to optimize your online advertising budget. Let’s see below a table of advantages and disadvantages of this practice:
The main advantages:
- Reduces the cost of acquiring a customer.
- Performance marketing strategies can be used in a wide variety of online channels.
- Reduces risk, since the advertiser no longer has to invest its budget in campaigns without knowing what the results will be.
- Generates customer acquisition strategies focused on conversions. It allows a more objective control of the results and the calculation of the return on investment (ROI).
- It improves the performance of marketing campaigns thanks to real-time data analysis.
- It allows a powerful combination of various online advertising methods: email marketing, social media, display, etc.
- It is easier to manage more efficiently the budget allocated to digital advertising.
The main disadvantages:
- The cost of investing in this type of campaign can be high for small businesses.
- Currently, there are few agencies specializing in performance marketing.
- Sometimes you can experience failures in the collection of campaign data.
- Data protection regulations can make it difficult to optimize performance marketing actions.
The 6 best practices of using performance marketing
In this section, we are going to talk about the 6 best practices to use performance marketing in your project.
Propose clear and measurable objectives
For a performance marketing strategy to be successful, the objectives must be clear and measurable. This way, we can later choose the performance indicators that best fit the project.
In addition, it is important that the client’s expectations are perfectly defined. Only then will the team of specialists be able to design a plan that meets their needs.
Read more about SMART goals examples
Defining KPIs to measure performance
From the beginning, it is essential to define the KPIs or performance indicators with which we will measure the performance marketing campaign. This will determine the budget that the client will receive.
It will also be an essential step for the marketing team to evaluate the performance of the campaign. And, if necessary, introduce changes and improvements.
Campaign monitoring
As you can see, performing the correct monitoring of the performance marketing actions carried out is a necessary step. So this task must be carried out objectively and reliably.
It is essential to obtain real data to implement the necessary changes as soon as possible. This way, marketing teams can speed up the decision-making process and be more flexible. In this regard, it is vital to remember that the relationship between the agency and the advertiser is transparent.
Establish the advertising payment model
As this type of strategy can be carried out through different channels, the metrics that determine the cost vary. For this reason, performance marketing agencies must establish this point with the client from the start.
In general, the most common advertising payment models for this type of action are the following:
| Payment model | Purpose | What it measures | How it is calculated |
|---|---|---|---|
| CPL or Cost per Lead | The lead, also known as a potential customer, who has become interested in the products or services of the brand. | It refers to the money that has been invested in the acquisition of that potential customer. | Total investment in the marketing campaign / Leads obtained = CPL |
| CPA or Cost per Action or Cost per Acquisition | It is used to measure the performance of display advertising campaigns, remarketing and affiliate marketing. | The advertiser pays each time a user buys your product after seeing the ad. | Total investment in the marketing campaign/ Number of conversions = CPA |
| CPC or Cost per Click | It is suitable for those who want to get more traffic to a particular website. | The payment is made based on the visitors who access the advertiser’s website for which the ad was made. | Total investment in the marketing campaign/ Number of clicks = CPC |
Sales funnel optimization
Even if you have the best performance marketing campaign ready, unless your entire sales funnel is optimized, the results may not be the best. This is the main reason why before you get down to work, you need to take a look at your landing pages, registration forms, etc.
In fact, by improving the experience of the user landing on a landing page, you can increase the results. Therefore, evaluate your landing page and perform A/B tests, in order to make the right improvements.
Boost performance marketing actions that worked
As you can hear: what works should never be eliminated under any circumstances. Instead, you should always try to improve it. To do this, determine which actions are giving good results.
Then, you can start optimizing them to achieve a higher conversion.
Conclusion
By improving the measurement of digital marketing campaigns, we can also optimize them. This is precisely what performance marketing seeks to achieve: to ensure that the results obtained are based on real data.
Moreover, by implementing this set of performance marketing actions, we focus on achieving real conversions. And, consequently, we are able to analyze which actions are giving the best results. This way, we also manage to leave behind those that are not working. And as a result, the advertiser gets to optimize its advertising investment and the marketing agency gets higher remuneration.
