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What is Performance Marketing and How Does It Work?

Have you ever noticed that while perusing a magazine, you only read those advertisements that are the most eye-catching? Any newspaper or even website is splattered with ads. However, you only take notice of those that are alongside an interesting fact or article and portrayed appealingly.

That means ads differ based on their performance too. Performance refers to how many views/conversions an ad can get. Its price can be set according to its performance. That is the underlying concept of performance marketing.

It is an interactive advertising method with a variable price, which depends upon the ad’s performance. For instance, the price of an ad can be determined by its views on a webpage, clicks, and conversions. It is a blend of brand marketing and paid advertising, with the only difference that it is paid for once the desired results occur. This advertising strategy has largely taken over the marketing world. It is popular because it is a win-win offer for both the retailer and the publisher.

Performance marketing and Affiliate marketing

Both terms—Performance marketing and affiliate marketing—are used interchangeably. Affiliate marketing is a chunk of the broader ‘performance marketing’ ambit. This ambit also covers email marketing, influencer marketing, search marketing, and any form of marketing where the marketing partner seeks commission against sales.

Affiliate marketing, as the name suggests, is a related product and brand marketing strategy. This strategy further evolved and became a performance-based strategy. Increasing sales through coupon sites (affiliate) have not turned into writing articles about a product, which are shared via different platforms like a blog or social media sites (performance).

How does performance marketing work?

Performance-based advertising is cost-efficient in a way that it only incurs money when it brings results. Its return on investment is positive. However, businesses need to put effort into it to make it worthwhile. They have to develop attractive advertisements with simple landing pages and easy click-thru processes.

Performance marketing involves four actors: retailers, affiliates or publishers, third-party tracking platforms and affiliate networks, and affiliate managers. All these groups are necessary for the functioning of a performance marketing strategy. They operate simultaneously, with each having their role in providing the desired result.

Here’s how Natasha from JaalaTek Solutions explains these groups:

Retailers

They are advertisers—the businesses seeking promotion of their products and services via publishers or affiliate partners. Ecommerce stores and retailers dealing with health and beauty products, fashion and apparel, sporting goods, and food and beverage can reap the benefits of performance marketing.

This age belongs to influencers and social media bloggers. People look to others for recommendations, discounts, and reviews when they are researching making a purchase. Affiliate programs that usually bring the best results in performance marketing are those with already set up online brands or presence at content platforms having a proper audience. Moreover, these brands have a website that has a conversion rate. Precisely, these retailers are not starting from scratch in terms of performance marketing.

Publishers or Affiliates

This group is like a marketing partner and comes in many forms like cash-back and loyalty websites, coupon websites, blogs, product review sites, online magazines, and so on. Loyalty and coupon websites bring sales with lesser effort and lower payouts.

Influencers are the new entry in the world of publishers who promote the products through social media platforms, groups, and blogs. They guide their followers through personal reviews and experiences. They keep their followers updated on the exclusive offers, new product releases, and sales.

However, the marketing arena has changed drastically with the advent of content websites, social media influencers, mobile apps, product review sites, and so on. There are now remarketing ad managers and complimentary merchant partnerships.

Artificial intelligence is also transforming the advertising world among other things. In the backdrop of this transformation, there has to be a thorough understanding and a strategy detailing how all these firms can be successful.

Affiliate Networks

Third-party tracking platforms or affiliate networks are an essential part of affiliate partnerships. They provide a venue for tools like text links, banners, promotions, product feeds, and payouts. These networks and platforms are the places where the affiliate managers set out issue bonuses, commission arrangements, and send newsletters. They also handle returns.

For both retailers and affiliates, these platforms and networks are a helping hand for keeping track of clicks, leads, and conversions. Some of the affiliate networks in the marketing industry include AWIN, PepperJam, Avantlink, and Partnerize.

All the affiliate programs have different strengths, weaknesses, and cost structures. So, there is a need to do research or consult an expert on the matter.

Affiliate Managers

Affiliate managers are deemed as the main bridge between the retailer and the affiliate. Affiliate managers are usually in-house, but companies can also take the service of agencies to assist either the in-house team or the entire program.

Taking services of an experienced affiliate management company can help the brand supplement its performance-marketing program with a swift, higher return on investment (ROI). Agencies deal with tasks, including growth strategies, partner recruitment, content creation, growth strategies, and long-tail program optimization.

Agency partnership is more effective because the in-house team usually has limited expertise, resources, market research, and affiliate relationships.

Payment Models Used in Performance Marketing

Here are the common payment models used in performance marketing include Pay Per Sale, Pay Per Lead, Pay Per Click, Pay Per X. In Pay Per Scale, the retailers pay for the sales generated after the transaction is accomplished. It is the most common payment strategy used in e-commerce.

Pay Per Lead involves ‘lead,’ which is sign-up requiring information of the consumer. This conversion does not involve cash. The information includes the customer’s name, phone number, email address, income, job information, and personal traits.

Pay Per Click is a model in which the retailer pays for the clicks on the preferred landing page. Whereas, Pay Per ‘X’ involves any action desired by the retailer. This action, denoted by X, can be anything out of a sale, click, or a lead. For example, signups conditional with rewards programs and downloads are the cases of Pay Per X.

sawon907

It's Sawon Saha, Digital Marketer from Bangladesh. I am passionate about Search Engine Optimization (SEO), Social Media Marketing (SMM) and other sectors of Digital Marketing.

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