Performance marketing
What is performance marketing?
Performance marketing, also called results marketing and goal-based marketing, is a type of advertising in which you only pay based on the actual performance of the campaign. Results are most commonly measured based on actions such as clicks, sign-ups, purchases, etc.
It is clearly a strategy that is based on results, as well as users performing some kind of action, this action being responsible for the success or failure of the campaign. It is therefore an advantageous scenario for advertisers, since they only have to pay when the objectives of the campaign have been met.
1. How does performance marketing work?
The objective of any marketing campaign is to generate a profit for the brand that runs it, whether it is based on inbound marketing or outbound marketing. But constant changes in customers’ buying patterns and needs have significantly changed the way brands reach customers and generate sales.
This has made digital marketing more transparent and dynamic than it was in its early days, bringing new advertising formulas that satisfy both advertisers, who can know the ROI of their marketing actions in detail, and the channels they use to run their campaigns.
In response, performance marketing makes use of the most current technology to track consumers and their behavior, making it extremely simple to measure results and creating precise indicators to determine whether the set objectives have been achieved.
Only if the set objective(s) are achieved is the campaign considered completed, and the client pays the channel where the campaign was launched, based on the agreement reached.
2. Advantages of performance marketing
The advantages of performance marketing have positioned it as a great formula for all types of businesses, but it is especially small and medium-sized companies, which don’t have large marketing budgets, that most commonly use performance marketing campaigns.
The main advantages of performance marketing are:
- Measuring return on investment (ROI) is easy. Since only previously defined results are taken into account, and whether they have been achieved, the return on investment is known in real time.
- Clear conversion-based goals. No matter what type of objective is set, usually leads or sales, if the objective is met the campaign is paid for, and if not, it isn’t.
- Easily optimized. As it can be measured in real time, it offers the possibility of constantly optimizing the campaign in progress. Boosting the areas that need it most and reinforcing those where the campaign should deliver better performance.
- Opportunity costs are removed. Advertisers should not have to invest budget in a campaign without knowing how it will perform. This reduces risk and maintains optimal budget control.
- It applies to a wide variety of channels. It can be run on a wide variety of channels for online campaigns, such as email marketing campaigns, social media campaigns, display and any channel that is part of a content marketing strategy, among others.
3. Remuneration in performance marketing
There are very different remuneration models in performance marketing, since practically everything in online marketing is measurable, and there are even several ways to measure it.
Some of the metrics that are most commonly taken as a reference to establish remuneration/payments are:
- Click: Number of times users click on an ad or URL.
- Impressions: Number of times an ad has been displayed.
- Interactions: Metric used in campaigns that have an interactive creative.
- Exposure time: Total time that the creative is exposed on the website in relation to the total number of impressions.
- Average visibility time: Average time the creative has been visible on the user’s screen.
- Click through rate (CTR): Click-through rate, i.e. the division of the number of clicks by the number of impressions.
- CPM: Cost per thousand impressions; you pay per thousand impacts, regardless of the clicks obtained.
- CPC: Cost per click, or the price paid for each click obtained.
- CPA: Cost per acquisition, or cost per sale; it is paid for each conversion made by users.
- CPL: Cost per lead or cost per contact, where you pay for each lead obtained.