What is Performance Marketing

Are you a small business or website owner that wants to grow your brand and revenue? If so, you may have heard of "performance marketing". If you are wondering: "what is performance marketing?" then you're in the right place. We're going to define this type of marketing and give you the information you need to determine whether performance marketing is for you.

Performance marketing is a unique and increasingly popular form of marketing that helps business owners like yourself gain the upper hand on the competition. If you want to utilise performance marketing to its fullest potential and see positive benefits, then you should make every effort to learn more about performance marketing and why it's so popular.

Follow along to learn more about performance marketing and gain insight as to why so many people use performance marketing when trying to grow their business.

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What is Performance Marketing: An Overview

In the most basic terms, performance marketing is a type of online marketing in which businesses are paid based on results. That is, instead of paying for ad space as you would with traditional marketing, you only pay when someone takes a desired action, known as pay-per-click PPC advertising.

Investing in performance marketing channels is like saying, "I'll pay you x amount for each customer you bring me.". As you might imagine, this makes performance marketing very appealing to some businesses.

For example, let's say that you're an eCommerce store owner. You could sign up for a cost-per-click (CPC) performance marketing campaign in which you would only pay your marketing partner when someone clicks on your ad. So, for example, if you're paying $0.50 per click and someone clicks on your ad, then you would owe your marketing partner $0.50.

Alternatively, you could sign up for a cost-per-acquisition (CPA) performance marketing campaign in which you would only pay your marketing partner when someone purchases on your site. So, if you're paying $100 per acquisition and someone makes a purchase, then you would owe your marketing partner $100.

As you can see, with performance marketing, you only pay when someone takes a desired action. This is in contrast to traditional marketing, where you would pay whether someone takes an action or not.

Performance marketing can take many forms, but CPC and CPA campaigns are the most common. You may also see performance marketing referred to as affiliate marketing, lead generation, or cost-per-action (CPA) marketing. By all these names, performance marketing features the same basic core concept: pay for performance.

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The Benefits of Performance Marketing vs Digital Marketing

Performance marketing has many benefits, which is likely why it's become so popular in recent years. First and foremost, performance marketing is a great way to grow your business quickly and efficiently. Since you only pay when someone takes a desired action, you can be sure that your marketing efforts result in new customers and revenue.

In addition, performance marketing is a great way to track your marketing results. Traditional marketing can be challenging to track how many people saw or clicked on your ad.

With performance marketing, however, you can easily track how many people saw or clicked on your ad and how many people took the desired action. This makes it easy to track your ROI and adjust your marketing efforts accordingly.

Finally, performance marketing is a great way to get started with online marketing if you're on a tight budget. With traditional marketing, you typically have to pay upfront for ad space. With performance marketing, however, you only pay when someone takes a desired action, which means you can start marketing your business without a significant upfront investment.

Performance marketing differs from digital marketing in a few different ways. First, performance marketing has a different pricing model than digital marketing or search engine marketing. This is often more affordable for businesses as they start up but could become more expensive.

This is in contrast to digital marketing or search engine marketing, for which you would simply expect to pay a flat monthly fee regardless of the results. For many, this is a turn-off to digital marketing in a traditional sense.

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Drawbacks of Performance Marketing Strategy

Of course, performance marketing is not without its drawbacks. The most notable disadvantage is that you may have to pay more for your marketing efforts than you would with traditional digital marketing. This is because you're only paying when someone takes a desired action, which means that your marketing partner has less incentive to show your ad to as many people as possible.

In addition, performance marketing can be a bit of a gamble. Since you're only paying when someone takes a desired action, there's always the possibility that you could end up paying more than you would with monthly fees for digital marketing.

Finally, performance marketing may not be suitable for every business. If you're unsure whether performance marketing is right for your business, be sure to speak with a marketing professional to get their opinion or consult with a performance marketing agency.

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What Are the Key Metrics for a Performance Marketing Campaign?

If you are considering establishing a performance marketing campaign for your business, you might be wondering what the best way to evaluate success in your campaign would be. Of course, just like a digital marketing strategy, you will want access to data that tells you how much you have paid in marketing and the return on that spend. 

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Cost Per Conversion

How success is evaluated with performance marketing platforms is a bit different. This is due to the fact that you are paying for every conversion, not total marketing spend. 

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Target Acquisition Cost

The way that performance-based marketing agencies are making money is by marking up the amount that they spend to deliver you the leads. Once they hit their target acquisition cost, the difference between what they charge you and what they spend to get the leads. This creates a bit of a dilemma for a business using this model and employing these marketing companies. 

If the firm can get leads for cheaper than what you are paying, would it not be better to pay them for the campaign rather than by the results? This is the gamble that companies take who pursue a performance-based marketing plan. 

Therefore, when evaluating the cost of your marketing budget, you should take these factors into close consideration to determine whether it is suitable to move forward with this pricing model.

It may be a good idea to start out with a performance marketing model to determine if leads can indeed be had for cheaper than what you previously thought. By creating Google and Bing Ads and testing them for a couple of months you will be able to get an idea pretty quicky

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Should You Invest in Performance Marketing Channels?

Though performance-based marketing can be a great option to help some businesses scale up quickly and only pay for proven results, it can also hold some companies back. Some businesses prefer to set a marketing budget and have a digital marketing agency manage their paid advertising campaigns.

Another similar strategy to performance marketing is search engine optimisation (SEO). While you can't pay for results with an SEO strategy, you can use a performance marketing-based mindset to help built better and more effective SEO campaigns for your business. An SEO strategy is another option like performance marketing that you can invest in for business growth and success.

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Profitable Success With Performance Marketing

Performance marketing agencies, on the other hand, performance marketing agencies can lead highly profitable, successful performance marketing campaigns aimed at your target audience. This can be done without investing in content marketing, search engine optimisation, social media marketing, brand marketing, web traffic, and other marketing strategy initiatives. These marketing strategies can require months of investment, especially those centred around content marketing.

In contrast, you can invest that same money in instant results and see positive campaign performance within days.

At the end of the day, what will determine whether performance marketing is for you is what kind of business you have. Performance-based marketing works better for some business models than it does for others. For that reason, consider your goals and what you hope to achieve with performance marketing campaigns before deciding to start your campaign.

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Key Takeaways

Now that you know a bit more about performance marketing strategies and what the benefits are of this strategy, you should be able to make a more informed decision as to whether this will be the right option for your business. Here's what we learned:

• Performance marketing is a type of marketing where you only pay when someone takes a desired action.

• Performance marketing has many benefits, including the fact that it's a great way to grow your business quickly and efficiently.

• Performance marketing has some drawbacks, including that it can be more expensive than traditional marketing and may not be suitable for every business.

• If you're not sure whether or not performance marketing is right for your business, you might want to do some cost analysis with the help of a digital marketing and performance analysis professional.

With this knowledge, start running the analysis on your own business to determine what marketing strategy is the right one for you and your company's future!

Get in touch with us today for your digital marketing or New Zealand business needs. We specialise in performance marketing, search marketing and more.