What is Performance Marketing?
In principle it is a remuneration model in the advertising market that has become extremely popular. With the raise of the Internet, its many channels and technology the advertising market has changed. The direct measurement of people’s behavior on digital channels made it easy for publishers to sell a variety of key metrics to the advertising market. Hence it is a marketing model which advertisers are only invoiced if an ad performs a specific outcome based on user behavior. Publishers get paid out if specific results are achieved. For the advertiser this means that he pays only for very specific measurable behavior when his potential customers interact with the ad.
Within performance-based marketing, there are many ways to advertise and display products and services. Each remuneration model has its own advantages and ways of working.
This is to show you each model and explain the benefits to each side.
Dies soll Ihnen jedes Modell zeigen und die jeweiligen Vorteile erklären.
CPM (Cost per Mille = Thousand) charges advertisers for impressions. This is also referred to as pay per view. In other words it is the number of times an ad is shown that the advertiser pays for. So it is a price for every 1.000 times an ad is delivered. Therefore it is critical for an advertiser that these impressions are served to the right audience and that the ad is also visible to this audience.
CPC (Cost per Click) is when the advertiser pays the publisher only when someone clicks the Ad. CPC measures how many times an Ad is clicked and charges a certain price for every click. The advantage for the advertiser is that he only pays if his prospect is interacting with the advertisement. From the impressions served only those that want to take the next step will click so a click indicates interest in the product or service hence also a higher price than an impression served.
CPL (Cost per Lead) is where the publisher charges an already established price for each lead generated. Advertisers on the other hand only pay only for someone going the next step after the click. That is to say, a person who has given some kind of information about themselves. That can be for example contact information like an e-mail address, a telephone number. Needless to say that again there is less people that will take this next step from all that have clicked, but again these are more qualified. Therefore again the price for CPL is higher than for CPC, but justified by guaranteed leads. Again it can be a very effective model.
CPA (Cost Per Acquisition) is the cost for someone becoming a new customer, a new acquisition. CPA only pays out to the publisher when the ad delivers an acquisition, when the desired outcome is achieved.
CPS (Cost per Sales) is the amount an advertiser pays for the sales generated by an Ad. In that sense the price can be seen as a commission from the sales generated.
CPV (Cost per View) refers to Advertising where the ad is delivered in the form of a Video. It is the price for the view of a Video Ad. Some channels allow to skip Video ads for the user, which makes CPV only applicable when the user does not skip, but watches the video at least in part.
CPI (Cost per Install) has emerged from the ever growing app market. The advertiser is only charged when his App is installed by a user.
If you have further questions or need help with setting up Performance Marketing please get in contact as we are here to support you.
What are the types of Performance Marketing Channels?
What are the types of Performance Marketing Channels?
Performance marketing can be executed on a variety of digital media channels. Here are the most common ones in practice that every marketer should know about.
With Search Engine Advertising (SEA), you reach potential customers when they are looking for your specific or related topics on a search engine like Google, Bing or Yahoo. You bid on the keyword terms that your target audience is typically looking for so your ads will show.
Payment model: pay per click
With social media marketing, you acquire visibility, traffic, and customers through advertisements placed on social media websites such as Facebook, Instagram, Twitter and LinkedIn.
Typical pricing models: CPC, CMP, CPV, CPA, Cost-per-like
With affiliate marketing, you offer compensation to a media partner when they generate traffic, leads, sales – whatever you decide – on your behalf. Affiliate partners can range from large blogs to influencers to affiliate platforms.
Typical pricing models: CPC, CPL, CPI
Native advertising lets your advertisement blend in seamlessly in the publisher content. This is because your ad, in its design, content, and writing style, mirrors the editorial publisher content around it, which makes the user feel like it really belongs.
Typical pricing models: CPC
Display advertising comes in several forms including banner ads, rich media, and more. These display ads rely heavily on images, audio, video, and a bit of text to communicate their message. With Programmatic Media advertisers can take a more targeted approach at largee scale. Targeting criteria will define then which websites to run display ads on, where contextually relevant and where in-market audiences frequently visit. Programmatic can also serve in retargeting campaigns to further improve marketing performance.
Typical pricing models: CPC & CPM
What are the benefits of Performance Marketing?
You know exactly what you pay for
A clear benefit of performance marketing is that you’ll only pay for your predefined results. So you agree upfront to a defined metric that will be the basis for payout. This also leaves no room for misunderstandings, ambiguity, upfront costs or extra payments.
Easy to manage campaign budgets
With performance marketing, you can start the campaign with your goal and ideal cost per action and then work out your budget from there. Let’s say you’re trying to define the budget for 1,000 new sales with an expected cost per sale of 10 Dollars. You’d expect to pay 10k Dollars for this performance marketing campaign.
Easy to measure and attribute value
Performance marketing demands track-ability so that publishers and platforms can get paid for the action that results. So understanding what’s working is built into the relationship itself. With this user-tracking, marketers can usually dive into what drove the most performance to understand how to best move forward.
You do not have to search for your customer, but instead you appear when someone is looking for your product or service. Often times performance marketing allows your brand to show up when audiences are looking for the offer you are selling. Your advertising is based on whether it’ll drive qualified audiences to your site – oftentimes allowing you to show up when audiences are closer to the bottom of the funnel so you are getting higher quality leads.
How does performance marketing work?
Performance marketing consists of three core players:
Specialised agencies and marketing technology providers complete the list of players in the field of performance marketing.
Advertisers, also known as merchants or retailers, have products to sell, and offers or services to promote. In their marketing efforts they aim to raise the awareness for their brand and want to get new customers and sales. They set up performance marketing campaigns in order to follow an effective and measurable strategy. These performance marketing programs can either be set up in-house, in direct cooperation with the networks or via an agency.
Networks act as intermediaries between advertisers and publishers. They serve as crucial connecting element in the market. Their platform
• connects supply and deman
• tracks transactions
• hosts the ads
• fulfills the payouts
• manages compliance
• assures reporting
Publishers, also known as affiliates or marketing partners, are independent website owners. They have inventory to sell and place advertisements on their websites with links in the ads that are tracked. They can do this in direct sale to an advertiser, but typically in the performance market this is done via the networks. Publishers are then paid for the completion of a specific action on their website (views, clicks, leads or making sales). The publisher does not handle the sale, ship goods or accept payments directly from the consumer: This is the responsibility of the advertiser.
Agencies offer a variety of services including marketing strategy, design, platform management, selecting and handling the marketing technology stack, landing page optimization, SEO and SEM expertise and more. Years of experience, expertise, and relationships are instrumental in building a successful marketing performance campaign. So if an advertiser wants to avoid the hassle of running their program in house an agency is a good alternative to succeed in performance marketing.
Service providers develop applications, services and tools that make building, running and optimizing businesses easier than ever. They provide everything from web hosting to blog and website creation tools to analytics packages, fraud detection and security to GDPR compliance and legal services.
What are the challenges of Performance Marketing?
Automation and machine learning
Savvy performance marketers aren’t ignoring or fearing new technology — they’re finding ways to embrace it. These technologies can help performance marketing the same way they help other businesses: by efficiently managing general and mundane tasks resources will get released so you can better focus on strategic activities that drive your business forward.
Managing the data maze
The sources of data have exploded along with the KPIs measured and complexity of different channels and data points out there are still growing every day. Still you need to make sense and build a holistic understanding of the consumer journey.
Obsessed by the wrong metrics
Measurability is both a curse and a blessing. Exclusively chasing performance at the bottom of the funnel may lead to a dry out effect. The right attribution model also helps not to evaluate channel attribution solely based on last click, which might mis-lead your budget spend split. It is crucial to also measure brand health indicators all along as well as to continue feeding the top of the funnel.
Fraud, Bots and Brand Safety
The question is if your ads are served to a real human being (and not a bot), if the paid ad impression also had a chance to be seen and if your brand is protected from environments like hate speech, fake news, false politics, etc.
While this may seem scary, it shouldn’t deter you from running programmatic ads. With technology monitoring your traffic sources and ad campaign costs, you can detect the sites that don’t add value to your campaigns and drop them. Also with a whitelist approach you are always in the know where your brand appears.