What Is Performance Marketing?

August 17, 2021
Posted in News
August 17, 2021 Camilla Prytz-Hansen

Advertising today is a tricky venture. Just consider for a moment how many ads you encounter every day – and then consider how many of them you ignore. No one advertises simply for the sake of advertising; there is always a strategy behind it. But companies often aren’t equipped to reach the goals they strive for on their own and that’s where performance marketing comes in.

THE BASICS

The simplest performance marketing definition is that it is advertising that works towards a clearly stated objective.

Sometimes, this may simply be dispersal: reaching as many people as possible for maximal exposure. Other times, it will be to drive actions such as service sign-ups, sales, app-installs, survey participation, and similar.

For this reason, there are a number of common payment forms:

  • CPC (cost per click)
  • CPM (cost per 1000 impressions or clicks)
  • CPL (cost per lead)
  • CPI (cost per install)
  • CPA (cost per action)
  • CPS (cost per sale)

Depending on the difficulty and value of the action generated, the payout rate might vary (from a few cents CPC to thousands of euros on CPA or CPS). In some cases, revenue share (rev share for short) or hybrid combinations are also a possibility.

Performance based advertising or affiliate marketing is a partnership between a brand, advertiser, or performance network and a publisher/affiliate. One side provides the advertising campaigns and the goals they seek to achieve, and the other is responsible for promoting the campaigns. If the campaign and the affiliate’s traffic are a good match, such a collaboration can be highly profitable for all parties involved.

THE PROCESS: A-Z

Regardless of the performance goal, the process towards a successful performance marketing campaign is almost always the same. It goes like this:

 

  1. Brand/advertiser needs something. Brand awareness, traffic to their website, leads for telemarketing, sales—you name it
  2. Brand/advertiser develop a marketing campaign that they believe will help them achieve that something and decide on an initial rate that they are willing to pay publishers and what types of traffic they want
  3. The campaign is offered to publishers, often with the help of performance networks such as VIP Response
  4. Publishers prepare their creatives
  5. Publishers launch the campaign
  6. Depending on a) how the offer performs for the publishers, and b) how the offer performs for the advertiser, optimizations can be made. This may result in payout adjustments, alterations to funnels or landing pages, removal or addition of some traffic sources, etc.

 

If all goes well, this process establishes a mutual partnership that ensures everyone’s happiness. Therefore, it is important to keep an open dialogue at all times and most importantly optimize, optimize, optimize.

 

THE BENEFITS OF PERFORMANCE MARKETING

There are a number of benefits to performance marketing for both sides. For lack of space, we’ll look at four here.

Transparency

Everyone gets what they deserve. It seems obvious that paying purely for performance according to a set goal is beneficial for most advertisers. It’s a way of ensuring that the budget is spent on relevant advertising and does not go to waste. But performance advertising is also beneficial for affiliates. Imagine being given a budget and a goal. Then imagine that the campaign simply does not perform well enough to leave a profit margin for the publishing party. With performance as a goal, affiliates are sure to get paid for what they actually deliver and to monitor whether or not a campaign is profitable.

Strategy

Strategy Performance Marketing

Another perk of performance marketing is that it leaves a big part of the strategizing in the hands of those who know how to reach the target market. By delegating the task of publishing the campaigns to the right audience, advertisers avoid the proverbial “spaghetti-throwing” of putting out advertisements and “seeing what sticks.” Through experience working with a specific traffic source or vertical, affiliates know what they must do to achieve the goal of a given campaign. (Or at least they have an idea what will or will not work.) Publishers, in turn, benefit from advertisers’ past expertise working with other marketers in the form of tuned landing pages, creatives, and advice.

Tracking

VIP Response GIF

A key aspect of performance marketing and what makes it so successful is that it involves thorough tracking. Anyone in the industry will tell you that optimization is key. This can only be done by looking at the data you collect through a campaign. For affiliates and advertisers alike, things to consider might be targeting (by age, by location, by gender, by demonstrated interests, etc.), traffic source or medium, which angle appears most enticing to recipients, and many more. Other key tracking elements are numbers of impressions and clicks, conversion rates, and earnings or cost per click impression or click. The diligent tracking at the heart of performance marketing is the true key to its success.

 

A Wealth of Traffic

Finally, performance marketing is brilliant because it is versatile. Performance based marketing comes in many shapes and sizes, with a treasure trove of traffic sources to match. As the internet develops, so do the potential avenues to revenue. As long as there are people, there will be new, innovative ways to reach them – all it takes is the right angle, a good campaign, and the patience and creativity to try it out. There is no shortage of creativity and the potential of digital advertising can never be exhausted.

Brands seeking to spread awareness or acquire sales are no longer limited to expensive, televised advertising, newspaper columns, radio announcements, or posters in public spaces. Publishers in 2021 offer everything from SMS marketing to native advertising to search engine optimization. Display banners, infomercials, and videos, too. And with the field of performance marketing comes the added benefit of using publishers who are experts in their specific area of digital marketing.

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Camilla Prytz-Hansen

Originally from Denmark, but graduating with honors from the Vrije Universiteit, in the Netherlands. Camilla studied Literature and Journalism and is passionate about writing and researching all things content and online marketing. Entering the Performance Marketing realm as an Affiliate Manager in 2020, her career at VIP Response took off. She combines both aspects in drafting helpful content and insightful articles and tips to the affiliate and online marketing sphere.