What is performance marketing? What is the goal of performance marketing? How has it evolved over the years and how can it help my organization?
Today’s blog answers these questions and more.
What is performance marketing?
Two decades ago, performance marketing emerged when brands were getting increasingly concerned about the amount of money they were spending on large advertising campaigns. They wanted a way to clearly measure the impact of campaigns on their audience.
Performance marketing is a form of digital advertising that enables advertisers to pay publishers based on the performance of their marketing campaigns. The brand or advertiser defines the desired action they’re looking for and then pays when that action has been completed. That action may be submitting a form or completing an eCommerce transaction.
Over the years, performance marketers have had to shift their strategies to respond to changes in the industry, including:
- Regulatory changes —CAN-SPAM act of 2003 for email marketing, GDPR of 2018, now CCPA and internet browsers such as Safari and Chrome blocking cookies.
- The rise of social media and “influencers”—marketers are starting to roll these influencers into performance marketing in order to make the efforts more measurable.
- New campaign types, such as mobile cost per install (CPI) for mobile applications and cost per lead (CPL) for lead generation.
Yet amidst change, the goal of performance marketing has remained the same: incremental growth through a profitable, measurable marketing channel.
The value of performance marketing
The goal remains true today: brands demand transparency from their media buys.
In order to maintain and/or increase their ad budgets, marketers need to prove their success to the business. The best way to do that is to understand the outcome of their audiences’ actions:
- How many people saw my ads?
- How many people clicked on the ads?
- How many conversions can be attributed to those ads?
- How much money did I make against my expenses?
As one of our customers said, “If you can’t measure it, don’t do it.” This sums up the objective of performance marketing—and really, all digital marketing.
When you have transparency in your campaigns and you can track and measure each impression, click, and conversion, you can then effectively optimize campaign performance:
- Which campaigns led to the most new customers?
- Which led to the highest value customers?
- Which is most profitable? Which supports the best ratio of acquisition costs to customer lifetime value?
- Where should we invest more heavily?
With performance marketing, you only pay for what performs, so you’re not investing huge amounts of budget without knowing your return. This supports incremental growth.
Growing your performance marketing program
Performance marketing programs are used by companies across all types of verticals, most common examples are eCommerce, retail, financial and legal services, real estate, and gaming.
Oftentimes, a brand that is new to performance marketing will first use a performance marketing network (also referred to as an affiliate network) or agency to determine which partners and campaign types work best for them and quickly expand their reach.
Once they’ve gotten the hang of it, they will often bring performance marketing in-house to create a more customized program and reduce the commission fees they’re paying to the network/agency. They can then use a performance marketing software such as CAKE to manage all the assets, commissions, attribution, reporting, etc. associated with their campaigns.
Partners are the driving force of performance marketing
The most common types of performance marketing are Affiliate Marketing and Lead Generation. However, in recent years, the rise of social media and the influx of direct-to-consumer online retailers (that rely heavily on referrals from their new customer base) has led to new forms of performance marketing: influencer marketing, partner marketing, and referral marketing.
No matter what you call it, if your goal is to pay on a performance basis—only for the results you get—then it rolls up into performance marketing. And partners play an essential role in delivering on that goal. Identifying the right partners for your performance campaigns can mean the difference between lackluster results and incremental revenue growth from access to new audiences.
CAKE has been in business for over 10 years and we have seen the industry change during that time. We too have continued to evolve to support our customers in achieving their performance marketing goals, cultivating valuable partnerships, and increasing business profitability. No matter how the performance marketing ecosystem evolves, we’ll continue to deliver innovative solutions and services that our customers need and that helps move the industry forward.
Visit our Blog for more information and best practices on performance marketing.