What Is Performance Marketing?

You must perform if you want your brand, business, or company to succeed. This is where performance marketing can help.

We're always talking about marketing strategies and tactics — that's because marketing plays a vital role in giving you what you need to grow your business and brand.

What Is Performance Marketing?

Performance marketing is a comprehensive term that refers to online and offline marketing and advertising programs in which advertisers (a.k.a., brands, retailers, or merchants) pay marketing companies (a.k.a., publishers, outlets, or affiliates) when a specific action is completed; such as a sale, lead or click.

How Does Digital Performance Marketing Work?

Advertisers place their ads on specific channels (explore the top performance marketing channels below) and pay based on the ad's performance. There are several standard payment models in performance marketing:

1. Cost-Per-Click (CPC): Advertisers pay each time their ad is clicked. This model is adequate for driving traffic to your website and online platforms.

2. Cost-Per-Impression (CPM): CPM stands for "cost per mille," meaning payment is made for every 1,000 impressions (views) of the ad. For example, if your ad receives 25,000 views, you would pay the base rate multiplied by 25.

3. Cost-Per-Sale (CPS): With CPS, payment occurs only when an ad directly leads to a sale. This model is frequently used in affiliate marketing.

4. Cost-Per-Lead (CPL): Similar to CPS, CPL focuses on lead generation. Advertisers pay when users sign up for something, like a newsletter or webinar, allowing for follow-up opportunities to convert leads into sales.

5. Cost-Per-Acquisition (CPA): CPA is a broader model that includes any specific action completed by consumers, such as making a purchase, providing contact information, or visiting a webpage. Advertisers pay based on these predefined actions.

Performance Marketing Examples

What are real-life examples of digital performance marketing? There are several different examples we can share.

Pay-Per-Click (PPC) Advertising

With PPC, advertisers pay for each click that directs users to their website. Platforms like Google Ads are widely used for this purpose, making it one of the most popular forms of performance marketing.

Email Marketing

While not always labeled as performance marketing, email campaigns can be optimized for performance. Marketers analyze metrics like open rates, click-through rates, and conversions to refine strategies by testing subject lines, content, and calls to action.

Influencer Marketing

Brands collaborate with influencers to promote products or services, often tracking performance via engagement metrics, impressions, clicks, and sales made using unique promo codes or affiliate links provided by the influencer.

Search Engine Optimization (SEO)

Though not directly a paid model, SEO is crucial in performance marketing. Success is measured through keyword rankings, local keyword rankings, organic user growth, organic session growth, organic market share, featured snippets, and user engagement.

Affiliate Marketing

This performance-driven strategy involves businesses rewarding affiliates for generating traffic or sales through the affiliate's promotional efforts. For instance, affiliates may promote products on blogs or social media and earn a commission for each sale made via their unique referral links.

Social Media Advertising

Platforms like Facebook, TikTok, Instagram, LinkedIn, Snapchat, and X (formerly Twitter) provide advanced targeting capabilities to reach specific audiences. Performance is tracked through impressions, clicks, shares, engagements, and conversions.

Display Advertising

Advertisers use banner ads displayed on relevant websites to reach their target audience. Payment is typically based on impressions (CPM), clicks (CPC), or specific actions taken by users (CPA).

Content Marketing

By sharing valuable and relevant content, businesses attract prospects and convert them into customers. Performance is measured by metrics such as engagement rates, social shares, and the number of high-quality leads generated from the content.

Why Is Performance Marketing Important?

Performance marketing is marketing based solely on business outcomes and data. While brand marketing is used to grow recognition and increase visibility, unfortunately, it doesn't focus on what matters most in marketing: results. Furthermore, when you know the exact results you're getting, you'll be better prepared to make the right business decisions.

It Helps You Track KPIs and What Matters the Most

Performance marketing is trackable and measurable down to the exact clicks. Companies will be able to track and measure everything — from acquisition costs to individual store sales, even the average order value of new customers.

Performance marketing's strength is derived from a straightforward concept: the agency must meet client-defined metrics and achieve the desired impact — a measurable business result — to fulfill the contract.

PDMI West 2023: Talking Performance Marketing And CTV

Check Out This Performance Marketing Infographic

Want to read more about the basics of performance marketing? PDMI member DFO Global has you covered with this evergreen infographic that breaks down the difference between brand and performance marketing, how performance marketing works, common conversion goals, and more.

Click here or on the image below to access this infographic today.

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