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Performance marketing: what it is and how it works

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Performance marketing is a marketing model in which the company only profits from results. These are concrete objectives previously established according to the company's needs. They can be simple goals such as a retweet or a subscription, but they can also refer to more ambitious goals such as closing a sale. This concept was developed by the Performance Marketing Association, an organisation of which companies such as Google and Amazon are members

Performance marketing begins when the company closes an agreement with the advertiser brand in which specific objectives are agreed. From that moment on, the company commits to carry out a marketing campaign to achieve them, otherwise it will not receive any remuneration. Performance marketing is an evolution of pay-per-click marketing as it focuses on specific objectives such as web traffic or registrations. It also goes a step further than traditional marketing because of the target audience and the tools it uses. Performance optimisation agencies can provide services to the marketing team and ensure the success of its strategy. Performance marketing should not be confused with affiliate marketing as the latter concept is a technique to develop performance marketing.

Benefits of performance marketing

  • Optimisation: The need to measure and know the progress made implies the constant optimisation of campaigns. The actions that are generating the best results are strengthened and those that are not working are discarded. This helps to constantly improve the brand.
  • Multichannel model: Performance marketing allows marketing actions to be deployed through different channels, such as email marketing, content marketing or social networks, among others.
  • Focus on lead conversion: The objectives set for performance marketing are related to sales and lead conversion. This ensures a real understanding of the marketing strategy used.
  • Multi-channel model: Performance marketing allows marketing actions to be deployed through various channels, such as email marketing, content marketing or social networks, among others.
  • ROI measurement: CPM and CPC offer benefits for results, but their relationship with sales is not entirely measurable. We can know how many times we have launched an ad, but not how many views it has had. On the other hand, CPC helps us to know who has visited our website through the click, but not what actions have been carried out afterwards. Performance marketing facilitates working with cookies that allow us to track the user's journey through the company's website.
  • No opportunity cost: Performance marketing strategies are focused on specific results, so the risk is lower and the costs are estimated for each specific campaign.
  • Better investment: The budget allocated to digital advertising is established on the basis of specific objectives. This ensures proper management of the company's investments.

Problems that performance marketing can present

  • Very high cost
  • Lack of knowledge of technological platforms
  • Lack of resources
  • Compromise data security
  • Tedious bureaucratic processes
  • UnreliableROI

Key elements in performance marketing

  • Click-through rate: To determine the success of an ad, the click-through rate must be high. It is not the number of times an ad has been shown, but the number of interactions the audience has had with it. In case the click-through rate is low, but the number of impressions is high, it is recommended to do an A/B test by changing visual elements of the ad.
  • Engagement: This is used to measure the interactions that the publications have had on social networks, taking into account elements such as the number of likes, shares or comments.
  • Arrival of new customers: Generating the arrival of new customers to a company is vital to ensure the achievement of the objectives.
  • Increase in organic media: For performance marketing, the means by which users reach the brand is important. Paid media guarantees visits, clicks and impressions, but by implementing a good marketing strategy, an increase in organic traffic can be achieved. If this is achieved, less investment will be made in paid media.
  • Lead analysis: The objective of marketing campaigns is to increase the number of leads with the intention of converting them into potential customers. In performance marketing, it is useful to analyse this data to find out if the communication is being effective and to provide the sales team with information on their commercial objectives.

    performance marketing

How to incorporate performance marketing into your business

1. Define objectives

For a performance marketing strategy to work, you need to be clear about your objectives, which should be specific and measurable, such as increasing the number of leads generated or the click-through rate, among others.

2. Decide on the metrics

Once the objective has been established, the metrics to be tracked must be selected. For example, if the intention is to increase the number of leads, it is advisable to define the number or percentage of leads to be reached in a given period of time.

3. Having a presence in the digital environment

To achieve a greater impact on users, you need to be present in the digital environment, so your marketing strategy should determine the communication channels in which you want to appear.

4. Allocate budget

After establishing the objectives, metrics and dissemination channels, it must be agreed how and how much of the budget should be allocated to each area.

5. Analysis and measurement

In order to measure the effectiveness of the performance marketing campaign, objective results need to be analysed. This is achieved through monitoring tools.

Best practices in performance marketing

  • Establish a close relationship with advertisers to specify working conditions, which will ensure transparency and trust between the two companies.
  • Have a team that is up to date with new technologies, online advertising and data processing.
  • Use reliable monitoring tools to track the campaign.
  • Correctly define the objectives using KPIs.

Performance marketing tools

Pay-per-click advertising is ROI advertising that brings immediate results. If your company does not pay per impression or for more exposure, you can control the budget and targeting on behalf of others. Here are some of the tools that serve to fulfil this function:

  • Google Ads: It can be used to run ads on Google, Youtube or Gmail, as well as multiple campaigns such as search campaigns in which information on keywords is obtained, video campaigns such as those used in Youtube advertising, bumpers, shopping campaigns, etc.
  • Facebook Ads: Its operation is similar to that of Google Ads, but it focuses on Facebook. It facilitates audience segmentation and offers the possibility of carrying out different campaigns based on the objective, such as increasing web traffic, improving the reach of publications or achieving a higher percentage of clicks.

On the other hand, it is also essential to measure campaigns. This is achieved through analytics platforms. The best known is Google Analytics. Through this tool, it is possible to understand the interest of users in a website and evaluate their behaviour.

Success stories using performance marketing

New York Times: It managed to increase its number of readers by launching a multichannel performance marketing campaign, broadcasting on television, social networks, print media and mailing reactions to controversial events such as fake news and the arrival of Donald Trump to the presidency.

Domino's: This brand is known for using performance marketing campaigns, but the most successful was Domino's Anyware , in which they enabled home ordering across all devices and channels, i.e. customers ordered via Twitter, Alexa or the Facebook Messenger chatbot.

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