What is performance marketing?

According to Nielsen, 70% of marketers planned to “increase performance marketing spend [...] at the expense of brand building” last year.

This doesn’t come as a surprise if you consider what performance marketing means. After all, marketing overall can be a huge challenge; you pour your time, budget, and effort into your campaigns and sometimes it can feel like guesswork, experimenting to see what sticks.

Performance marketing is the opposite, as you only pay for results.

Let’s dive into what this strategy is and why you should invest in it.

What is performance marketing?

Performance marketing is a digital marketing strategy focused on results, not brand awareness, and you pay only when specific actions are completed (such as clicks, leads, downloads, sales, etc.) – i.e. when your marketing actually works.

This means you don’t have to keep throwing money at campaigns and hoping for the best. Saving money is part of why performance marketing has become so popular.

Because performance marketing is data-driven, you can easily track the success of your campaign with analytics tools, which allows you to tweak and improve your strategies in real time.

The benefits of performance marketing

Here are some of the benefits of investing in performance marketing:

• Cost-effectiveness: As mentioned, you only pay for results you achieve, which cuts down your spend.
• Transparency: You get clear insights into what works and what doesn’t, since your tracking is so solid.
• Flexibility: You can easily fine-tune your campaign at will.
• Scalability: Performance marketing campaigns can be scaled up or down based on your budget, results, and goals, allowing you to increase investment if the campaign is doing well or pause it if it’s underperforming.
• ROI: Because performance marketing is all about getting tangible results, you get a very clear and direct link between your investment and your return.
• Audience reach: Leveraging different platforms, like search engines, social media channels, and affiliate networks, for instance, allows you to reach a wider audience – which boosts your chance of conversions.
• Low entry barrier: Even organizations with small budgets can invest in performance marketing and see results. This makes it very accessible for startups and SMEs to compete with the big fish.

How does performance marketing work?

Set clear goals

First things first, you’ll want to set clear goals. What are you looking to achieve? More clicks or impressions? Leads? Sales? Make sure you’ve got your key performance indicators sorted out ahead of time, as they’ll guide your campaign.

Pick the right channels

It’s also important you choose the right channels. For instance, will you invest more in pay-per-click (PPC) campaigns, social media platforms, or display ads? Use your audience’s pain points, interests, etc., to narrow down your channels, instead of trying all of them. A scattered approach rarely – if ever – works.

Define the payment model

There are many different types of payment structures. For example:

• Cost-per-click, where you pay for every click on your ad.
• Cost-per-acquisition, where you pay only when an action, like a sale or sign-up, is completed.
• Cost-per-mille, which is when you pay for every 1k impressions of the ad.
• Cost-per-lead, where you pay when a lead is generated, like a form submission or an email subscription.

Leverage tracking tools

Accurate tracking is vital – tools like Google Analytics, pixel tracking, and UTM parameters help you measure the performance of your campaign.

Optimize your campaigns in real time

It’s important to note that performance marketing is dynamic; it allows you to analyze data and make tweaks according to information you get in real time.

Pay for results

The crux of it is the payment. But the best part is that you only pay when you achieve results, so it’s a win-win for businesses who want to maximize their ROI.

Performance marketing channels

We’ve touched on some of the channels you can use for performance-based marketing, but let’s now take a closer look at some of them.

Paid search

Paid search ads appear on search engine results pages when people search for certain keywords. You bid on keywords relevant to your business and the ads are triggered by user queries. You can use several platforms for this, such as Google Ads, Bing Ads, and Microsoft Advertising.

Social media advertising

By placing ads on social platforms, you can target specific audiences based on demographics, interests, behaviors, etc. Types of performance-based posts include sponsored posts, carousel ads, video ads, and lead forms.

For example, Invisalign partnered with Avani to create natural ads on TikTok to promote their product.

@avani #ad i’m choosing @invisalignofficial treatment every time over metal brackets. take the Smile Assessment on invisalign.com #Invisalign #SmileSquad ♬ original sound - avani

Affiliate marketing

Affiliate marketing is where affiliates (e.g., influencers, bloggers, YouTubers) promote your products or services and earn a commission for getting sales or any other action that you want people to take, like filling out a form or downloading an ebook.

Use cases tend to include the promotion of niche products and growing an e-commerce site. For example, Amazon Associates.

Display ads

In display advertising, visual ads like banners and videos are shown on third-party sites or apps (e.g., Google Display Network). This is typically used in retargeting campaigns and when you’re looking to increase the visibility of your brand, product, or service.

Native advertising

Native ads are designed to be less intrusive and to match the style/format of what’s around them, helping you to promote your content and get more traffic.

Influencer marketing

With influencer marketing, you can boost awareness of your product since you partner with people who can help you promote it to a wider audience. This also allows you to improve trust in your brand and increase sales.

For instance, Nike partnered with Michelle Wie West, who set many golf records from a young age, to help promote their shoes.

Email marketing

Perfect for nurturing leads and increasing customer retention, email is a great platform for sending out promotional or informational messages to your audience. After all, you can use it to generate leads, promote content, convert people by offering them a free trial or a discount, target inactive users to re-engage them, and more.

Video advertising

Video ads are also performance-based marketing, and they can help you boost brand awareness, drive traffic, and explain complex products. Video ad spending is expected to reach US$205.1bn this year, which shows marketers understand the benefits of using video in their marketing.

For example, video can be highly engaging, since it can hold people’s attention quickly and for longer, can lead to higher CTR, and can be used across several platforms, from YouTube to TikTok and Instagram.

Common performance marketing metrics

So, which metrics should you track to measure the performance of your website? There are too many to name them all here, so here are HubSpot’s top five:

1. Conversion rate

This is the metric you’ll track if you want to measure the percentage of clicks that lead to an action – for example, someone buying one of your products or signing up for a service.

2. Total monthly visitors

This metric is all about the number of people who visit your website or landing page in a given month. It includes traffic from all channels, including organic search, paid ads, social media, direct traffic, and referrals.

It’s important to track it because it helps you evaluate whether your campaign is actually successful (since a higher number of visitors indicates successful marketing). This metric can also tell you if you’re reaching a wide audience and if your campaign has enough visibility.

3. Click-through rate (CTR)

You can calculate the CTR percentage by dividing clicks by impressions and multiplying by 100. This metric measures the amount of people who clicked on your ad after seeing it. Another popular click metric is cost-per-click, which indicates the cost of clicks on your ad.

4. Search traffic

This refers to the visitors arriving at your site via organic traffic (e.g., Google or Bing) and it offers insights into what customers are looking for.

5. Bounce rate

This is calculated by dividing single-page visits by total visits to your site (and multiplying by one hundred if you want the percentage). In short, the bounce rate of your website refers to the number of visitors who leave without interacting with anything.

Other metrics include:

Cost-per-conversion (CPC)

By dividing the total ad spend by the number of total conversions, you can find how much it costs to acquire a new customer or lead. CPC helps you see how well your campaign is performing – because you understand how much you’re spending to acquire clients, you can better justify your budget to stakeholders as well.

Return on ad spend (ROAS)

ROAS is calculated by dividing revenue from ads by your total ad spend. With it, you can measure how much money you make for every dollar you spend on ads.

Customer lifetime value (CLV)

This metric tracks the long-term value of the customers you acquire. It can help you make better informed decisions about your acquisition, retention, and overall marketing spend, since it facilitates how you:

• Optimize your budgets,
• Segment your audience,
• Measure your ROI,
• Tweak your strategies,
• Create personalized campaigns, and more.

Engagement rate

Finding your engagement rate means you can measure how users are interacting with your ad. Are they clicking, sharing, or commenting on it? This metric gives you insight into how effective you are when it comes to capturing the attention of your audience.

So, you can more easily optimize and improve your strategies if you know how engaged people are.

Retargeting CTR

Similar to the click-through rate we mentioned above, the retargeting CTR measures just how effective your retargeting campaigns are at driving clicks.

Open rate

Email is a crucial element of many marketing campaigns, and tracking the percentage of people who open your emails is just as important. After all, it indicates how effective your subject lines, audience segmentation, etc., are in getting people’s attention.

Attribution metrics

This includes metrics like first-touch attribution, which tracks conversions based on the first point of interaction with your brand, and last-touch attribution, which refers to the final point of interaction before conversion.

Multi-touch attribution considers all touchpoints in the customer journey so that you’re aware of which channels are actually driving revenue.

Performance marketing vs brand marketing

We mentioned at the start of this article that many marketers planned to invest in performance marketing instead of brand building, but this doesn’t mean brand marketing is dead. It helps you to maintain a strong image of your company in people’s minds which, in turn, allows you to establish trust and increase loyalty. 

But what are the differences between performance and brand marketing?

While performance marketing focuses on measurable actions like clicks, leads, or sales, as well as short-term, data-driven campaigns, brand marketing aims to build long-term awareness and loyalty. It’s also about creating sustained growth and emotional connections with your audience.

Here’s a comparison table of brand and performance marketing:

In short

Performance marketing helps you to know what’s working and what isn’t, and you can easily make changes to your campaigns, whether it’s a PPC one, an email flow, or a social media strategy. Because you only pay for results, this is a low-risk approach, and you get to experiment and be creative, save money, and track all your efforts.

Make sure you’re tracking and measuring everything with our Marketing Attribution ebook, which aims to help you make data-driven decisions and prove the impact your marketing has on your revenue. 

The Marketing Attribution eBook

Real-world data combined with expert insights in a simple eBook to give you the roadmap for scaling your marketing attribution efforts.

Revenue Marketing AllianceCharley Gale