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What Is Performance-Based Marketing?

Performance marketing is the term given for online marketing campaigns where advertisers pay marketing companies or advertising platforms for results achieved, such as clicks or conversions.


Unlike traditional and organic marketing, performance marketing is specifically used to drive actions, track and measure those actions, all while attributing the ROI of each asset, campaign, or activity.

While major corporations can spend millions of dollars on branding, most businesses need to focus on the bottom line to stay profitable. Performance marketing puts the power back in the hands of the advertiser. You determine the action, then pay when that action has been completed – whether it’s a sale, lead, or click.

How Is Performance Marketing Different From Digital Marketing?

Digital marketing is marketing or advertising that uses online channels. Performance marketing is a type of digital marketing that uses a payment model in which you only pay when a certain outcome occurs.

Digital marketing, also called online or Internet marketing is a broad term that encompasses various strategies, channels, and payment models. Performance marketing can involve various channels and strategies as well, but it’s defined by the payment model used. Using this approach, however, may lead to other differences as well.

For example, performance marketing campaign goals are typically shorter-term and focus on easy-to-measure metrics as leads generated rather than goals such as increased brand awareness.

How To Measure Performance Marketing?

A defining element of performance marketing is ROI (return on investment) – every activity and action is measured, reported, and analyzed against pre-defined KPIs. This is how the performance of a campaign can be understood and optimized towards improving performance.

Measurable ROI is the key to successful digital marketing, so it’s important to track it regularly. There are loads of performance optimization tools available on the market, but whichever you choose, give your campaigns time to gather data. The more data you have, the deeper your insights and the more you’ll be able to optimize accurately and effectively.

Here are a few common KPIs for marketing and where they might be used:

1- Conversion Rates- The conversion rate measures the percentage of customers who take a specific, desired action. It could be clicking through a paid ad, signing up for a newsletter, or starting a free trial. You’ll probably have to track multiple conversions across your marketing funnels, so make sure you align this metric with your goals.

2- Customer Acquisition Cost- The CAC is calculated by dividing all the costs spent on trying to acquire new customers by the number of new customers acquired in the period the money was spent. It is often used as a metric to determine marketing effectiveness.

3- Customer Lifetime Value- The CLTV is calculated by multiplying the average purchase value by average purchase frequency, then multiplying the result by the average amount of time a customer stays with your brand. Knowing your CLTV will help you determine how much you can spend on customer acquisition.

How To Build A Performance Marketing Strategy?

There are so many different types of performance marketing channels and campaigns, so there is no single way to do it. However, these are the main steps to build a performance marketing strategy of any kind and for any audience. Use them as a guide to get your performance campaign running towards success.

1- Establish Your Campaign Goal- Before you can measure the success of any campaign, it’s important to establish your campaign goals. Whether generating brand awareness or selling products, setting goals before launch is the very basis of performance marketing.

Many ad platforms require you to establish goals before creating ads or setting up campaigns. Your campaign goals determine where your ads are shown, who they’re shown to, and other factors vital to success.

The most popular digital marketing goals are:

  • Brand Awareness

  • Website Traffic

  • Remarketing or Retargeting

  • Engagement

  • Lead Generation

  • Sales

Once you have established your campaign goals, you can use ad platforms to create campaigns that target those specific goals.

2- Choose Your Digital Channel- In performance marketing, it is wise to diversify the channels you use, rather than focusing exclusively on one channel. This helps spread campaign exposure and reach, broadening the chances for success. Whether it’s affiliate marketing, native advertising, or social media platforms, look for channels that specialize in your conversion type and where you are most likely to find your target audience.

By diversifying on different social media networks, for example, or broadening from simple display ads to native advertising, you can massively increase your potential reach and expose your performance campaigns to a much wider audience.

3- Create And Launch The Campaign- A lot of the work of performance marketing goes into creating campaigns – identifying the target audience, understanding their pain points and desires, and crafting ads and messaging to address their needs and grab their attention. The more you understand the target audience and how the product or service can appeal to them, the easier it will be to create the best ad copy, design, and scheduling. And of course, the technical aspect of the campaigns, such as ad sizes, copy character limits, and acceptable images, also depend on the particular platform or channel you are using.

4- Measure And Optimize Your Campaign- The real work kicks in post-launch. Performance campaigns begin to generate data the moment they are up and running. It’s up to the marketer to optimize individual campaigns for performance, across all channels in use. Keep track of analytics and metrics to determine which sources of traffic are performing best, then allocate ad funds accordingly. Use performance marketing campaigns not just to grow sales but also to identify your best channels, audiences, and campaign objectives to increase your return on investment.

5- Handle Potential Pitfalls- Like, with any marketing campaign, there are some potential challenges and pitfalls that can come with performance marketing. These may include:

  • Brand safety

  • Compliance-related issues

  • Privacy regulations

  • Click frauds & bot traffic

  • Publisher fraud and placement transparency.

One way to reduce potential problems at the outset is to focus your resources on high-quality advertising networks and platforms, where issues like brand safety and data privacy are handled responsibly and reliably.

We certainly hope this article helps you create successful Performance Marketing Campaigns for your growing business. Want to discuss more? Connect-with-us. We will be happy to answer your queries.