Performance marketing is a relatively new term in the marketing world. In a nutshell, performance marketing is where an advertiser pays only for the results attained, and for nothing else.
Performance marketing has successfully reversed the traditional value proposition of advertising and also allows for real-time measurement of ROI.
Digital marketing refers to any form of marketing that uses an electronic device or system. This includes email marketing, social media marketing, and search engine marketing. Generally speaking, digital marketing takes place through the internet.
Marketing of any form is ultimately looking for sales. That is where success is, or at least should be, measured. Typical digital marketing models, such as CPM and CPC, will tell you a cost for certain actions, but won’t tell you the whole story.
In the case of CPM, you will know the cost for every 1,000 times an ad is served. However, you still cannot be certain that a real person actually saw the ad. In most cases, someone real probably did see the ad, but perhaps only fleetingly in passing where it failed to fully register.
With the CPC model, you pay for each time someone clicks on the ad. This serves as a keyword performance indicator (KPI), but it doesn’t let you know what happened next. You know someone was on your site, but did they spend time there, did they make a purchase, or did they leave immediately?
With performance marketing, you only pay for what you get. In other words, if a campaign fails to work for you, it won’t cost you. For this reason, those offering performance marketing services need to know how to build a marketing strategy that works, or they will go bust.
If you take out a display ad in a newspaper, you pay up front. If the ad fails, you wasted your money. You can do all the right things beforehand to try and ensure that the ad is not a failure, but you can never be certain your money has been well spent until later.
It’s much the same with digital marketing. Your CPM or CPC campaign might work great, or it might flop. You won’t know until you try, and it will cost you either way. With performance marketing, when you pay, it’s because the campaign was a success.
Between 2015 and 2016, performance marketing grew by an impressive 12%, according to a UK study. The return on investment (ROI) is also impressive; for every $1 spent, over $12 is returned, on average.
The findings of the UK study also show that mobile devices are driving the growth of performance marketing. This is no surprise as there are around twice as many people accessing the internet on smartphones as there are people using tablets or personal computers.
Performance marketing is a relatively safe method for a small business on a limited budget to use. They can avoid risking large amounts of money, as they will only pay for success. This works equally well with companies who have large budgets. Perhaps it is this factor that makes performance marketing particularly attractive to all sectors.