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Performance Marketing – why this discipline is essential for your business

header pictures performance marketing - tractionwise

Marketers are terming “performance marketing” as the next big thing in digital marketing; digital marketing has really grown in recent years, due to the advances in social media and its outreach. Digital marketing focuses on creating engaging and relevant content across different platforms, utilizing advertisement platforms and running social media campaigns, targeted to the consumers that frequently use their smartphones for online search, buying and selling.

Therefore, in this era of digital marketing, websites are becoming more and more mobile-user friendly, as that’s what consumers seek. Marketing is crucial for any business, and performance marketing involves a measurable marketing campaign across different channels, that ends up in a sale, click or any action taken by the consumer, which can be tracked and evaluated.

Performance marketing is great for young brands and startups

When budgets are small, brands base decisions on data more than ever before. Then world class technologies in attribution coupled with the convenience of performance marketing will make it a marketing necessity.

This is the reason why also SME and corporates together with advertisers and agencies are looking for meaningful attribution of their marketing spends and gaining insights in the campaigns.

Why businesses need to ace their game in performance marketing

Performance marketing uses various advertising and marketing campaign channels, most of which are paid advertising and marketing, and can be tracked with the help of various tools, such as analytics and metrics. The marketing company your business hires, will be paid when a certain action is completed by the consumer, in most cases, it is the completion of a call to action or a sale. As performance marketing relies heavily on paid marketing, it explores different channels, options, and targets a specific consumer market, and crafts specific, a goal-oriented marketing campaign for that certain business.

Bigger corporations spend millions on performance marketing, and small to emerging businesses can learn a lot by following the basics, or the bottom line of such campaigns. 

All businesses that wish to have a solid online presence, need to focus on digital performance marketing. Performance marketing utilizes paid advertisements on social media giant, Facebook, and other channels. Paid Google advertisements are also utilized, and engaging content is produced across various publications for better ranking at search engines. Consumers, always first look up the search engines for a particular product/ service/ solution to their problems, and later to social media channels, such as YouTube, Instagram, and others. 

Performance marketing strategy focuses heavily on targeted advertisements and marketing campaigns, meaning it is not a random campaign, but a certain audience segment is targeted each time. 

Performance marketing tools are utilized to create a top-quality advertisement campaign, your ad must be in high quality, must be relevant, and must be able to pique interest, if it doesn’t generate interest, the social media network, or Google, won’t show it anymore, on its platform. Therefore, if an ad generates interest; it gives more clicks; and clicks leading to action and conversion, the network would show it more often, hence your marketing campaign would have worked. And performance marketing would help you evaluate that conversion with the help of the online metrics. For example, Facebook will show an ad more on its network, if the bid amount is reasonable, Google has quality and relevance and it shows conversion.

Affiliate marketing and sponsored content are types of performance marketing, in which businesses collaborate with other businesses, and generate a marketing funnel. Leads and sales from a sponsored content are very easy to track. Therefore, performance marketing is a type of paid marketing, in which end result has to be conversion or a call to action, or sale, the marketing channel when the conversion has taken place. 

Performance Marketing Funnel and KPI

The funnel stages that guide customers through can be measured and optimized with different performance indicators. It starts with cost per impression within the awareness stage, continues with cost per click in the trigger stage, followed by cost per engagement in the search/engage stage. The next stage is considering, which can be measured as cost per lead and the purchasing or buy stage is the cost per sale.


How performance marketing works to run a successful business

Performance marketing in B2B or B2C has completely changed the way products were previously sold and marketed, it has revolutionized the way companies now market their products. You get to set a bid with a marketing channel, and then your advertisement is displayed, and your company finally pays when the ad has shown conversion or generated an action. It’s a win-win for both marketing channels and your business, and there is nothing to lose. The best part of performance marketing is, it lets you measure everything; from impression to a click to an action being taken, the demographics of the audience that has shown more interest, and this enables you to up the game in your marketing campaigns. There is no doubt in, why your business needs performance marketing. 

Performance marketing plan lets you pay for a specific action taken by your targeted audience, for example, if your marketing goal is just to increase brand awareness, and you only want your advertisement to be seen, you’d only pay for the number of times your ad has been seen. Performance marketing on Facebook and Instagram would help you pay for and measure engagement; for example, the number of likes, shares, and comments. No advertising channel today promotes spam and fake likes and clicks, only engagement from real users is what counts. That is why the era of backlinking has gone, and now content is the king, which generates interest and provides value to the readers. 

Google is very strict, in the type of content it ranks, and what keywords and the number of keywords, you can use. 

Performance marketing tools are convenient and easy to use tools will let you evaluate and measure performance that is gathered from real users and customers. Most B2B marketing campaigns rely on email subscriptions, which is very easy to measure and track, lead generation through email campaigns is what most B2B marketers look for. E-commerce brands look for sales, and only pay to advertising-channels, when a sale is made. Performance marketing in a nutshell, helps in reducing cost per acquisition CPA and increases the ROI, return on investment, which is what every business looks for. Therefore, we can easily say, performance marketing is very cost-effective, as businesses would only pay when a certain marketing goal has been accomplished. 

Performance marketing focuses on return on investment ROI

Performance marketing strategy lets businesses spend less on marketing than ever before, the ability to track return on investment, businesses can now focus on specific marketing goals for a specific segment of the audience, and only paying, when customer acquisition has been achieved. There are many examples of thriving startups and companies that have taken the route of performance marketing; one performance marketing example would be of ride-sharing app/company “Lyft”; they provide customers with the luxury of having their own private driver, within a few minutes, and right from their mobile phones. Their marketing strategy focused heavily on students and in and around campuses and universities, and tech companies. 

How to calculate Return on Investment (RoI)

A very simple way of calculating return on investment, and thus attached with a big assumption is shown here:
(Sales Growth - Marketing Cost) / Marketing Cost = ROI
If sales grow by $500 and the marketing campaign cost $100, then the simple ROI is 900%.
(($500-$100) / $100) = 400%

For digging deeper in RoI calculation, check our soon to come article.

Performance Marketing examples

With the help of the word of the mouth, and reliable and quality service, they were able to spread their services like wildfire, they didn’t have to spend millions on expensive marketing, and they delivered good value to their customers, and gained more customers, as a result. The incentives, promotions and bringing in referrals, was the marketing strategy that worked for them, and delivered instant results. Performance marketing funnel has also worked for reviews sharing site, “Yelp”; it combined social networking with other digital marketing techniques back in 2004, and now boasts more than 148 million reviews. 

Though, there are many other similar websites, Yelp is still the market leader, and any business that has a 5-star rating on Yelp, sees an increase in business revenue up to 5%-9%. 

This return on investment is due to targeted marketing, and result-oriented and goal-oriented marketing, which is provided by performance marketing channels. The performance indicators in this type of marketing are conversions, engagement by the followers, and other measurable performance indicators. In the world of performance marketing, you have to stay updated, relevant and fresh, and for this type of marketing to work, you have to designate goals. What are the goals of your marketing strategy: is it website traffic, visitors, social media engagement, or sales. It helps you allocate funds only for the type of marketing technique that works, and leave the rest. 

Often underrated mistakes and hacks within performance marketing

Avoid these mistakes

  1. Fail to set goals
  2. Not paying attention to analytics
  3. Fail to test
  4. Targeting the wrong audience

Check out these hacks

  1. Leverage video marketing
  2. Use landing pages for hard conversions
  3. Apply remarketing
  4. Answer questions

Performance marketing is here to stay

Whichever your performance marketing strategy or goal is, it is here to stay, and it’s all about being trendy, cool and unique for the current and upcoming users of social media channels. There are companies that have ditched the older trends of email campaigns and paid advertising, the marketing funnel for Domino’s pizza, for example, was the ease to access them and place an order. The sudden quick growth of Domino’s pizza was due to the fact that they let their customers place an order from anywhere, customers could place an order from twitter, even their Facebook messenger.

 And that is how they escalated their game, by leveraging on already existing social media channels, and reaching out to more customers. This ease of access in order delivery made them a flourishing pizza delivery service. 

The future of performance marketing for businesses is bright, again setting a specific marketing goal is very important, if you’re unsure what you’re trying to achieve from your marketing, how would you be successful? For companies that provide online services can set their performance marketing goals to getting more subscribers, it is important to set one goal at a time, and not invest all at once on different type of marketing techniques. Optimization in this type of marketing is done faster, and resources are injected only in techniques that are working. 

This result-oriented marketing strategy is what all businesses seek. Therefore, as performance marketing doesn’t require a huge budget to initiate, small businesses can jump right into the bandwagon, and get results!  

Boost your Go-to-Market with Performance Marketing

Want to understand how your Go-to-Markets and Launches can be boosted with Performance Marketing Strategies and tactics? Let us get in touch.

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André Wehr
André Wehr
As a founder and entrepreneur, I experience every day how important Traction and Customer Centricity is. It makes the difference between a nice idea and a viable business.

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