Performance Marketing: 5 steps to increase your ROI
The Internet has forever changed the way consumers discover and shop for products. Especially since last year e-commerce experienced a huge upswing due to the lockdown. And so, of course, the way companies advertise and sell has completely changed.
Today, advertisers can collect campaign data 24/7 and measure results in real-time as they occur. While attribution has been almost impossible in the past, data transparency allows marketers to fine-tune their campaigns so they perform better. And that's exactly what the performance marketing.
What is performance marketing?
Performance marketing is the term for online marketing campaigns in which advertisers pay for results such as clicks or conversions.
Unlike traditional and organic marketing, performance marketing is used specifically to trigger actions, track and measure those actions, and in the process determine the ROI of each asset, campaign or activity.
While large companies can spend millions of dollars on their branding, most companies need to focus on the bottom line to stay profitable. Performance marketing puts the advertiser in control. You determine the action and only pay when that action has been completed - whether it's a sale, a lead or a click.
How does performance marketing differ from traditional online marketing?
With most forms of advertising, the advertiser pays an upfront fee for the ad space, regardless of performance. This can mean spending hundreds to thousands of CHF without ever converting. With performance marketing, advertisers only pay for successful transactions.
Performance Marketing vs. Brand Marketing
In an increasingly saturated market, standing out from the crowd is a challenge and that is why your brand awareness is so important. There are many ways to increase brand awareness, e.g. B.
- social media campaigns
- Native Ads
- content marketing
- and much more
Some of these can even fall under the heading of performance marketing as they are measurable and advertisers only pay for specific actions. For example, you can increase your brand awareness by targeting your target groups with relevant top-of-funnel content confront,that address their problems and arouse interest. Since the results of these campaigns can be assigned, the advertiser sets a specific budget and only pays according to the conversion goal, such a brand awareness campaign is also a form of performance marketing.
Performance Marketing vs. Affiliate Marketing
Affiliate marketing is a distinct subset of performance marketing as it is based solely on metrics and goals. Affiliate marketing is when you earn a commission for promoting another company's product or service online. The affiliate marketer advertises on behalf of the merchant with the aim of driving traffic, clicks and sales to the merchant's website. The affiliate partner only receives remuneration for actions carried out, such as clicks, conversions or leads.
Performance Marketing vs. Programmatic Marketing
Programmatic marketing is an automated method of buying ad space, targeting the most relevant audience at the best possible price. Programmatic marketing is becoming an integral part of performance marketing as it allows advertisers to buy better placements at scale and maximize their ROI. A major advantage of programmatic is the detailed reporting and analysis, which means that advertisers can examine and optimize the performance of programmatic ads.
How do you measure performance marketing?
An essential element of performance marketing is the ROI (return on investment) - every activity and action is measured and analyzed using predefined KPIs. In this way, the performance of a campaign can be understood and tweaked to improve it.
A measurable ROI is the key to successful digital marketing. Therefore, it is important to follow him regularly. There are a variety of performance tuning tools on the market. But whichever you choose, give your campaigns time to collect data. The more data you have, the deeper your insights and the more accurate and effective you can optimize. Below are some of the key metrics and KPIs commonly used in performance marketing:
CPM (Cost Per Mille)
CPM stands for Cost Per Mille or Cost Per Thousand and is the price paid by the advertiser for 1000 impressions of a digital ad. In other words, it's the price for every 1000 impressions of an ad. The CPM therefore does not measure the actions taken by the viewers, but only determines the price for the display of the ad. Some performance marketers focus less on CPM and more on metrics that have concrete, actionable meaning.
CPC (cost per click)
Cost Per Click is the price paid for each viewer click on an ad. CPC is a better indicator of engagement than CPM because the viewer took an action and actually clicked on the ad. A higher CPC usually means the value of the conversion is higher. For example, a luxury car brand might set a higher CPC, targeting a much smaller audience of potential customers who are likely to buy an expensive car. The cost of the click is more expensive, but the potential return is also much higher.
CPA (Cost Per Action)
CPA stands for Cost Per Action) and measures campaign performance based on a specific desired action for the target audience to take, e.g. B.
- Download an e-book
- Registration or Subscription
- purchase of an item
- app download
- or some other action
In performance marketing, the action taken by prospects is considered the most important tangible and measurable result, which is why CPA is also one of the most important and popular metrics.
LTV (Lifetime Value)
This metric focuses on an individual customer's projected "lifetime value" throughout their relationship with the brand or company. LTV estimates prospective spends of acquired customers based on their ongoing activity using advanced methods such as predictive analytics. With more sophisticated ways of measuring it, LTV is quickly becoming a popular metric as it helps marketers plan their overall strategies to increase ROI.
Types of performance marketing
Performance marketing has evolved over time thanks to new technologies and changing consumer behaviors. In today's performance-driven world of digital marketing, it's all about reaching the right people, on the right device, at the right time. The tools and targeting options available have evolved significantly, giving performance marketers more opportunities than ever to create powerful campaigns for different audiences and different goals.
Search engine marketing (SEM)
SEM, or search engine marketing, is an important part of performance marketing and definitely worth the time and investment. SEM is the placement of paid ads on Google's search engine results pages (SERPs) or something
.It is very effective as it presents the user with targeted ads related to the product or service they are looking for. And that's when intention is high and there's a good chance of catching his attention and interest.
Another performance marketing tactic that is gaining ground is Native Ads, for example on social media platforms. Native ads are more effective than display ads because they don't look like advertisements and thus don't disrupt the user's browsing experience. Rather, they "natively" fit the web page on which they appear.
How to build your performance marketing strategy in 5 steps
There are so many different types of performance marketing channels and campaigns that there is no one-size-fits-all approach. However, below are the key steps to building a performance marketing strategy for any type and audience. Use them as a guide to make your performance campaign a success.
Step 1: Set your campaign goal
Before you can measure the success of a campaign, it's important to set your campaign goals. Whether it's creating brand awareness or selling products, setting goals before launch is the foundation of performance marketing.
With many advertising platforms such as LinkedIn Ads, Instagram for Business etc. you need to set goals before creating ads or setting up campaigns. Your campaign goals determine where your ads appear, who they're shown to, and other factors critical to success.
The most popular digital marketing goals are:
- brand awareness
- website traffic
- lead generation
Once you've set your campaign goals, you can use advertising platforms like the Facebook Ad Manager Create campaigns aimed at those specific goals.
Step 2: Choose your digital channels
When it comes to performance marketing, it's wise to diversify the channels you use, rather than focusing solely on one channel. This helps increase campaign reach and increase the chances of success. Whether it's affiliate marketing, native advertising, or social media platforms, look for channels that specialize in your conversion type and where you're most likely to find your target audience.
By diversifying across different social networks or expanding from simple display ads to include native advertising, you can massively increase your potential reach and expose your performance campaigns to a much wider audience.
Step 3: Create and launch the campaign
A big part of performance marketing is creating campaigns - identifying the target audience, understanding their problems and desires, and crafting ads and messaging to address consumers' needs and grab their attention. The better you understand your audience and how the product or service can appeal to them, the easier it will be to create the best ad copy, design, and planning. And of course the technical aspects of the campaigns, such as e.g. For example, ad size, character limit, and allowed images vary depending on the platform or channel you use.
Step 4: Measure and optimize your campaign
The real work starts after the start. Performance campaigns generate data as soon as they are launched and running. It's the marketer's job to optimize each campaign for performance, across all channels used. Track analytics and metrics to determine which traffic sources are performing best and allocate ad dollars accordingly. Use performance marketing campaigns not only to increase sales, but also to identify the best channels, audiences and campaign goals to increase your return on investment.
Step 5: Dealing with potential pitfalls
As with any marketing campaign, performance marketing has some potential challenges and pitfalls that can arise. This can include:
- Compliance issues
- Click fraud and bot traffic
- Publisher Fraud and Transparency in Placement
One way to reduce potential problems in the first place is to focus your resources on quality ad networks and platforms where issues like brand safety and privacy are treated responsibly and reliably.
How to build your performance marketing strategy in 5 steps
Native advertising is the perfect example of performance marketing - advertisers create advertising campaigns for a specific conversion goal and only pay for clicks or other conversion actions. Contrast this with a television ad that runs for a specific period of time and at a specific frequency, but there is no guarantee of how many consumers will see or respond to it.
This sums up the benefits of performance marketing. Performance marketing focuses on tracking and attribution, which gives marketers much more control over their budget and ROI.
For these 3 reasons, performance marketing is the new marketing
- Easy tracking of performance:
Performance marketing campaigns are set up with the express aim of tracking and measuring. Using various data analysis tools designed specifically for performance marketers, it's easy to keep your finger on the pulse of performance campaigns and adjust them for better results.
- Minimal risk:
Marketers know exactly what is happening with their performance campaigns at every stage. This puts them in a much better position to optimize and reduce risk whenever the need arises. In addition, shorter lead times are possible with less risk. No more waiting around for permits.
Performance marketing is ROI oriented, meaning the focus is always on the ultimate goal of performance improvement. This ensures that performance campaigns continuously produce better results, which strengthens the brand in all areas and contributes to more leads and sales.
CONCLUSION: When it comes to performance marketing, your ROI is the focus
With performance marketing campaigns, you can measure everything from brand awareness to conversion rates - broken down down to the individual ad. As advertising becomes more transparent, advertisers are looking for online marketing strategies with proven ROI that go beyond branding.
Performance marketing was born out of this need and is becoming more sophisticated and advanced over time. By using a good performing marketing agency, you can continue to focus on your core business and do what you do best, while a team of experts takes care of the entire advertising process as well as reporting, analysis and optimization for you.
Contact us today for a free analysis of your advertising accounts and let us show you the potential of your online business.