Performance marketing, or performance-based advertising, is the concept in digital marketing of optimizing your marketing campaigns depending on the desired results – the number of sales, clicks, subscriptions, or overall interactions you aim at.
Over the past couple of years, there has been a lot of interest in performance marketing as a new strategy for customer acquisition, engagement, and conversion, so it is definitely an approach worth exploring.
One of the most significant benefits of performance marketing is its cost-effectiveness compared to traditional marketing methods – it allows you to pay for results achieved instead of paying in advance without a guaranteed return on investment.
In addition, you can find a great variety of handy software tools that make it more manageable – from AnyTrack for convenient attribution reporting to end-to-end solutions like Fintel Connect for managing partnerships.
In the article below, we explore how performance marketing works to help you make the most out of it.
How performance marketing works
In order to stop wasting money and get the most out of each advertising channel, it is crucial to take into account the main components of performance marketing.
These include in-depth data analysis for determining campaign goals, selecting digital channels, developing campaign strategy, and measuring and optimizing your campaign to tackle the possible pitfalls and get the best results.
Here is an overview of each of the essential steps of performance marketing:
1. Data analysis
First of all, it is necessary to carefully analyze the company’s business indicators, as well as the product’s advantages and disadvantages, relevant market and competition – dynamics, trends, and forecasts.
This way, you will get a better understanding of how to improve the interaction between your company and its existing and potential customers and determine what to address in your campaign.
However, there are some more factors you need to consider in your in-depth data analysis, including:
- your target audience and where these users come from (e.g., contextual advertising ads, organic search, social networks, direct link, etc.),
- search results on target keywords,
- current conversion rate,
- transaction sequence,
- traffic sources efficiency.
2. Goal setting
Establishing goals is the starting point in developing a successful marketing campaign. Only with clear and precise goals can you select suitable advertising channels and tools, form a comprehensive strategy, and determine a budget and deadlines.
As such, the previously conducted analysis will help you establish realistic and less abstract goals, which is essential for achieving tangible results.
However, keep in mind that there are four main types of goals you should consider in your strategy:
- business goals (the company’s position in the market and its level of sales and profits),
- marketing goals (attracting new customers, increasing customer loyalty, introducing new products),
- communication goals (increasing brand awareness, stimulating sales),
- media goals (social media reach, impressions, budget, etc.).
In order to create a comprehensive marketing campaign, you should set SMART goals, meaning that they need to be specific, measurable, achievable, relevant, and time-bound.
For example, instead of aiming just to “increase sales,” you should formulate it more precisely – “double the number of sales of a specific product made from the website.”
3. Selection of channels
When it comes to selecting the channels for your performance marketing campaign, it would be best to diversify them. This way, you will be able to cover more campaign goals and expose your brand to a much wider audience. As a result, you can increase your campaign reach and increase your chances of success.
Some of the most effective performance marketing channels include social media marketing, native advertising, search engine marketing, banner (display) ads, and content marketing.
When deciding which one to choose, seek channels that will help you reach your target audience and suit your conversion type.
4. Campaign development and launch
You need to develop a performance marketing campaign that will appeal to your target audience in the most effective way possible. To do this, you need to determine your current customers’ and prospects’ pain points and understand how your products can solve them.
Next, you need to create relevant ads and messages to address those needs and grab your customers’ attention. The better you understand your audience and their needs, the better the content, design, and timing of your ad will be – it’s when the analysis comes in handy one more time.
As for the technical aspect of your performance marketing campaign, you should create ads’ sizes, character limits, and overall designs in accordance with a particular channel or social media platform you will be using them for.
5. Campaign measuring and optimization
After the launch of the campaign, it will begin to generate data – appeals, requests, etc. However, just counting them is not enough. It is essential to understand their quality level and how they are connected to the marketing channels you use.
Keep track of metrics and analytics to identify which of them eventually led to actual sales, how much money was spent on developing these channels, or the company’s overall profit received from these investments.
This way, you will see not only how to adjust your campaign or whether to optimize its individual channels for better results but will also be able to detect your best channels, audience segments and identify which objectives to optimize to increase your return on investment.
The bottom line
Performance marking is one of the most cost-efficient strategies you can use to attract new customers and make your business more profitable.
However, in order to make your advertising campaign effective, you need to follow several essential steps – from conducting in-depth data analysis to establishing campaign goals, developing an appealing ad copy, and measuring and optimizing the results.
While all these steps are crucial, you should pay close attention to the analysis and take it as seriously as possible, as it will be one thing you will be basing your whole campaign on.
As such, conducting a thorough analysis and drawing relevant conclusions from it will help you ensure that your performance marketing efforts will be tangible and bring you the best return on your investment. Good luck!