Performance marketing is at a crossroads; all brands must cope with new trends appearing out of the blue daily. Needless to say, digital channels have entirely altered the way companies operate their duties, advertise and sell. As a result, learning something about media buying online becomes critical.  

Just bear in mind this statistic: according to the United States Census Bureau, online shopping increased in 2020 by 43%.

What You Need to Know about Performance Marketing

That might complicate the mission of many companies, and marketers now have to immerse themselves in this technology which brings incredible capability for business growth. 

On the other hand, marketing specialists need to gather campaign data 24/7 and don’t even stop measuring the results to adjust and update all the time. 

Frankly, buying media was less complex in the past, even though attribution was nearly impossible. 

Today, in the very worst cases, you need multiple actors combing with shifting layers. As a result, it would take more time to plan and optimise. However, at the same time, data transparency enables marketers to retweak the message and the channel to induce ads to perform better. That’s why this process is called performance marketing. 

In this article, we break down what performance marketing is, explain targeting the best practices, how to set CPA targets and examine what you need to do to do it right. 

What is Performance Marketing?

Performance marketing is a form of marketing that focuses on measurable goals and results. 

In other words, it’s a marketing strategy based on a cost-per-purchase target. 

Yet, only qualified marketers have specific performance targets. They need to set a certain amount of conversions from a certain amount of spend. That can be done only through performance marketing, the term for digital campaigns where advertisers pay marketing agencies or platforms to help them bring results. 

But what does that mean for business?

As a business owner, you constantly strive to improve your bottom line. Performance marketing can help you do just that by focusing on key metrics that drive results. You can make informed decisions that will enhance your overall performance by tracking and measuring the right data.

Unlike traditional or organic marketing, performance marketing will enable you to drive actions and measure and track those actions for the sake of each asset, campaign or activity’s groundbreaking ROI (return on investment).  

While it’s easy for major corporations to spend millions of dollars on advertising and branding, most businesses can not survive without focusing on the bottom line. 

So, it can help you save money by eliminating wasteful spending to stay profitable. Additionally, it can help you increase sales and grow your business. So, performance marketing may be just what you need if you are looking for a way to elevate your one’s enterprise to new heights.

In short, this marketing plan puts the power back in the hands of the advertiser because you are the only one who decides the action and pays when that action is completed, whether it’s lead, click, or sale.  

Key Benefits of Performance Marketing

Even with all the benefits of media buying and programmatic advertising, there is a sense that not every marketer or player in digital advertising has your best interests at heart. 

That’s why you need to adopt performance marketing to track all progress. Then, businesses can follow how effective their marketing campaigns are and make necessary adjustments. But not just that, let’s see what you will gain from this approach.

1. Increased ROI: With performance marketing, businesses can see a higher ROI because they only pay for results by scaling advertising efforts to meet your business objectives without breaking the bank.  

2. Greater insights: Businesses gain valuable insights into what works and what is irrelevant. That allows them to course-correct and make necessary adjustments to improve their campaigns.

3. Brand awareness: Through conducting affiliate marketing and cooperating with other agencies with their established audience, your business can reach new audiences. Also, you will bring recognition to your brand by increasing traffic to your site. 

4. Improved customer acquisition: One of the main goals of performance marketing is to acquire new customers. It’s a creative and effective way to diversify your audience and extend your reach, thanks to valuable data.

5. Building SMART objectives: Performance marketing is transparent and measurable, which will help you establish your SMART business objectives. In fact, brands can see the entire click-to-consume experience of each buyer. So, they will be aware of where to invest more and in which partners and channels can bring a better outcome. 

6. Minimise risk: Since advisers only are paid after the desired action happens, you have a considerable opportunity to minimise the CPA (Cost Per Acquisition) and maximise the ROI. That leaves more room to accomplish other tasks with the same budget by performing proper marketing strategies to be tested and expand to grow and compete. 

What Does Performance Marketing Really Work?

To understand how performance marketing works, we need to define your ROI in which you can measure every activity and action through reports and analysis against pre-set KPIs. That’s how your campaign results can be optimised and updated towards improving performance.

So, measurable ROI is the key element of any successful digital marketing. You need to track it regularly through different optimisation tools. But with the revolution in business intelligence tendency, you might be loaded with which software will be effective for your campaign to gather the most relevant data. 

The more data, the more profound insights! There is no question about it.

Then, you’ll be able to optimise your campaigns accurately and effectively.

So, the answer to how permanence marketing works is the key metrics and KPIs you depend on to measure your input and output.

Here is what you need to observe:

CPM

CPM, or cost-per-million, is a performance marketing metric that measures the cost to reach one million potential customers. Also, it refers to what the advertiser will pay for 1000 impressions on the digital ad. These impressions are just for getting the ad seen. 

So, if 20000 people have seen your ad, your base rate will be calculated 20 times. 

But it doesn’t measure the action taken by viewers. 

So, you can tell that CPM allows marketers to compare the cost of reaching a potential customer through different channels. By understanding the CPM for each channel, you will be able to make wise decisions about where to put your money to get the most return.

Related to Performance Marketing: Learn more how to set up email marketing campaign

CPC

CPC stands for “cost per click.” It is another metric used to measure the effectiveness of an online advertising campaign. So, it’s a good indicator of engagement volume. CPC is important for performance marketing because it allows advertisers to track ROI.

A campaign’s ROI is determined by dividing the entire cost of the campaign by the number of clicks it generates. For example, if an advertiser spends $100 on a campaign and generates 1000 clicks, then the CPC would be $0.10.

A higher CPC reflects the value of the conversion. That means expensive products require higher CPC. For example, if you want to sell a luxury car, you need to set a higher CPC because you target a niche with specific qualities and are likely to buy more for a car because the cost of a click is more expensive. 

On the other side, the forecasted return is much higher. 

In short, CPC is important for performance marketing because it provides a way to track ROI and determine how much they are willing to spend on each click. This information is ultimately valuable to optimise campaigns for your budget.

CPA 

CPA stands for cost per action, allowing marketers to see how much they spend on each customer acquisition. It tracks a specific desired reaction you want your audience to take, such as signing up, purchasing a product or downloading a template on your website.

CPA can be used to measure the effectiveness of various online marketing channels, including paid search, display advertising, social media, and email marketing. By understanding which channels produce the lowest CPA, marketers can focus their budgets on the most efficient channels and reduce wasteful spending.

Performance Marketing: How to set up dynamic search and campaign in simple tips

In addition to acquisition costs, CPA can also be used to measure the lifetime value of a customer. This metric is important because it shows how much revenue a customer generates throughout their relationship with a company. 

LTV

LTV, or lifetime value, is a performance metric that refers to a customer’s total value over their relationship with a company. LTV allows marketers to track and optimise their campaigns based on the profitability of each customer.

LTV may be calculated in different ways. Still, the most common method is to take the average revenue per user (ARPU) and multiply it by the average lifespan of a customer (LSC). This formula provides a quick and easy way to estimate the value of a customer.

However, LTV is not just about money. It’s also about engagement and retention. A high LTV means that customers are spending more money and sticking around longer.

CPS

CPS, or consumer purchasing behaviour, is a field of marketing that studies how people buy and use products. By understanding CPS, businesses can improve their marketing performance by targeting their audience more effectively and creating better campaigns.

There are three main types of CPS: market analysis, product research, and customer research. The market analysis looks at overall trends in the marketplace, product research investigates how people feel about specific products, and customer research studies actual purchasing behaviour.

How to use it as a performance metric? It means you only pay when a sale has been completed, which was driven by your ad. It also refers to affiliate marketing.  

Businesses can develop new products that better meet the needs of their customers based on what CPS tell them about purchasing habits. Therefore, understanding CPS is an essential part of any successful marketing strategy.

CPL

CPL, or cost-per-lead, is a metric that measures how much it costs to generate a new lead. This metric is important for businesses to understand to improve their marketing performance. Companies can optimise their marketing efforts by understanding their CPL to acquire leads more efficiently.

There are a few ways to calculate CPL. The most common method is dividing your marketing campaign’s total cost by the number of new leads generated. That will give you your CPL for that particular campaign. You can also track your CPL over time to see if your campaigns are becoming more or less efficient.

If your CPL is too high, you are spending too much money to acquire new leads. That could be due to inefficient targeting or poor conversion rates.

What is the Difference Between Performance Marketing and Other Related Terms?

Traditionally, advertisers pay a fee up-front for ad space regardless of performance. That could mean hundreds or maybe thousands of dollars spent without tangible outcomes. No conversion, no engagement, no sales. 

That’s how performance marketing is different from other new concepts. Advertisers only pay for a specific action that is a measure of success you set out ahead. 

So, what is the difference between performance marketing and affiliate marketing?

In simple terms, performance marketing is a type of marketing where businesses pay for results. That could include sales, leads, or clicks. On the other hand, affiliate marketing is a marketing type where companies pay affiliates commissions for referring customers.

So, what’s the difference between the two? Performance marketing is focused on results, while affiliate marketing is focused on building relationships. Performance marketers are concerned with how many sales or leads they can generate, while affiliate marketers are more concerned with creating long-term relationships with their customers.

Both types of marketing can be effective, but it’s important to understand the difference to define the best for your business model. 

How Can Profiletree Help You?

Based on a unique marketing methodology, Profiletree never leaves you guessing. As a result, your target customers will see your business on social media and online. Fuelled by an unrivalled passion; our marketing team will be your digital marketing consultant and partner during your journey.  

Let your brand tell a story and amplify your message across social media, then utilise other marketing channels such as paid advertisement targeting campaigns, search engine optimisation and influencer marketing. 

As your brand has specific goals, obstacles, and challenges, we will take the time to craft what you want to match your business vision and model. 

Our team specialise in each area of digital marketing, advertisement web development and customer relations.

Here are some things we can do for you, check our services page for more information!

  • Create a Well-Optimized Strategy

We are business marketing consultants more than anything else. As the right answer requires the right query, we are ready to ask well-targeted questions to craft your strategy empowered by our unique methodology. Our mission is to help your brand get more engagement from consumers on the best channels available to your business.   

  • Build Intensive Marketing Research 

You will never get the best results without conducting profound market research.

Our marketing solutions help you to understand your competitors, your audience, and their preferences while analysing any data you have. After that, you will learn how to build a long-lasting relationship with your customers and turn them into your brand representatives.

  • Get Recognition You Deserve 

Precise data-driven planning combined with real-time insights will meet the objectives set out for you. That will enable you to get a higher percentage of qualified leads and quality engagements on search engine results and all social media channels.  

It’s not just about paid ads. Actually, it’s about how to make your brand find its way among competitors and gain recognition from the right audience. That’s why our cost-effective solutions are always measurable and can clearly impact return on investment. Great businesses struggle to find their voice online, with over a decade of experience in digital marketing, Profiletree can help you today.

  • Amplify Your Revenues 

As our only goal in conducting a marketing performance plan is to achieve a higher ROI, we will also focus more on your expenses. We will help you find new approaches to decrease the cost of customer acquisition online.

Learning how to master social media will help you grow, create conversions with targeted customers and proactively establish your brand’s online reputation to get outstanding results and gain new customers. 

  • Be an Influencer in Your Market 

We will set up an extensive network to be a leader and influencer in your industry. First, you will gain your audience’s trust, and then they will follow suit. And that’s when you will be able to achieve your KPIs and beyond.

How can this happen? We have already tested many ways to gain more exposure online and have found the best route to success is to look at the entire customer journey. It’s not just about the first click. We followed the audience from their initial impressions of a site to the completion of their buyers journey and beyond.

Maximise your digital performance by generating fresh ideas that challenge your competitors and help you stand out!

Contact us now!

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