According to The Manifest and Clutch small and medium businesses in the United States spend between $10,000 and $50,000 per year on marketing (up to 5% of their revenues). However, only half of the entrepreneurs know how effective their marketing efforts have been. The others either doubt or know for sure that the money has been wasted. This is a big problem but it can be solved with performance marketing.
What Is Performance Marketing?
Definition of performance marketing
A model where an advertiser pays only if concrete, financially measurable business results (KPI) are achieved within the agreed time frame. It can be a subscription, click-through, new user registration, repost, or sale. In this case, the cost of marketing services is usually linked to their effectiveness.
For example, the cost of advertising can be calculated on the basis of:
- a frequency at which the ad banner was displayed on a web page;
- a number of ad banner click-throughs by website visitors;
- sales (targeted actions) generated by the banner;
- or a combination of the above factors.
Indicators (not to be confused with web analytics) for which it is possible to accurately measure a cause-and-effect relation between the content/advertisement and the user’s committing a targeted action.
The following performance indicators are usually used:
Types of performance marketing
Experts divide this type of promotion into three main and two additional types depending on the marketing channels used. The main ones include affiliate, search-engine, and SMM; the additional ones are native advertising and sponsor advertising.
The advertiser rewards an affiliated person when the referral traffic leads to sales or other target action (subscription, registration). That type is used by 80% of the brands around the world.
Stimulation of targeted actions through SEO and paid advertising in Google, Baidu, Yahoo, Yandex, and other search engines. This is the easiest and most effective way to attract customers which returns $2 for each dollar invested in ads.
Social Media Marketing (SMM)
Another type of performance marketing is a paid advertising as well as creation and promotion of content on Facebook, Instagram, Twitter, LinkedIn, VKontakte, QQ, and other social networks. Statistically it has the highest return from consumers.
Native advertising is content and ads designed to resemble the typography, design, and stylistics of an ordinary content of a website. Sponsor advertising is the same, only the user is told that it is an advertisement or a sponsored content.
The performance marketing strategies usually involve the use of all promotion channels at the beginning to test their effectiveness. Then the strategy is changed, shifting the focus toward one or two of the most effective promotion channels.
Brand Marketing vs. Performance Marketing
Initially, there were several interpretations of the performance marketing concept that were very different from each other. This confused both advertisers and marketing consultants, so in 2013 the Interactive Advertising Bureau (an organization that develops industry standards in digital marketing) created a committee of 200 experts representing 130 leading Internet companies, including Microsoft, Google, Facebook, Yahoo and others. The result of their work was presented as the Defining Performance marketing in today’s digital landscape (PDF) document.
The experts divided Internet promotion into brand campaigns and performance marketing in the standard. The main difference between them is that the first approach focuses on long-term goals, while the second focuses on quick results and maximum efficiency. The rest of the differences are:
Top 5 of Performance Marketing Agencies
Campaigns should be launched as part of one of performance marketing strategies with the help of advertising agencies (such as NeoSight) because this type of promotion requires special (usually paid) tools to measure KPI and web analytics, as well as a good understanding of cause-and-effect relations between various types of content and specific business results.
Here’s a list of the best performance marketing agencies:
Specializes in launching effective (Cost-Per-Action) marketing campaigns. It provides ready-made adaptive solutions for Internet advertising campaigns, offline business, and affiliate programs.
The company was founded by growth leaders, engineers and data specialists from Silicon Valley and New York City. Mostly works with big players: Amazon, Nike, Jonas Paul, Steer, P&G and others.
One of the oldest full-service digital marketing agencies, operating across multiple channels including SEO, PPC, and lead generation. The agency has an unprecedented number of clients and completed campaigns.
A full-service agency with experience in all major digital channels including SMM, SEO, PPC, and lead generation.
Level Up Digital
It provides E2E marketing services using a “growth driven methodology”, which includes proprietary methodologies for research, implementation, testing, and effective campaign management.