Performance marketing is a commonly used phrase in the world of digital marketing. If you are an aspiring digital marketer, you must know what is performance marketing and the purpose it serves for businesses. Performance marketing is a vertical of digital marketing that is driven by results. The cost of performance marketing efforts is calculated based on the results, i.e., how the users and the consumers react toward the performance marketing efforts.  

Different metrics are employed to measure the results of a performance marketing campaign. A company that runs a performance marketing campaign is paid only when the client’s digital marketing objectives are met. These digital marketing objectives range from a click to a sale. Hence, this form of digital marketing is termed performance marketing.

What is Performance Marketing in Digital Marketing?

Performance marketing is a crucial component of digital marketing. While digital marketing encompasses everything digital, i.e., from content to present on digital channels, performance marketing only involves result-driven strategies and efforts of digital marketing. It talks about numbers, measurable results, and other metrics directly impacting the business, showing how well your digital marketing efforts have translated. 

The people responsible for performance marketing decide on the company’s goals and then quantify them to make them measurable. These goals mainly include generating leads, reaching a particular threshold for social media engagement, website traffic, etc. These results help the performance marketers allocate a budget and calculate the actual spending to drive the results.

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How does Performance Marketing Work?

Now that you know what is performance marketing, let’s try to understand how it works. The primary job of a performance marketer is to choose a digital marketing channel and create an ad for that particular channel. Here, performance marketers can choose to create more than one ad for different platforms. Once the ad is created, it is launched on the platform. A performance marketer’s job is to monitor the ad’s performance. A few metrics must be considered when it comes to performance marketing.

Cost Per Click

Cost Per Click, or CPC, is the price a marketer pays every time the ad gets clicked. This method is widely used to ascertain the cost of the campaign and also to check the efficiency and effectiveness of the ad. 

Cost Per Impression

Every time your ad is displayed to a customer or appears on their feed, the marketer is charged for it. This is called the Cost Per Impression. Impressions refer to the total number of times the ad gets displayed to the viewers, and the CPM is calculated for every thousand views. For instance, if 30,000 people view your ad, you will have to pay an amount equivalent to 30 times the base rate. 

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Cost Per Sales

Also called the CPS, marketers pay the cost if the sale of the product or service is made via the ad. This is a common term used for affiliate marketing. Hence, marketers measure this metric based on the value of the sales and the number of people who make the purchase post watching the ad.

Cost Per Lead

Cost Per Lead, or CPL, is a very important metric used by performance marketers. The cost per lead is calculated when a potential customer clicks your ad and is redirected to your landing page. The cost is calculated when the user performs an activity on the page, like adding something to the cart, creating an account, signing up for the newsletter, etc. The primary purpose of CPL is to get access to leads so that you can retarget them. 

Cost Per Acquisition

The CPA is the company or marketers’ cost to acquire one consumer. The cost is charged when the user or the consumer performs a desired action like completing a sale, filling in their personal information, etc. 

Forms of Performance Marketing

Once you know the important metrics and how to calculate them, you must figure out the values of all of these metrics whenever you run a performance marketing campaign. There are different forms and channels of performance marketing. You can experiment with these forms to identify the type that works best for your business.

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Display Ads

Display ads are the most common form of performance marketing. These are common sites on several marketplaces and platforms like Amazon, Flipkart, etc. As the name suggests, a display ad uses a visual to interact with the audience. The visual can be anything ranging from a product to a promotional discount. Display ads were first used within Facebook to redirect people to different shopping websites. However, with the introduction of ad blockers, these ads are losing their charm. 

However, these ads are still doing pretty well on e-commerce and other shopping websites where people are on the lookout for better deals. 

Native Advertising

Native advertising is another popular form of performance marketing where the ads are created within a platform to match the appeal of other content available. YouTube is one platform that uses native advertising in the best possible way. The ads that play before the content look exactly like any other video on YouTube. These are also common on marketplaces and e-commerce sites where the ad looks like a regular product listing.

Native Advertising works as it blends well with organic content and is consumed like one. Hence, it gives you the window to naturally promote your brand.

Content Marketing

Content marketing has gained a lot of momentum in recent times. Content is the best way to reach out to your audience and create an impact. Also, it costs much less compared to other forms of performance marketing. It gives you a window to educate your audience and promote your product. You can create content and promote it on social media channels or create a blog section on your website. 

You can add your branding and other elements to the content you produce. You must try experimenting with different content forms and include them in your content marketing strategy.

Social Media

Social media is a very important aspect of performance marketing. Here’s where your performance marketing efforts yield results. You must identify your target audience and select the platform based on where you will find your audience. For instance, if you want to target the youth for your products, you must use Instagram to reach out to your audience. However, if you sell a solution for C-suites, you must build a presence on LinkedIn.

Social media allows you to reach out to your potential customers directly and drive traffic to your website. It also allows users to share user-generated content and create a buzz around your products and offerings. If you want to measure all the critical metrics for a performance marketing campaign and reach out to a massive audience at once, you must go ahead with Facebook or use two or more platforms together.

Search Engine Marketing

Optimizing your website and making it searchable is another vital part of performance marketing. As most people will find out about your brand and website via searches, you must ensure that the website is prepared and optimized for search engine marketing or SEM. 

When it comes to performance marketing, you must focus on reducing the Cost Per Click for your campaigns while running any ad campaigns. However, if you want to make the best use of organic SEM, you will have to work on content marketing and improving the SEO of the website. You can improve the SEO by incorporating popularly searched keywords and the keywords that come with less competition. Incorporating backlinks that will redirect people to your website is also an important part of performance marketing.  

Benefits of Performance Marketing

Now that you know what is performance marketing in digital marketing, you must also try to understand the benefits of performance marketing. Some of the benefits of investing in performance marketing are:

Measurable

The best thing about performance marketing is tracking your progress and measuring it. It allows you to define a measurable goal and then measure the actual results of a campaign. You can calculate metrics like CPC, CPL, CPI, etc., and make necessary amends to the campaign if the numbers are different from your target. 

Reach

With performance marketing, you can expand the reach of your business. Platforms like Facebook allow you to create cohorts and select geographies where you want your ads to be displayed. Hence, you can use different digital channels and collaterals to increase the reach of the business as a part of performance marketing. 

Budget-friendly

You pay based on the results when you run a performance marketing campaign. Hence, it is an affordable form of marketing compared to the other traditional methods of promoting your products and reaching out to the audience. Also, performance marketing guarantees results. Hence, brands don’t hesitate to put some money aside for performance marketing. 

If you are interested in learning more about performance marketing, you should apply for the Advanced Certificate in Digital Marketing and Communication anchored by MICA, Ahmedabad. The course will introduce you to the world of performance marketing and its use cases in the real world.

Some highlights of the course are:

• Learn from the best industry professionals
• Get a MICA Executive Alumni Status
• Have access to 15+ Case Studies and Live Projects

Conclusion

Performance marketing is evolving and changing how marketing is done. It is result oriented, and it helps marketers measure the outcomes of their efforts. Currently, some companies are looking for performance marketers who can help them fuel their growth and expand their business, which also makes it a potential career most likely to experience growth in the future.