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Performance Marketing: What Is It and Why You Need One?

Last Updated 30 November 2022, 10:12 IST

People nowadays are spending more and more money on advanced electronic devices such as mobile phones, tablets, laptops, and many other smart devices. And this spending is expected to increase steadily over a long period of time. Keeping this in mind, many strategies related to online marketing are also emerging each day. Some of the most popular as well as effective forms of digital marketing are affiliate marketing, social media advertising, performance marketing, and influence marketing. In this article, we will mainly focus on what performance marketing is, its types, and its benefits. We will also explain briefly how performance marketing works.

Introduction To Performance Marketing

In simple words, performance marketing is one form of digital marketing where payment is made to the service provider only after reaching the business objective. Some also pay when the desired action is carried out, such as completed sales, bookings, etc.,depending on their agreement.

Now, you might be thinking this is similar to affiliate marketing. But performance marketing includes affiliate marketing as a subcategory. But in affiliate marketing, companies pay a certain amount as a commission to affiliates for advertising their products via different channels, which are tracked by an affiliate link. Performance marketing encompasses a wide range of strategies, including influence marketing, email marketing, search marketing, and any other type of advertising where a service provider trades commissions for sales. If you are curious to know to learn more and develop your career in this field you can enroll yourself in any digital marketing course.

Types Of Performance Marketing

Performance marketing is a broad broad category. Numerous more types of digital marketing are included under it. Some of the most effective and common performance marketing types are:

Display Ads

Display ads on the side of the Facebook newsfeed, website, or any digital channel help to increase brand awareness as well. But it doesn’t seem more effective due to the ad blocker trend.

Content marketing

To maximize sales, it is crucial to inform your customers about your specific brand. It can be done by publishing useful information about your brand through content in the form of a blog, audio, or video.

Affiliate marketing

It is a type of digital marketing where the advertiser pays a certain commission to the publisher when the desired action is taken on an affiliate link. The action can be anything click, lead generation, sales, etc. Very popular channels for affiliate marketing are coupon sites and review sites.

Native advertising

It is advertising that appears to be natural to the web page or content that the audience is viewing. For example, watch the next video on YouTube. The users feel natural but actually, they are sponsored content.

Social media marketing

The popularity of social media is increasing day by day. One of the really efficient ways to expand the reach of your business and drive sales is through social media advertising.

Search engine marketing

Search engines are used for the vast majority of organic searches. So it is crucial to optimize your website for search engines. Some advertisers pay a certain commission to advertising agencies based on results.

How Does Performance Marketing Works?

Mainly 4 groups are involved in the working of performance marketing. Retailers, who are looking to promote their brand or business. Affiliates, who are ready to publish advertisements for the merchant such as coupon websites, product review sites, mobile apps, or any person having huge followers on digital channels. The third group is affiliate networks or performance-tracking platforms that both affiliates and merchants can access. These platforms help to track key performance indicators (KPIs). The last party involved is the affiliate manager, who has expertise in the field. They help you to analyze the marketing budget, goals, brand alignment, and many other things before making an agreement with a marketing agency.

When the agreement is done between the retailer and advertiser. The advertisement published ads in different digital channels in a different forms through a marketing agency. When the performance is good and meets the business objective or agreed on conditions, payment is made to the affiliate. There are various indicators to measure the performance of marketing and pay for it. Some of them are:

1. PPS(Pay Per Sales): Pays only when the mentioned or certain sales are driven by that ad.

2. PPL(Pay Per Lead): Leads are generally in contact with potential customers. When someone signs up for something it generates a lead.

3. PPC(Pay Per Click): Payment is done based on the number of times the ad is clicked by the audience.

3. CPA(Pay Per Acquisition): Similar to PPS and PPL but in a general form. Pay only when a certain action is completed.

5. CPM(Cost Per Impression): Pays for the number of views the ad gets. Generally, they have rates per every thousand views.

5. LTV(LifeTime Value): pays based on predicted lifetime value until they work together.

Why Do You Need Performance Marketing?

Whether you own a small business or a large enterprise, you don’t want to spend your hard-earned money on worthless things. In performance marketing, you just need to pay for the results. So in the field of digital marketing, performance marketing has huge potential. Some of the benefits of performance marketing are:

  • Low risk: It is not risky because you have to pay only after the desired action is carried out.
  • Boost brand awareness: Affiliates and agencies have their own established audience. So performance marketing helps to reach new audiences.
  • Trackable and measurable performance: The performance can be measured and tracked with the help of a third-party tracking platform. So this method is transparent and risk-free.
  • Affiliates and advertisers have expertise in the field which can be beneficial for us. The more benefits they give, the more commission they get.
  • It also helps to diversify the revenue streams. It adds more and more channels to your advertising.
  • Discover new formats: Affiliates not only post the content in one channel but they publish on multiple channels. This helps to discover new formats and reach more audiences.
  • while giving marketers or ad agency credit and visibility, allowing businesses to regulate their advertising spending.

Conclusion

With the trend of the world becoming digital, business owners also need to change their approach to get more customers. Performance marketing is genuine and one of the best digital marketing strategies you should definitely go for. It helps to boost traffic, generate leads, and increase sales as well. This will yield worthy results for your efforts and investment.

This article is part of a featured content programme.
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(Published 30 November 2022, 10:10 IST)

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