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Performance Marketing is part of Online Marketing and is geared towards measurable performance. The marketing objectives consist of Conversions, which the advertiser has previously agreed upon with the marketer.
Advertising is faced with the accusation that it is not measurable, which has been a problem since the beginning of advertising. The empirical reasons could not be named for the lack of direct sales success after the use of advertising campaigns. First strategists such as Rosser Reeves, who is the originator of the USP concept, was able to address this flaw by carrying out extensive buyer surveys and product tests before and after market launch. Large brands use these methods even now to verify the performance of advertising campaigns.
In the course of trade being digitized, the advertising industry has benefited from being able to perform increasingly precise evaluations of advertising campaigns. For example, user interaction can be evaluated very well with Heatmaps, Clickmaps, or Web Analytics Tools, such as Google Analytics. Even in over-the-counter retail, customer movements can be predicted or evaluated using appropriate methods in order to arrange the assortment in stores.
Part of performance marketing is analyzing of buyer behavior in order to make online advertising even more performant.
Components and methods
Performance marketing generally consists of four areas:
Performance marketing professionals work in all the areas of online marketing, including SEO, SEA, Affiliate Marketing, E-Mail Marketing, Couponing, Newsletter Marketing, Social-Media-Marketing, Display Advertisement, and Guerilla-Marketing. The online character of these forms of advertising is important. This allows the individual channels to be evaluated and optimized with regard to their performance.
An important component of performance marketing is the previously defined objectives. These can be sales targets or other conversion goals. They are ideally individually tailored to the respective client. For a large brand, for example, an important goal in performance marketing may be to increase the sales of a new product in the first months after its launch on the market. In this case, conversion targets get defined for respective channels and agreed with the advertising managers.
Targets are always checked as part of performance marketing. To this end, advertisers use analysis tools such as Google Analytics or reports from the Google AdWords customer center. Large companies also use Business Intelligence programs for their performance marketing that can handle Big Data.
Detailed controlling or Monitoring requires continuous optimization of the methods used in performance marketing. Banners may be changed in order achieve better CTR or the content of a website can be optimized to achieve more conversions using A/B tests.
Advantages of performance marketing for advertisers
Successful performance marketing poses many advantages for advertisers and advertising agencies and thus leads to a win-win situation. The advantages for customers can be briefly sketched:
- Exact evaluations possible; the success of campaigns can be measured directly
- Advantageous billing based on performance, the customer pays only for achieved goals. For example, a customer puts their products into a price comparison portal using a performance marketing agency. Normally he would pay based on how many clicks on his ad. In the context of performance marketing, however, he pays only for a successful sale, regardless of the number of clicks.
- Accurate targeting facilitates the planning and budgeting of advertising
- Performance marketing is perfectly integrated into a marketing campaign
In order for performance marketing to have its full impact, advertisers have to achieve their goals in a realistic way. This includes an accurate knowledge of the target group to optimize Targeting and avoid Scattering Losses. Likewise, performance-based marketing strategies must take exact account of the market position of the advertiser in order to raise the performance of the campaigns in advance to a high level.