Performance Marketing: A Beginner’s Guide

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A total of $496 billion was spent on digital advertising in 2021 (including desktop, laptop, and mobile devices). Statista predicts that the figure will steadily increase over the next couple of years, reaching a staggering $646 billion by 2024.

Considering this forecast, it isn’t surprising that a number of new Internet marketing strategies have sprung up – social media advertising, affiliate marketing, email marketing, and most significantly, performance marketing.

Affiliate and retailer campaigns can be targeted strategically and with a high ROI, all based on the performance of the retailer (the “merchant”). Merchants can feel confident that their money is being well spent when they pay affiliates when certain actions are completed since they are already converting their target audience before they pay for the transaction.

Merchants can also benefit from free brand exposure and targeted clicks.

Find out how to get started with performance marketing for your eCommerce business by reading on.

Performance Marketing vs Affiliate Marketing: What's the Difference?

An organization’s performance can be improved through performance marketing. As opposed to only paying the marketing agency when a particular product is sold, the retailer pays the affiliate when the campaign achieves the desired result.

Performance marketing, in its simplest form, is affiliate marketing at scale, with new technologies and partnerships forming part of the mix.

Affiliate marketing, on the other hand, is a subset of the broader umbrella of “performance marketing,” which includes influencer marketing, email marketing, search marketing, and any other marketing undertaking that involves a marketing partner exchanging sales for commissions.

Affiliate marketing is when a person or company makes money by promoting the product of another company or person. Using affiliate links, affiliates promote the company’s product and earn a portion of the profit from each sale.

Performance marketing: How does it work?

Affiliate networks and third-party tracking platforms; affiliate managers or OPMs (outsourced program managers). There are four main categories in performance marketing: retailers and merchants, publishers, affiliates, and affiliate networks. The groups are imperative and must work together to reach the ultimate goal.

Performance Marketing: What are the benefits?

When you embrace performance marketing’s full potential to scale your business, you will be able to take advantage of the growing digital marketing industry.

Performance marketing is a great investment for your business for the following reasons:

  • Increasing traffic by working with affiliates and agencies that have their own established audiences can help you build brand awareness.
  • It is measurable and transparent when it comes to performance marketing. Now brands can see the full path each buyer takes from click to purchase and identify the partners, platforms, and channels where they should invest more.
  • A lower CPA (Cost Per Acquisition) and a higher ROI for affiliate marketing are the results of only being paid after the desired action occurs. You now have more money in the budget for other performance marketing strategies to be tested and expanded so you can grow and compete.

Performance Marketing: What are the Different Types?

strategy of one merchant may be limited to one area, while the performance marketing strategy of another merchant may utilize multiple areas within the larger “performance marketing” umbrella to accomplish their business goals.

Here’s a look at how businesses can benefit from different types of performance marketing.

● Social media marketing.

Social media marketing makes use of social media networks to gain visibility and traffic, such as digital content displayed on Facebook, LinkedIn, or Instagram. Advertisers can reach potential clients by using various ad formats and targeting options, while measuring KPIs such as clickthrough rate (CTR), cost per click (CPC), and return on investment (ROI).

● Paid search marketing.

Advertisers who pay for clicks on sponsored ads on search engines such as Google Ads, Bing, and Yahoo engage in paid search marketing. An advertiser may also pay each time their ad is displayed (CPM), but this is less common.

● SEO (Search Engine Optimization).

An alternative to paid search marketing, organic search relies on unpaid methods such as search engine optimization (SEO) to rank high in search engine results. Many search engine marketing companies measure their results based on performance, while others may partner with SEM companies and payout commissions based on their results.

● Affiliate marketing.

Any type of digital marketing that is affiliated with the advertiser and paid out when the desired outcome is achieved is referred to as affiliate marketing. A lot of the time, this involves partnerships with coupon, loyalty, review, or incentive sites, or working with influencers, YouTubers, or bloggers.

● Advertising on native platforms.

Unlike display ads or banner ads, these are forms of paid media that don’t seem like ads at all.

A native ad usually has the same format and function as the site it’s on – such as a news site or social networking site. The content fits “natively” on the website, and it can be dynamically fed based on user actions.

Native advertising is typically paid through CPM (pay per impression) and CPC (cost per click).

● Sponsored content.

Sponsored content is a form of native advertising and content marketing where a post or video is posted on a website that publishes similar content. The sponsored content will blend in with other content while still indicating that it is sponsored. Compensation can take the form of a free product or an experience, or it can be based on CPAs, CPMs, or CPCs.

Performance Marketing: How Do You Measure It?

Performance marketing is centered around calculating the ROI of every action since every KPI can be tracked and measured. Measuring and improving performance begins with key metrics, such as clicks, page views, and sales.

To give you a better understanding of performance marketing pricing, we have provided some of the most common metrics and KPIs.

● PPS (Pay Per Sale) or CPA (Cost Per Acquisition).

Basically, it is the amount that retailers or merchants pay when a customer completes a desired action, such as completing a form or making a purchase. Merchants most commonly set up this payment model in eCommerce.

● PPL (Pay Per Lead).

Typically, a “lead” is a completed form, such as a registration or sign up, with information on the customer – such as their name, email address, or phone number – so that the merchant can follow up with them and drive sales.

● PPC (Pay Per Click)

It is the amount a retailer pays an affiliate for each ad click referred to the desired landing page. PPC is one of the most popular digital advertising today.

● PPX (Pay Per X).

A merchant can define the “X” as any action other than a lead, click, or sale in this payment model. The download of apps, the upselling within apps, and joining rewards programs are just a few examples.

● LTV (Lifetime Value).

Based on this metric, retailers predict the “lifetime value” of a customer over the course of their relationship. Based on a customer’s behavior and actions with a brand, the LTV estimates how much a customer will spend.

Performance marketing holds huge potential for business owners seeking to engage and convert new buyers at scale and at a lower cost as marketing trends show continued investment in all things digital. When you partner with affiliate networks and publishers, you can reach more people than you would otherwise be able to within more traditional marketing approaches.

There’s always room for improvement and growth in the performance marketing space, no matter where your brand stands.

Determine which approaches work best for you and how to address the needs of your affiliate partners as well as your own brand. You need to define your specific goals, and once you have them, you need to build those connections.