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Performance marketing

What is performance marketing?

Performance marketing, also called results marketing and target marketing, is a type of advertising in which you only pay based on the actual performance of the campaign. Most commonly, results are measured based on actions such as: clicks, registrations, 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 is paying for it, whether it is based on inbound marketing or outbound marketing. But the constant changes in customers’ buying patterns and needs have generated important changes in the way in which to impact and generate sales.

This has led to digital marketing being more transparent and dynamic than in its beginnings, proposing new advertising formulas that satisfy both advertisers, as they will know the ROI of their marketing actions in detail, as well as the channels used by them to create their campaigns.

In response to this, performance marketing makes use of the most current technological means to track consumers and their behavior, making the measurement of results extremely simple and creating precise indicators with which to determine whether the defined objectives have been achieved or not.

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. By only taking into account previously defined results and if they have been successful, companies can measure ROI in real time.
  • Clear conversion-based goals. No matter what type of objective is set, generally leads or sales, if the objective is met, the campaign is paid for and if not, it is not.
  • Easily optimized. As it can be measured in real time, it offers the possibility of constantly optimizing the campaign in progress. By strengthening the most relevant areas and reinforcing the ones where the campaign should offer a better performance.
  • Opportunity costs are removed. Advertisers should not start spending money on campaigns without knowing how each action will perform. This reduces risk and maintains optimal budget control.
  • It is applicable in a wide variety of channels. It can be created in a wide variety of channels for online campaigns, such as email marketing, 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 the ad or banner was displayed to users.
  • Interactions: Metric used in campaigns that have interactive ads.
  • Exposure time: Total time that the ad is exposed on the website in relation to the number of impressions.
  • Average time of visibility: Average time the ad 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 and is paid per thousand impacts, without taking into consideration the number of clicks.
  • CPC: Cost per click or price to pay for each click.
  • CPA: Cost per acquisition or cost per sale, paid for each conversion.
  • CPL: Cost per lead or cost per contact, paid for each lead received.