What is performance marketing?
As the name suggests, performance marketing terms to all the marketing and advertising efforts that lead to a certain desired action which can be a sale, a website visit or an app installation etc. The most important characteristic of performance marketing is that the advertiser pays the platform only when the specific action happens. Advertisers can give an indication to the platform what is the desired action and the cost that the brand is willing to pay. The platform will optimize the campaign towards both the goals.
For example, consider you are a bakery and you want people to visit your online store and get to know more about your products. You go on Facebook and from the various ad options Facebook offers, you select banner ads and select your audience based on your location, target group demography and interest and set your objective as “Website Visits”. This would simply mean that no matter how many relevant people see your banner ad on Facebook, you would pay Facebook only when someone clicks on the ad and visits your website. In this example, advertiser would pay the platform on basis of click hence, the pricing model here would be CPC- Cost Per Click.
Similarly, there can be other pricing models as well based on the desired results:
- Cost Per Impression (CPM)
- Cost Per Sale (CPS)
- Cost Per Lead (CPL)
- Cost Per Acquisition (CPA)
Performance marketing has always been interchangeably used with terms like affiliate marketing, growth marketing, etc. In the following sections, we would try to understand the differences.
Performance marketing vs Brand marketing
When talking about performance marketing, the other term that often comes in mind is brand marketing. Brand marketing is nothing but all the efforts you put in defining your brand- creating brand name and design, establishing guidelines for clear and effective communications, and planning and executing marketing activities that set your brand apart from other brands. Here are some examples of brand marketing from blog of 99designs.com:
Apple’s Brand Marketing Strategy
Apple’s brand marketing has always focused less on products and more on the lifestyle that is defined by their products. Some of the notable characteristics of Apple’s Brand Marketing Strategy are:
- Crisp white packaging
- Provocative taglines like Think Different
- Their event-like product launches
Apple products have a dedicated fandom who defines their marketing initiatives.
Nike’s Brand Marketing Strategy
Nike believes in selling stories and present their products with an engaging story about the origin and the idea of the products.
Adding a background story to the products gives the brand a human touch.
Often seen as two ends of a spectrum- performance marketing and brand marketing can be differentiated on the basis of their marketing objective. While brand marketing helps the brand to grow in long-term, performance marketing is more concerned about growing the company business in short term. But the question that we often face is- Are performance marketing and brand marketing mutually exhaustive? Often not!
Brand marketing is like a roadmap- how would you want your brand to appear to the users? What position would you want to take in your audience’s life? Brand marketing can be the guiding light for performance marketing to work. Barry W. Enderwick has come up with a perfect example in his article Is it really Brand vs Performance Marketing? From his Netflix days-
“At Netflix when we were establishing ourselves as a streaming company before Netflix Originals came on the scene, we would create banner ads that featured marketing messaging developed from the foundation of our brand position — ‘movie enjoyment made easy.’ Typically, it would have a benefit-driven headline like, ‘Instantly watch as many movies as you want’ followed by support copy. The imagery would be something like a happy family in their living room with the Netflix UI on the TV.”
Another point Brand Marketing supplements performance marketing. In almost all cases, running branding campaigns show a lift in performance marketing parameters.
Performance marketing vs Affiliate marketing
To define affiliate marketing in simple words, according to Shopify.com, “Affiliate marketing is an online sales tactic that lets a product owner increase sale by allowing others targeting the same audience— affiliates—to earn a commission by recommending the product to others. At the same time, it makes it possible for affiliates to earn money on product sales without creating products of their own.”
Affiliate marketing involves referring to some other company’s products and services through one’s blog/website, social media channel etc with help of a unique link or discount coupon etc. Every time someone would use this link to visit/purchase the product/services (desirable action to be decided between the merchant and affiliate), affiliate would earn a commission. Here are some of the examples of affiliate marketing:
Popular e-commerce brands like Amazon and Flipkart run their own affiliate programs for bloggers, publishers, and content creators where they provide easy-to-use tools to integrate their unique product links on the content creator’s properties. Now, it’s the publisher/affiliate’s work to make sure maximum people visit their sites and get convinced to click on those links/make a purchase.
A good example of an affiliate site would be the product review and comparison websites:
Affiliate marketing is often used interchangeably with performance marketing. Going by the definition, in affiliate marketing, an affiliate is paid only when a desired action is completed, which implies that affiliate marketing is a type of performance marketing and with the advancement of technology the line separating both have become thinner but performance marketing involves a lot more than affiliate marketing only like social media marketing, search engine marketing, email marketing etc.
Performance marketing vs Growth marketing
By now we have understood that performance marketing has a lot of focus on KPIs such as sales, emails, downloads etc.- it encompasses all the paid strategies to generate quantifiable results within a particular time period. In terms of funnel, the focus is largely from Middle of Funnel to Bottom of Funnel.
In case of growth marketing, which often relies on performance marketing to achieve its goal, the focus however is long-term like Brand Marketing though here, the priority is to generate organic traffic, acquire and retain customers. Often the focus of growth marketing lies at top of the funnel and also involves organic marketing techniques like social media, SEO, content marketing, referral marketing etc. And many a times it can involve compromising on profitability to get more leads faster and scale up the business. For example, a new OTT platform offering content free of cost just to grow its user base or a new e-commerce platform offering deep discounts to snatch users from competitors.
Following is an example of growth marketing according to Ventureharbour.com:
HubSpot’s Growth Marketing Model
Growth marketing technique includes a number of strategies and methodologies across various fields like UX, customer service, pricing structure, brand voice and product offering, etc. Hubspot is a B2B brand that provides growth marketing solutions to companies. Following are key growth strategies employed by HubSpot that helps HubSpot to achieve high growth.
- Free Tools: Free tools offered by HubSpot act as a gateway to paid products.
- Brand Image: HubSpot doesn’t need any case study to establish the success of its products for HubSpot is the success story of its own products. Customers opting for HubSpot want a similar success for their brands using HubSpot.
- Lead Nurturing: HubSpot uses Email Marketing (which is one of its core products) to nurture leads.
- Pricing Strategy: HubSpot follows a Pay as You Grow model which means customers have to pay as they keep acquiring contacts.
- Content Marketing: HubSpot is one of the most authentic and most informative sources for content marketing.
- Webinar Marketing: The company leverages its expertise by conducting informative webinars and marketing it among its audience.
Benefits of performance marketing
In the previous sections, we have already discussed a number of benefits that performance marketing brings with itself. Summarizing them here for a better understanding:
- Performance tracking: The best feature of performance marketing is the ability to measure the impact of the efforts. Since the payment for performance marketing is tied to a particular action getting completed, there are mechanisms to track and measure performance marketing.
- Paying only for completed actions: The success of performance marketing depends on whether the objective of the campaign is met or not. The beauty of the performance marketing platforms lies in their ability to optimize the reach and targeting to maximize the desired result. Hence, the liability of performance shifts from the advertiser to the publisher.
- Reaching out to relevant audiences: Often advertisers select a concrete action like website visit, lead, sale, download etc as the objective and not just ad views. The publishers hence can maximize their earnings only by showing the ads to the most relevant audiences that are most likely to convert hence making performance advertising valuable.
- Real-time campaign optimization: Like most digital ad campaigns, performance marketing campaigns too come with the option to make changes to campaigns any time during execution to optimize them for getting the best results.
- Well-defined budgets: Before setting up a performance marketing campaign, most advertisers know the maximum price they are willing to pay for each relevant action completed. Most performance marketing platforms have a well-built system that has set the maximum price to be paid by the advertisers- either fixed or through a bidding system.
Characteristics of a performance marketing platform
Now that we know why advertisers should go for performance marketing, the next obvious question that comes to mind is- how do I know that this is the right performance marketing platform for your brand?
Any good performance marketing platform would have the following four characteristics:
- Reach: One of the most important characteristics of a good performance marketing platform is reach. There are two reasons for considering reach as an important parameter for selecting a platform- though advertiser has to pay only as per result, a platform’s reach is important in long term for scaling up campaigns. Remember, running one single campaign on a high-reach platform is better than running multiple campaigns on several low-reach platforms as it would adversely affect planning and operational efficiency as well as lead to duplication of reach.
Another reason for going for a high reach platform is to get benefits of advanced targeting options. Most high reach platforms offer one or more targeting filters based on factors like geography, audience demography, interest etc. This is possible only when a platform has reach high enough to segregate audience and still be able to deliver on reach numbers.
- Variety of ad-formats: Another important factor to be noted is the variety of ad formats offered by the performance marketing platform. There are two reasons why this factor is important. There are multiple ad formats possible in digital like search, display, video, native, audio etc. Placing ads through multiple formats gives multiple touchpoints for brands to reach out to the audience who might miss on some of these. This would also avoid ad fatigue.
Also, supporting multiple ad-formats makes it easier for the platform to optimize the campaign based on the performance of various ad formats by showing more of what works the best.
- Cost-effective: Like any other platform, cost is an important factor. What are the parameters on which campaign cost varies on the platform? Is the effective cost per reach/cost per download/customer acquisition cost comparable to other platforms that offer similar results?
- Ability to optimize campaigns: Performance is at the heart of any performance marketing campaign hence, one of the important characteristics of performance marketing platforms is the ability to learn from the campaign and optimize to get the maximum results.
Various performance marketing channels
There are numerous performance marketing channels. Some of the popular ones are:
- Social Media Marketing
- Programmatic Display Advertising
- Native Advertising
- Sponsored Advertising
- Affiliate Marketing
- Search Engine Marketing
- Mobile Advertising
- Video Advertising
Performance Marketing Example- Google Ads
What can be a better performance marketing example than Google Ads? Recently, Think With Google came up with a guide to achieve success in performance marketing with Google Ads. We would be laying down some important points from the guide here. In case you would want to know more, please visit: Three Steps to Master Digital Advertising.
How to setup goals?
The following 3 questions are very important:
- What would you want to achieve with the campaign? This is the marketing objective (MO). In the case of Google Ads, the main focus is on the following four:
- Lead Generation
- Online Sales
- Offline Sales
- Mobile Growth
- What metric needs to be improved to achieve the marketing objective? This would be the Key Performance Indicator (KPI).
- What value of KPI would define the campaign’s success? This would be the campaign goal and would depend on the ROI required by the business based on Customer Lifetime Value.
The following table has some of the most used KPI and Campaign Goal examples:
|MO||KPI Examples||Campaign Goal Examples|
|Lead Generation||Calls, Contact Form Responses||Cost Per Lead, Return on Ad Spend|
|Online Sales||Purchases, Subscriptions||Cost Per Acquisition, Return on Ad Spend|
|Offline Sales||In-store visits, Appointment Sign-ups||Cost Per Acquisition, Cost Per Store Visit, Return on Ad Spend|
|Mobile Growth||App Installs, Engagement||Cost Per Install, Cost Per Daily Active Users|
Now that the advertisers’ work is over, here’s how Google Ads platform works on the campaign.
How Google Ads work their magic?
- Conversion Tracking: A conversion happens when the desired action- click, purchase, lead form completion, etc takes place. Once the advertiser sets up the conversion tracking, Google Ads would be able to track the campaign progress. Conversion tracking is important because
- It measures the campaign performance against the desired KPIs and goals.
- It helps in calculating the campaign ROAS or CPA and decide whether the campaign is cost-effective or not.
- Helps in saving time and improving efficiency by unlocking automated bid strategies in Google Ads.
- Automated Bidding: Once conversion tracking is set up, Google Ads uses a powerful machine-learning algorithm to learn more about the right audience and maximize the results. This is how automated bidding helps:
- Optimizes the campaign towards a KPI or goal.
- Guided by customer lifetime value and target ROI.
- Provides real-time control and reporting.
- Ensures efficiency by placing the right bid at the right time.
- Dynamic Creative Formats: Another example of automation used by Google Ads is dynamic creative formats.
- These ads are pushed by machine learning algorithms that make the decision of what type of creatives to show to various customers under various contexts.
- With a limit of up to 30 individual texts, logo, video, and image creatives, there are about 45K+ potential permutations that can be tested.
- Some of the examples are Responsive search ads and Responsive display ads.
- Waterfall Media Planning: This is how the budget is allocated to various channels based on their efficiency
- Once the best-performing channel is identified, most of the money is spent here until it’s within the CPA and ROAS limit.
- Once the best-performing channel is exhausted, the campaign moves to the next best channel and so on.
Performance Marketing Article Series: What will we cover in the series?
In the first article of the performance marketing for Indian SMEs series, we went through some popular performance marketing definitions and examples for the same. Here are some of the topics we intend to cover in the upcoming articles:
- Performance Marketing Funnel
- In-depth understanding of various performance marketing platforms
- Performance Marketing for various business models- D2C, E-commerce, Offline etc
- Performance Marketing Case Studies
- Performance Marketing- Strategies, Tips and Campaign Learnings
In case, you have any question or have a topic in mind that you would want us to cover under our performance marketing article series, please let us know at Help@TheMediaAnt.com.
If you would like to understand more about performance marketing platforms offered by The Media Ant and their advertising rates and reach, please visit: TMA Performance Marketing.