What is performance marketing?

Upsail team

06.10.2022

Performance marketing is the concept of working with the market, according to which every dollar spent on marketing activities should bring measurable results to the company.

What is marketing performance? Features of performance marketing

The promotion of the company and its products requires an integrated approach. Working on recognition, image, loyalty, and other marketing tasks is necessary, which often requires significant financial investments. However, not all investments can be accurately estimated in figures. Often companies use tools and tactics to work for the future without the ability to calculate the exact result and make a profit. For example, a Facebook ad launched to reach as many members of the target audience as possible works to increase awareness. In this case, the advertiser pays only for impressions. Such an investment in marketing can be called an advance payment for potential future profits.

The concept of performance marketing is based on the fact that investments should be justified and bring results in the shortest possible time, ideally immediately. This approach allows you to achieve goals when the budget is limited and sales are needed now. Next, you will learn how the performance market works.

How performance marketing works

The level of competition in the markets in different niches is growing every year. It’s getting harder for consumers to make choices, and companies need more tools to get their attention, so advertising budgets are skyrocketing. Performance marketing allows you to find the most effective advertising models in such conditions and combine them into a single strategy for effective promotion in the market and increasing sales.

Goals, as in traditional marketing, are set according to the SMART model, but from all the possible ones, the achievement of which will cover costs and increase income is chosen. Therefore, instead of working on memorability, reach, and impressions, the brand will create campaigns to generate leads and increase sales and ROI. Moreover, according to the concept of marketing performance, the advertiser pays only to get the result. Check out the most common payment models below:

  • Percentage of sales. The most striking example of this model is referral programs when a partner is paid not for placing a link or advertising itself but only for purchases of attracted customers.

  • Lead generation. According to this model, payment is made for the attracted user who filled out the form, registered, subscribed to the chatbot, and so on. Leads are potential customers, so attracting and nurturing them is vital in increasing profits and sales.

  • New clients. It involves paying for an advertising campaign, not for clicks or impressions but for the sale of a product or service – a conversion.

  • They also use the CPC (cost per click) and CPM (cost per millenium) models, but their effectiveness is lower than that of the models discussed above. However, they are needed for traffic generation and branding. Read on to find out which channels are used in performance advertising.

Performance marketing channels

Performance marketing uses the same channels as traditional online marketing. The only difference is in the tools. They are chosen based on the payment models discussed in the previous section. Let’s look at the channels and tools for achieving goals in performance marketing.

  • Targeted advertising. Allows you to broadcast ads to representatives of the target audience on social networks. Such advertising is often lead generation, conversion, and catalog sales.

  • Media advertising. It is text, animated, or text-graphic ads placed on various resources through the Yandex and Google networks. Display advertising can also be targeted to the target audience.

  • Retargeting. A tool that allows you to “catch up” with site visitors on social networks. With the help of retargeting, potential customers are given a discount or other advantageous offer to motivate them to buy.

  • Email distribution. They allow you to stimulate purchases, cross-sell and increase loyalty. Email marketing helps increase ROI, LTV, and customer retention.

  • Affiliate Marketing. It involves interacting with companies and opinion leaders to promote the brand and stimulate sales. In affiliate marketing, payment is made as a percentage of the number of sales or a fixed rate for N number of attracted customers.

These are not all the channels and tools that are used in advertising performance. The main thing to build an effective strategy and achieve your goals is not their number but a brilliant combination and an omnichannel approach. Next, you’ll learn how to get started using performance marketing.

Stages of developing a performance marketing strategy

The process of preparing a performance marketing strategy consists of five main steps:

  • Goal setting. Conduct market research and identify the strengths and weaknesses of the company. See where the company is today concerning competitors and where you would like to be in a year. Set goals and objectives, the achievement of which will help you get to your destination. This can be an increase in sales, average check, LTV, or ROI.

  • Choice of channels and advertising models. Analyze your target audience. Make a portrait of a potential buyer, find your preferred communication channels, and study the effectiveness of those you already use. Next, select the tools you need to achieve your goals, define your advertising model, and calculate the cost.

  • Preparation of advertising campaigns and media plan. At this stage, they prepare the necessary content formats and visual materials for all selected communication channels and plan the date, time, and cost of advertising for each.

  • Setting KPI and choosing analytics tools. To analyze the performance of each campaign and the entire marketing strategy, set the metrics you will track and consider how and where you will collect statistics.

  • Evaluation of the effectiveness and optimization of the strategy. Track metrics for each campaign, analyze results, draw conclusions and improve your marketing plan.

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