Performance Marketing Explained: How to Get Started

11 min read

Performance marketing continues to grow in popularity as it proves to be efficient and cost-effective. It plays a major role in customer acquisition and retention and triggers measurable and beneficial customer reactions, all while offering an active feedback loop.

With a performance marketing strategy in place, business owners get to see what works, what needs to be doubled down, repeated, excluded, and ultimately where to increase or decrease their financial efforts. At its core, it seeks to put an end to risky investments through measurable results.

What Is Performance Marketing?

Performance-based marketing is a pocket-friendly and digital approach to scaling your advertising efforts guaranteeing results with every dollar spent. With performance marketing, retailers are only paying whenever a specific outcome occurs. Business owners only pay marketing service providers when the campaign is successful or a particular goal is met. Moreover, as with any other form of advertising, effectiveness will always depend on the promoted content’s quality, relevance to the audience, and how much it stands out from the competition.

What are The Benefits of Performance Marketing?

Performance marketing focuses on delivering the measurable success of the content and providing valuable feedback to performance marketers, ultimately improving the way they connect and interact with customers. Here are some of the benefits related to performance marketing.

Increased Reach. With performance-based marketing, users can easily reach a larger audience. Using different types of channels like social media performance marketing allows users to easily reach a wide and targeted audience.
Active Feedback. Performance marketing makes it easy to analyze and map out what’s working and what’s not. It can offer powerful insight to retailers who may not have had previous ways of calculating the success of their campaigns.
Cost-Effective. With performance marketing, every dollar spent directly correlates to the success of an ad. Minimizing costs and reducing payment when an action or goal is met, ensures business owners receive a maximum return on investment.
Low Risk. Compared to other forms of marketing, performance-based marketing doesn’t come with a lot of risks. Given the upfront costs are minimum, and you only pay for performance and results, this puts an end to risky and large investments at the beginning of a campaign when following other types of advertising.

Examples of Performance Marketing

At the core of performance marketing, it seeks to research and collect useful data to properly target and retain potential customers. There are many ways this can be achieved, creating different types and forms that we have covered in the next section. Moreover, determining the most effective for you will always come down to your brand personality, preferred business model, demographic, product, and budget. Here are some of our favorite forms related to ecommerce performance marketing.

Affiliate Marketing

Oftentimes, affiliate marketing and performance marketing get confused. Moreover, affiliate marketing is simply a type of performance marketing. Under this type, affiliate partners only get paid when a sale is made and is commission based. A brand will often work with an affiliate or publisher under this model. They’ll be provided a link to offer customers a discount and track their sales. This way you can both know how much profit is being made and how much your affiliate partner is to be paid.

Pay Per Click Advertising

This is a cost-effective way to target potential customers with easily measurable results. With this form of performance marketing, advertisers only pay a fee when their ad is clicked. Oftentimes, the fee may vary according to the number of people being reached, how many days the ad is run, and a few other factors.

Cost Per Click

Under this metric, you only pay per customer’s click. It’ll help you evaluate how much on average, each link click costs you. It’s very useful when it comes to analyzing Facebook ads efficiency and performance.

Cost Per Lead

Under this type of performance marketing, performance is measured based on the capture of lead, and customer information such as email address or phone number that is often acquired through some form of content strategies like ebooks, newsletters, or even free guides. With this type of performance marketing, companies only pay when a lead is gained.

Cost Per Impression

Under this particular type of performance marketing, you pay for every one thousand views of a specific advertisement. This is the closest type of performance and online advertising to those offered in other media such as television, radio, or print. It is all about how many views you get. Cost Per Impression can be easily calculated by dividing the total advertising cost of the campaign by the number of times the campaign was displayed to potential customers.

We can also say performance marketing is the heart of social media advertising, and many creators and business owners use platforms like Facebook and Instagram to reach their audience with cost-per-click and cost-per-lead performance models. Regardless of the type you choose to promote your business, you can expect measurable results and a higher return on investment than with any other form of marketing

How Performance Marketing Works

We already know performance marketing can turn out to be very convenient and effective, mostly because it’s easy to track, low risk, budget-friendly, and provides an easy way to reach a large audience. Now, let’s quickly dive into how to make the most of it and achieve greater results.

Define and create specific campaign goals

The first part of the process is defining goals and objectives. Determining what exactly you want to achieve as you lay the foundation for your campaign will not only provide guidance but also help you identify the metrics you’ll be tracking and paying for.

Identify your target audience

Before you launch your performance marketing campaign, you’ll want to have a solid understanding of whom you plan to reach with your ad efforts. This will help you save money, and time, and even help you identify the best channels and perhaps affiliate marketers for your brand. Focus on your audience, interests, demographics, gender, age range, and where the majority of them can be found or reached.

Identify Your Channels

Once you have determined your goals, it’s time to identify the best route for you to accomplish them. In this part of the process, you’ll be evaluating the different platforms where you can reach your target audience. This is whether you plan to use social media, search engine advertising, affiliate marketing, sponsored content, or even Youtube affiliate marketing or ads.

In this part of the process, you’ll also want to evaluate the best type of performance marketing for your brand and audience, and even the best affiliate partners to accomplish your campaign goals. A quick tip is to always prioritize affiliate partners that resonate with your audience, no one will purchase your products if your affiliate partners have nothing to do with your brand or simply can’t communicate your message properly.

Measure and Track Your Efforts

Once you’ve launched your campaign, don’t forget to track and measure what’s working and what’s not. Keep track of your efforts either based on return on investment, how much it’s costing for you to make a sale or get a specific reaction from your audience, or even by what the value of each customer gained compared to how much it costs to reach.

Ultimately, the goal is to properly allocate funds, change channels if needed, find out how much money is going into the campaign compared to how much profit is being made, and finally determine the kind of content that resonates with your audience. This is the heart of performance marketing and how you’ll guarantee to increase your return on investment.

Metrics you can track for improved quality of traffic and results include:

Total cost;
Impressions;
Clicks;
Views;
Customer information gained;
Click-through-rate;
Sales made with discount links.

All of these will help you evaluate the best approach for you and prevent unnecessary investments in low-quality traffic and unsuccessful campaigns.

Final Words

Performance-based marketing offers huge promise for business owners looking to elevate their advertising efforts without the risk of big upfront costs, along with measurable results. This type of marketing continues to show a lot of potential for business owners to maximize their sales and reach new customers at scale.

Regardless of the market niche or audience, we can conclude that most business owners are likely to find some form of benefit from performance marketing.

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Jan 1, 2023

About the author

Anastasia Prokofieva is a content writer at Ecwid. She writes about online marketing and promotion to make entrepreneurs’ daily routine easier and more rewarding. She also has a soft spot for cats, chocolate, and making kombucha at home.