Performance Marketing – Is it for you?

What is it about and how can you use it?

Performance Marketing is a term a lot of marketing specialists and people, selling very different channels, talk about. Performance marketing is by definition (according to that “…the action must be measurable and the campaign buy can be optimized on that basis.” Many people confuse performance marketing with Affiliate marketing since both basically is about measuring and optimizing the campaigns through or with the help of some kind of technical platform.

Even though Affiliate Marketing is a part of Performance Marketing, there are other channels like real-time-bidding, programmatic or any other channel where you can use a technical platform and measure the activity of the consumer, not just the view. This means that the term Performance Marketing is defined by three things:

  1. Technical Platform
  2. Payment model defined per performance
  3. Optimization possibilities

Technical Platforms for Online marketing

If we start looking into the Technical Platform part of the definition it could include any standard Tracking Platform used by any Affiliate Network. In these platforms you can follow the consumer from the initial view of your advertising through the sales funnel up until the final point of sale. Even though the view in itself is not enough to make it a part of Performance Marketing it is still an asset when evaluating or

Even though the view in itself is not enough to make it a part of Performance Marketing it is still an asset when evaluating or analysing the events that comes afterwards; the click, the lead generated or sale closed. In many platforms you have the possibility to adjust the buy in real-time and enhance the effect of the campaign or redraw if the performance is not following the goals you have set up.

Modern technology and above all, modern technical platforms like programmatic platforms, have a built-in intelligence you can benefit from even if you are not a super-experienced marketer. There is usually some kind of geo targeting option available in most technical tracking platforms and also different options on how you want to track the traffic. All of these things put together will give you a lot of insights and knowledge about your specific consumers and the patterns of your traffic.

Payment models and how they differ

If we secondly look into the payment models it takes us a bit deeper into the chain of events when a customer enters the journey that we can track in the Technical Platform.

If we start looking into bidding platforms the process of optimizing is shorter compared to more long term efforts like affiliate marketing since you work with the click as a parameter of optimization. This means that you are optimizing on the first point of traffic after the view.

In lead channels you also work towards an optimization of a specific goal; you want the consumer to do something; leave an e-mail adress, watch a video tutorial, answer polls or share your information. There are multiple ways we can use lead generation as a performance model but in the end of the day we are looking for the consumer to make some kind of action.

In the affiliate marketing model you work with focus on the last step; the CPA (cost per acquisition) or the sale. The data you gather about how your traffic behaves and which of your affiliates are generation sales and which once are not is something you can optimize and draw lessons from. The longer you work with affiliate marketing – the more accurate you become on knowing which kinds of affiliates will give you the best ROI in terms of delivering good sales with a good CTR.

It’s all about finding, improving and optimizing the publishers you have in your affiliate program to enhance your sales volumes.

Optimization is the third part of Performance marketing

Optimization can look quite different depending on the channels you are optimizing.

The click is the first sign of interest from the consumer and if we can find a formula to make sure that they end up on our offer they will be more likely to buy our products. The math is simple; the more clicks we send to our site = more likely to make a lead or a sale (an action). This is true and at the same time it is not since it also depends on the quality of the click meaning that clicks from one specific channel might convert better into different actions than another channel does.

If you want leads, sales or views on a tutorial video for example, you will need to have different sets of strategies when you buy the clicks. This is the point of optimization: what do we want the consumer to do and from which channel of clicks do we get the best performance outcome?

Performace Marketing is very complex in itself and not easy to explain to someone who is new in marketing due to the complexity of different channels and possibilities. For someone who wants to test performance marketing the entry step is quite easy if you only look into the business model; you pay for performance – not views, often referred to as a CPA model. It takes some time to become good at performance marketing and looking into a possible partner to work with in this area means you need to do some research, hire an agency that are experts in the area and can give you total transparency or hire staff who has previous knowledge in the area.

It might be tempting to throw in budgets into something that is labelled “performance based” but in the end of the day there are costs for hosting, banner materials, bad traffic (if you don’t optimize the traffic well enough) and other costs like fixed fees (affiliate networks often charge monthly fees for instance) or set-up fees and costs for technical platforms. With the above said I believe, after working with performance marketing the past 15 years or so, that it is wise to bring in “knowledge” before you get started. Affiliate marketing, for instance, is not a money making machine, as many tend to believe – you will need to build your brand, SEO your website and have a long term strategy to get it to work.

And finally to sum things up ask yourself; would you click on the banner or video you just created? Would you buy from your own online store?

Kim Lehult
Online marketing expert, Serial entrepreneur,
CEO of Witty AB and founder of HIME AB

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