Performance marketing is becoming a common way for brands to determine the efficacy of their ad spends. Knowledge is power. And being able to directly measure how the performance of your ad relates to sales can lead to better allocation of an ad budget, and thus greater overall business success.
What is performance marketing?
The concept is fairly simple: rather than pay for advertising upfront, you only pay based on an ad’s performance. When used with online advertising, results can be measured by clicks, sales, and/or leads.
A Forrester study, commissioned by Criteo in late 2015, found that nearly half of marketers surveyed have engaged in performance advertising. Of those who hadn’t yet done so, 59 percent said they planned to invest in technology to deliver performance marketing campaigns some time over the next two years.
More than half of marketers have moved to performance marketing because they feel their customers expect a personalized, cross-channel experience, the study adds; and 28 percent say they feel their competitors will follow suit.
Why performance marketing?
Performance marketing is, in large part, a by-product of web advertising. A recent CMO Survey found that 63 percent of CMOs in the U.S. don’t feel they can prove the short-term impact of their marketing spend, and even more — 69 percent — aren’t confident in proving the long-term impact quantitatively.
Customers are reaching your brand through more channels. That means you have new, more effective ways, to measure how their activities lead them through a purchase cycle.
Previously, online ad data was limited to a number of eyeballs. But how do you know if these people are really looking at your ads? You don’t. But you do know if they’ve clicked on it and purchased something as a direct result; what the initial customer engagement with content was through each channel; and if they’ve engaged across multiple platforms.
How do performance marketing campaigns work?
Performance marketing ads can range from web banners to pop-ups, cost-per-view ads placed alongside relevant content, and cost-per-click. They are generally purchased from web or mobile publishers that generate large amounts of traffic.
Major sites like Google and Facebook use performance marketing, but smaller sites, like popular blogs, are involved with it, too. Brands advertise via these platforms because they can get fully trackable, measurable, and quantifiable data about their ad spend that, with the right tools, can be linked directly back to sales.
Companies that use performance marketing range from single-person, sole-proprietor businesses up to Fortune 500 companies. They include a number of business types, from retailers to insurance companies and agencies.
Churchill Insurance, for example, ran a performance marketing campaign exclusively on MoneySavingsExpert (MSE), a site with 9.2 million readers in its email database and 11 million web visitors. The result was 800 quotes, 300 new customers, and an increase in conversion rates from 12 percent to 38 percent.
Can performance marketing help my brand?
With performance marketing, you can devise highly targeted campaigns for your key demographics. And the website that runs them, in turn, gets to promote relevant and timely content to its visitors. It’s a win-win.
You can better allocate ad spend, versus purchasing an ad based on the circulation numbers, for example, and paying for a massive audience even though a large fraction of that audience probably won’t even notice your ad. Performance marketing can cost less, even though the price is variable, since it solely depends on the performance of the ad.
If your customer base spends a lot of time online (and let’s face it, which demographic these days doesn’t?) and is comfortable making web transactions, performance marketing is worth considering.
What you’ll need for performance marketing
To best take advantage of performance marketing, create attractive ads that will draw website visitors to them, and that include targeted and enticing calls-to-action.
Most important, however, is that the landing page is easy-to-understand, and makes it simple for the potential customer to get what they are hoping to receive, whether it’s a product, service, or subscription. Thus, the web development team is just as important as the advertising department.
A good marketing analytics tool can help you track important metrics for a performance marketing campaign.
What metrics do you track in performance marketing?
Top-of-mind will be data like the cost of customer acquisitions and average order value.
Brands can enjoy real-time measurement of return on investment (ROI). Look at not only how many clicks an ad is getting, but how many of those clicks generate actual leads, and result in actual sales. This is often referred to as CPA, or Cost Per Action.
With a good marketing analytics tool, you can get predictive metrics that forecast the total future value of a customer over a lifetime. What’s the cost of customer acquisition, the cost to convert them to new leads, and the investment needed to both keep and grow existing customers?
Additionally, a good marketing analytics tool will measure the number of marketing touch points through a customer journey, determining if they use single-touch or multi-touch attribution, and thus accounting for every marketing activity that played a role in influencing that sale.
Bottom line
Performance marketing can help with brand awareness, determining the best touch points to reach a target demographic, gaining a better understanding of overall customer lifetime value (CLV), and hopefully, in the long run, more effectively allocating your marketing dollars.
