Performance marketing involves using digital marketing tactics, such as digital display ads, search result placements, and pay-per-click advertising (PPC), to collect performance-based compensation on a short-term or ongoing basis. As such, you can measure and predict the growth of your business.
You can measure the performance of your PPC campaign and see your return on investment (ROI) with this powerful tool.
Let’s look at how you can start a performance marketing campaign with a clear strategy to generate revenue for your business.
Performance marketing is a business strategy and approach using digital marketing tactics to generate leads, sales, awareness, and traffic in a scalable way. Marketing companies measure the impact of their advertising programs on those key results, which enables them to take advantage of measurable investment in the small business setup.
To generate revenue, you need to focus on the performance of your marketing strategies and your business goals to help you understand which campaigns produce the most sales.
You can then use this insight to improve your digital marketing strategy and increase ROI.
Revenue from performance marketing is at the heart of the digital marketing industry’s shift. It is how advertisers pay marketing companies for their services and how small businesses generate income—the worldwide ad spending forecast 2022 projects digital ad spending to grow to 602.25 billion worldwide this year.
Performance marketers use KPIs to see if visitors perform the desired action, such as signing up for a mailing list or buying a product. Then they can gain insights into how you can use online performance marketing to increase revenues.
You should have access to rich metrics to measure the success of your digital marketing campaigns, along with time-sensitive data that allows you to buy ad placements on advertising platforms.
You can measure your marketing campaign’s performance and see your ROI with the metrics.
Here are some marketing metrics you should track to make decisions and improve results.
The CAC measures the total cost of acquiring a new customer. You can calculate it by dividing the total marketing budget by the number of customers acquired, including all costs incurred during the sales process.
The average order is the total number of sales divided by the total number of orders, including repeat customers. Transaction value lets you determine how much revenue you make per business deal.
The metric helps you analyze how close your sales are to your average conversion rate or required marketing investment.
Return on advertising spend determines the profit gained per dollar spent on ads. The metric shows how every dollar you spend on advertising translates into incremental revenue.
You can calculate ROAS by determining the actual user actions, such as consumption of your online content, and counting what you pay for each activity.
Ad spend is the total amount you contributed to a performance-based marketing campaign. You can determine your ad spend by summing your total PPC costs, including ad clicks, and dividing it by the number of conversions.
The metric is vital for small businesses that want to calculate their return on investment and revenue.
Revenue is the total amount you make from a sales transaction, including the services or goods sold and any additional fees charged. The metric allows you to measure how much your business makes from your marketing campaign.
Here are the key performance indicators for ad performance and delivery.
The cost per mille (cost per thousand) is the amount you pay for every one thousand ad impressions. The metric shows how competitive your chosen target audience is. A general rule of thumb is that broader audiences are cheaper to show your ads to than more specific ones. For example, a business/marketer audience is less specific than financial planners.
Cost per click measures how much you pay each time someone clicks on your ad. You can determine CPC by dividing your ad spend by the number of clicks you receive. The metric allows you to evaluate how effective PPC campaigns are and how much they cost you per conversion.
The click-through rate tracks the percentage of users who clicked on your ads to the number of times your ads appeared in search results or on a web page. You can calculate CTR by dividing the total number of clicks by the total number of impressions or the sum of all views.
The reach indicates the number of users in your target demographic who saw your ad. The metric determines how many people your ads reach and therefore, it helps you understand how big your audience is.
Impressions tell you the number of times your ad appears on a web page, search result or on a social media platform feed. The metric is an excellent indicator of how well your ad is optimized to appeal to its target audience, and it helps you decide whether to invest more in advertising.
Frequency measures how much and how often your ad appears to unique users. You can determine the frequency by dividing your total number of impressions by your reach. The metric helps you evaluate the efficiency of the ads you choose for your campaign and how frequently your target audience views your ad.
There are several types of ad platforms you can use to test your next campaign. Here are some of the largest online marketing platforms in the industry.
Social media advertising allows you to choose channels from which you distribute your ads. You can craft the image and design of your ads to ensure they look right on each platform.
Meta provides ads through an ad delivery system with bid strategies. Facebook allows you to set up PPC campaigns to promote your business by analyzing and optimizing your audience based on interest, demographics, and geography. Facebook Ads Manager lets you create ads in line with your objectives.
Instagram promotes mobile and social ads to help you market your business with performance-based marketing. You can create head-turning posts with Instagram ads that have the potential to go viral on the platform. The platform allows you to choose from various ad formats, from video ads, carousel ads, swipe up or swipe down, and more.
Whatsapp and Messenger are accessible platforms for sending text, audio, video, or picture messages over mobile networks. They let you share audio or video messages, images, stickers, and other forms of content to improve marketing efforts.
Find more about the bidding strategies on the Facebook ads bidding strategy guide
YouTube is an advertising network that lets you advertise your video content. You can choose to pay for ads to increase the number of views, watch time or leads & sales
Pinterest is a marketing channel that allows you to display text, images, and videos on a grid-based layout. Marketers use the medium because it makes it easy to deliver clear visuals that emphasize their points with compelling content.
Twitter is a social media platform for discovering what’s happening around you and sharing it with friends. The channel lets you engage with your target audience and drive leads to your business by creating video, flash, and web-based ads.
You can also post tweets and organize your content in lists. The company also provides analytics tools that make it easy for you to track your followers’ interests.
TikTok is a social video app that lets you publish video content, including music and other forms of media. The platform allows creators to connect with their audience through live streaming and original content creation.
Search engine marketing lets you see how well your business resonates with your target audience by leading them to your website with strategic keywords. The performance-based advertising channel provides various formats, including text ads, paid listings, and sponsored links.
Google Ads is a performance-based advertising platform that lets you choose and target your audience with keywords to display ads.
Search engine advertising on Google Ads allows you to build and manage campaigns aligned with your marketing objectives to generate leads, engage customers, and grow your business.
Microsoft Ads is a performance-based advertising channel from Microsoft. The platform allows you to choose from various ad formats, including text ads, display banners, and video ads.
Microsoft Ads provides various tools for planning and running marketing campaigns and generating traffic to your website. You can use advanced targeting tools for demographic and interest-based audiences to generate leads with your ads.
Apple Search Ads is a performance-based advertising platform that lets you promote your business and drive traffic to your website. The ads are mobile-friendly and adjust automatically to different screen sizes.
The platform provides ad formats such as banners, text, and rich media ads that you can use to create compelling content for your marketing campaign.
The iOS14.5 update’s impact on digital marketing has brought about new changes that continue to make digital advertising a key marketing channel for Apple brands.
The update introduced new capabilities for advertising via app-based campaigns. The update also introduced new capabilities for advertising through ATT updates, which give you easier access to valuable data about your ad campaign performance.
Display advertising is a marketing channel that lets you create visually appealing ads to promote your marketing campaign. The performance-based marketing channel provides various ad formats, including pictures, text, banners, and video ads.
Google display network is a performance-based advertising platform that allows you to reach a large audience with your ads on various websites and apps. You can choose from multiple ad formats, including rich media ads and banners, to create eye-catching content for your marketing campaign.
Other top display networks for advertising include Yahoo Network and Adknowledge.
Native advertising implements ad creation that matches the look and function of the host platform and ensures advertisers can target the right audience. The performance-based marketing channel provides native advertising in various formats, including banners.
Taboola is a native advertising platform that lets you create ads based on your goals. The platform provides ad formats like banners and cards to promote your business and generate traffic to your website.
Outbrain is a native advertising platform that lets you create ads based on your product or service. The ad formats include slides, videos, and stories that provide compelling content.
Other top native advertising networks include TripleLift and Nativo.
To develop a performance marketing strategy, you must define your goals, identify your target audience, and choose a direct-to-consumer marketing channel. Your strategy needs to include content distribution across all channel types and how often you plan to share information with your target audience.
The first step is choosing which products and services offer the most substantial front-end customer acquisition. Deciding which products and services to focus on helps you determine what content to create, how often to share information with your target audience, and how much traffic to generate.
Pick one media channel and determine how to get a great ROI before expanding into other channels. Your media channel choice impacts the type and format of content you create, your traffic measurement, and various other performance marketing goals. The best way to know which channel is right for your business is to test different channels for yourself.
Begin with Meta (Facebook) and then add Google search or Youtube pre-rolls, depending on your media and customer acquisition strategy.
Before creating content and sharing information with your target audience, you must set up all the technical infrastructure components, including conversion events, pixels, and tags. Setting up technical bits is necessary so that ad platforms optimize delivery for your goal conversion action and for you to acquire accurate conversion data.
Your target audience must be the one with the highest chance of success for your business. You must pick a target audience that you can engage so that they respond to your performance marketing campaign and remember your brand.
Before running ads, consider which area is the best for your goal conversion action. Your target audience will only engage in your performance marketing campaign if they know your brand and have a high affinity for you before interacting with the ad.
Once you have a target audience that proves faithful, lookalike audiences are a great way to expand national and international campaigns.
The key to a successful performance marketing campaign is to provide different creative variations, including text ads, video ads, rich media ads, and coupon or promotion ads.
Create as many variations as you need because different ad creative variations can contain diverse innovative components. A high volume output makes you more likely to discover profitable campaigns.
After you’ve developed your strategy, launched ads, and received click-throughs or conversions from your audience, evaluate the performance of each ad campaign. Assess performance based on business metrics. Evaluating ad performance lets you know which ads to keep and which ones to ditch.
Track ad performance closely to make adjustments and obtain your business’s highest return on investment. Tracking conversion data helps you determine which ads are performing well for your business and allows you to focus your budget on converting brand-new customers into repeat customers.
Optimizing performance marketing campaigns depends on having the right message, creative, and optimization components. These performance marketing tips will ensure that your brand has the best chance of success.
A market-tested offer is the heart of your campaign. When deciding which offers to use in your performance marketing campaign, you must use one of high quality and tested. Focusing on a well-designed, market-tested offer that works best for your business is crucial to improving conversion rates.
optimize your landing pages and sales funnel for optimal conversions. Remove unnecessary navigation components for an intuitive design, use a clear and concise call-to-action, employ mobile-first design, use fast-loading web pages, and focus on user experience up to the point of purchase to increase your conversion rates.
Ad tracking and attribution software enables you to determine which ads and campaigns are converting best for your business. As you run more campaigns, build a library of ad campaigns that help you determine which source delivers the most sales.
Track conversions and adjust to optimize your campaign performance.
Choose the correct conversion event to make sure your campaigns are delivered to the right people based on your actual business goals.
Testing multiple ad variations and audiences is another way to make the most of your time and effort. Create several ad variations that use different media types, messaging, sales copy, color schemes, and offers. Testing multiple creative variations lets you discover winning ad creatives and audiences that boost conversion rates.
Pause all ad campaigns that underperform, indicated by low ROI, high CAC, and more. If a campaign is not converting, it’s best to switch it off to prevent wasting money. Pause ads that aren’t performing well as soon as possible to keep your drive within budget and effective.
After successfully launching your performance marketing campaign, check for proper delivery notifications, analytics, and ad feedback. If you do not receive immediate positive results, such as high CTR, re-evaluate your campaign.
Performance marketing is a distinct type of digital marketing. It focuses on finding and potentially expanding the specific target audience of a business.
Companies that use performance marketing spend less on advertising to target their audience and reach the desired action. Their ads display in relevant spaces based on the demographics and interests of the viewer.
Performance marketing differs from other digital marketing because it focuses on actionable audiences. Digital advertising entails all aspects of internet marketing, including lead generation, building sales funnels, PPC campaigns, and email marketing.
The difference between performance and digital is the goal of the campaign. In digital marketing campaigns, advertisers hope that website visitors will take action so that they can sell a product or service. In performance marketing campaigns, companies want to get qualifying traffic to their websites or mobile apps to generate qualified leads & sales.
Performance marketing focuses on the performance of the business to generate leads and conversions. In contrast, brand marketing focuses on building a brand’s identity, strengthening the company’s image, and increasing consumer satisfaction.
Affiliate marketing differs from performance marketing in that it deals with third-party websites. Affiliate marketers utilize affiliate programs without the need to place ads on platforms and acquire a portion of the revenue generated by the company they promote. Affiliate marketers also do not need to promote products actively.
In performance marketing campaigns, companies create ads with conversion rate optimization. They use automation and tools to track ad performance for better conversion rates. The data about these conversions enable them to identify and account for each campaign outcome metric.
Programmatic marketing differs from performance marketing because it does not rely on a set of rules and algorithms. Programmatic marketing uses advanced artificial intelligence methods for more precise targeting and madia buying.
Performance marketing relies on well-designed ads to attract qualified consumers with the best chance of converting to a lead. They use messaging that focuses on the primary goals of their businesses, such as generating leads or retaining customers.
Growth marketing focuses on promoting a business’s products and services to attract new and existing customers. Performance marketing focuses on the conversion of visitors to leads and customers.
Performance marketing differs from growth marketing because performance marketing attempts to achieve a specific conversion goal. Growth marketers aim to grow and increase traffic, awareness, and brand loyalty using a modified product feature using light resources.
Some companies fail to use their performance marketing campaigns effectively because they do not manage their advertising efforts effectively or choose inappropriate strategies. Here are some of the setbacks of performance limitations.
Performance marketers rely on CTAs to convert visitors and drive leads through their sales funnel. However, focusing too much on CTA leads to a diluted brand message.
Performance marketers appeal to the emotions of their viewers by using flashy, exaggerated claims and information. The excessive information may make clients regret purchases that are not as good as advertised.
Some performance marketing platforms, such as Facebook, disable accounts and business managers, limiting the reach of your ad campaign and stopping the flow of traffic to your landing page.
Here are the frequently asked questions regarding performance marketing.
Performance marketing refers to using digital marketing tactics to generate leads, sales, awareness, and traffic in a scalable way.
The five KPIs are CPM, CPC, CTR, reach, and impressions.
Performance marketing aims to increase revenue for small businesses.
Performance marketing is not a subset of SEO and only deals with advertising on different platforms to entice site visitors to convert into leads or customers.
The main benefit of performance marketing is that it delivers highly qualified leads. Performance marketing allows companies to focus on prospects most likely to become customers.
The performance marketing metrics are customer acquisition cost, average order, return on investment, customer lifetime value, revenue, and ad spend.
Walter Voronovic shares accurate, honest & pragmatic information on how to use the internet to build profitable digital business assets.
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