Performance Marketing

The main goal of advertising and digital marketing is to increase traffic to the website and encourage people to purchase a certain product or use certain services. Performance Marketing, which is becoming more and more popular, helps companies achieve this goal, but it does it in a more innovative way than traditional advertising. In simple terms, Performance Marketing is marketing that is based on performance and its campaigns charge advertisers once an ad has delivered desired results. From this guide, you can find out everything there is to know about performance marketing and why you should consider using it.

What is Performance Marketing?

Performance Marketing is an online advertising strategy in which advertisers hire marketing companies when a certain business goal is accomplished, for example, when a product is sold. In Performance Marketing, marketing companies are referred to as ‘publishers’ or ‘affiliates’ and advertisers are called ‘retailers’ or ‘merchants’.

The way Performance Marketing works is that merchants pay publishers when a specific action is completed. This way, merchants know that their money is not being wasted as their business is already performing well. Merchants only pay publishers when a desired action occurs.

What makes Performance Marketing different to other forms of advertising?

In traditional advertising fees are paid upfront so there is no way of knowing whether the ads will actually be successful. In Performance Marketing, advertisers only pay for successful transactions, which allows businesses to grow.

What is the difference between Affiliate Marketing and Performance Marketing?

Technically, Affiliate Marketing and Performance Marketing are the same things so people often use these terms interchangeably. There are however some differences between them.

Affiliate MarketingPerformance Marketing
a term which originated before Performance MarketingAffiliates promote your product and in return they get a commissiondoes not ensure that the consumer will buy a producta concept that goes beyond what affiliate marketing doesthe affiliate has to achieve the goals set by a merchant to fulfil the contract and get paidthere are several payment structures and performance marketing channels that merchants can choose from

How does Performance Marketing work?

Performance Marketing consists of four groups which are necessary for it to work. Each of them has a different role.

  1. Merchants

They are also known as retailers or advertisers and they represent businesses that want to promote their products or services. Merchants include companies that specialise in various sectors as no matter what the firm does, it can be successful in Performance Marketing. Nevertheless, the businesses that perform the best in Performance Marketing are usually the ones that have an already established brand and a big online presence.

  1. Publishers

They are also known as affiliates and they represent marketing partners. The most common forms of publishers are:

  • blogs
  • online magazines
  • product review sites
  • coupon and loyalty websites
  • social influencers
  • content sites
  • mobile apps.

The role of publishers is to share a product or services with their followers and encourage people to purchase them.

  1. Affiliate Networks and Third-party tracking platforms

They are essential to forming a partnership between merchants and publishers. They offer tools like links, promotions, or banners and help merchants and publishers keep track of leads, downloads, and other actions caused by the ad.

  1. Affiliate Managers

They are said to be the main driver between merchants and publishers and they help form performance marketing strategies and scale the advertising programs. As Big Commerce explains, their tasks include:

  • growth strategies
  • partner recruitment
  • campaign management.

They make sure that the goals that the merchant wants to achieve are attainable.

Performance Marketing strategy depends on the payment structure chosen by a merchant. The most common ones are:

  • Paying only for sale caused by an ad
  • Paying when consumers sign up to your services as a result of an ad
  • Paying for downloads from an ad
  • Paying for acquisition when a specific action defined by the merchant occurs.

When a merchant picks a payment system that works best for them, they can choose a Performance Marketing channel.

Performance Marketing channeldescription
Paid search adsSearch Engine Marketing is the most popular Performance Marketing channel so many people decide to pay for ads placed there.
Social media adsThis kind of ads has been growing in popularity in recent years and includes ads on platforms like Facebook, Instagram, or Twitter.
Native advertisingNative advertising refers to paid content that resembles the original content of the website where it is placed.

What are the benefits of Performance Marketing?

Performance Marketing helps businesses grow and promote their brand. Thanks to Performance Marketing, they can increase their market share and better engage with the audience. Performance Marketing allows businesses to better plan their advertising campaigns and better manage their finances as firms pay for ads that actually work. When preparing a Performance Marketing strategy, it is easy to determine a budget. Moreover, Performance Marketing campaigns are optimised for the businesses’ specific needs. The biggest benefit of Performance Marketing is spending money only on results, not on tools that don’t work.

Furthermore, as Performance Marketing is fully digital, businesses can track their performance and get insight into how the ads are doing. They can also keep track of how much they are spending on the campaign and how many people actually engage with the ads. Based on that they can decide whether to pause the campaign and change their approach, or whether to go on with it.

Thanks to Performance Marketing, firms can also verify which platform generates the most interest in the ad and based on that they can decide to place more ads on the website. Similarly, if a certain platform is not successful in generating traffic, businesses can remove the ads from there and place them elsewhere. Lastly, Performance Marketing allows firms to explore various advertisement options. Many people are not even aware of some online websites where their ads could be successful. Performance Marketing evaluates the needs of each business and can advise them where to place their ads. Thanks to Performance Marketing, companies can target even hard-to-reach audiences