What is performance marketing?

Performance marketing is an umbrella term used to describe online or offline marketing that drives measurable business results. Performance marketing is results oriented marketing. Rather than prioritizing marketing outputs, such as the number of blog posts written, performance marketing emphasizes the results and outcomes of the outputs.

  • Marketing output: Newly published e-book added to a dedicated landing page on the company website and then promoted on social media.
  • Marketing performance outcome: E-book generated 150 on-site conversion actions via downloads within the first two weeks, of which resulted in 85 marketing qualified leads, 15 new customers and $65,000 in revenue.

Performance marketing goals and desired outcomes

Strong performance marketing occurs when a marketing campaign, program or activity meets or exceeds expectations or benchmarks. This includes, but isn’t limited to enhancing:

  • Marketing campaign return on investment (ROI)
  • Business revenue, or the annual recurring revenue (ARR), which is largely applicable to SaaS organizations
  • Customer lifetime value (CLTV / LTV)
  • Number of subscribers
  • Brand awareness and market share
  • Website conversions, where users take a desired action. For example, with eCommerce websites the most common goal is to convert visitors into paying customers after clicking on ‘buy’

Performance marketing vs. demand generation – what’s the difference?

No matter which term you prefer to use, performance marketing and demand generation are essentially the same. Marketing teams may choose to define it differently, and it’s important to know that there isn’t one universal definition. It is, however, more important to focus on the goals that actually matter and make a positive difference. For instance, traditional marketers prioritize the number of leads generated (MQL) and focus on a low cost per conversion (CPC) number rather than lead quality and revenue. It’s better to spend $800 for a lead that results in revenue, rather than the volume of leads with little to no revenue impact.

With demand generation, marketers look to increase target audience brand awareness and interest. When planned and implemented correctly, businesses achieve growth as a result of new customer acquisition or up-selling to existing customers.

Benefits of successful performance marketing and demand generation

  • Speed up the sales cycle by moving customers through the buyers journey at a faster rate. This produces faster revenue growth, reduces sales and marketing costs, and increases employee productivity.
  • Lower customer acquisition costs (CAC) due to better communication channel efficiencies and stronger conversions.
  • Offer greater opportunity to deploy campaign experimentation.

Organic search marketing drives digital performance

Achieving organic performance is arguably considered to be one of the most strategic and impactful areas of marketing. With organic search, there are no advertising costs associated with capturing new website visitors. As a result, the CAC tends to be much lower compared to paid marketing. When a business secures high search rankings for its relevant keyword search terms used by target audiences, greater website traffic can be expected compared to the competition. When visitor volume also translates into new business revenue and growth, organic search can then be considered a strong digital marketing performance channel.

Created by DeepCrawl, this SEO Revenue Funnel illustrates how a web page eventually helps drive revenue. The initial stages provide a solid website foundation in order to maximize bottom-of-funnel conversions.

When advertising dollars are spent to achieve strong performance results, marketers need to clearly define their budget, goals, objectives, amongst many other critical campaign related details, including but not limited to target audiences and the total addressable market.

Performance marketing can also refer to online advertising where the advertiser only pays for the results. The three main payment models are:

  • Percent of sale: The advertisers pays a commission on each sale generated.
  • Leads: A fixed amount is paid for each lead.
  • New customers: A fixed amount is paid for each new customer acquired.

Hybrid performance models that include several payment types are also an option, such as a fee for both the lead generation and percent of sale commission.

Affiliate marketing performance

With affiliate marketing, third party publishers or influencers (also known as affiliates) are compensated when a transaction occurs or a defined goal is achieved. Commission fees typically act as motivation.

Measuring performance marketing

There are many ways to measure marketing performance depending on the campaign or marketing activity. Below are a few popular ways marketers evaluate and report on the success of their project or campaign:

  • Cost per Action (CPA)
  • Customer Acquisition Cost (CAC)
  • Cost per Mille / Cost per Thousand (CPM)
  • Customer Lifetime Value (CLTV or LTV)
  • Revenue and Profit Growth

How to create a performance marketing strategy

Step 1: Identify and outline the business goals and objectives

Before launching a new marketing campaign, it’s critical to understand and align to the broader business goals and objectives. Oftentimes high performing sales and marketing teams will create their 1-3 year growth plans and targets. Marketers need to have full visibility, understanding, and input to the strategic, overarching direction of the business. To develop a business strategy, there needs to be a strong understanding of the market.

Step 2: Create marketing goals, objectives and plans that align to the business

Understanding how the marketing plan feeds into the broader business strategy provides clear and intentional focus for the overall team. Remember to consider the entire buyer’s journey:

This image shows the different stages in the marketing funnel and buyers journey.

Step 3: Determine the budget, timeline, and resources you’ll need to be successful

Set realistic expectations in order to achieve your desired performance results. Research is required at this planning stage. For example, you may need to conduct a performance audit on your competitors to identify what you will need to outperform them.

Step 4: Select your marketing channels

Determine your go-to-market approach by choosing your marketing communications channels. This will allow your teams within marketing to better execute on the plans, since each communication channel requires dedicated and customized execution.

Step 5: Create and launch the performance marketing campaign

Proper execution in marketing is vital to success, however it’s important to remember that it comes after there’s a clear strategy and plan in place.

Step 6: Monitor the results and continuously optimize the campaign

This is the point in which the performance results are seen. Pivot quickly and adjust the campaign where needed to increase marketing performance.

Step 7: Report on the performance marketing outcomes

While performance should be tracked continuously, monthly and quarterly reports offer a more holistic view. When a campaign ends, be sure to thoroughly review and summarize the overall performance marketing outcomes.

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