What is Performance Marketing: How it Works, Channels, and Benefits

Performance marketing is one overlooked strategy that is creating a lot of buzz amid brands and agencies alike of digital marketing. It is the term used to describe online marketing campaigns in which advertisers pay marketing companies or advertising platforms to achieve results in form of clicks and conversions. It is primarily used to drive actions, track and measure those actions, all while attributing the ROI of each asset, campaign or activity.

How Performance Marketing Works

Advertisers put their ads on a channel of their choosing. These performance marketing channels help to drive traffic to your website. The payment is based on how the ad performs and is measure based on the following dimensions:

1. Cost Per Click (CPC)
   Advertisers pay based on the number of times their ad is clicked on. This is a good way to drive traffic to your site.

2. Cost Per Impression (CPM)
   The views on your ad are called impressions. By using CPM, payment is made for every thousand views.

3. Cost Per Sales (CPS)
   Payment is made only when you’ve got a sale driven by an ad. This system is also commonly used in affiliate marketing.

4. Cost Per Leads (CPL)
   When someone signs up for something like an email, newsletter, or webinar you pay for every cost per lead. It helps you to follow up with customers and drive sales.

5. Cost Per Acquisition (CPA)
   CPA is paid when consumers complete a specific action. This also includes making a sale, consumers sharing their contact information, visiting your website or blog etc.

To understand this process elaborately you can also visit our Performance Marketing Terminology guide.

Top Performance Marketing Channels

There are five different types of performance marketing channels that agencies and advertisers use to drive traffic:

1. Banner (Display) Ads
   Display ads are common when you’re working online. These ads appear on a pre-defined ad slot on any webpage. However, due to the increasing popularity of ad blockers display ads are slowly losing their appeal. But there are many companies that run display ads utilizing interactive content, videos, and engaging graphic design which help then achieve success.

2. Native Advertising
   Native advertising uses ads that appear on a web page or site that promotes sponsored content. They are mostly popular news websites, blogs or marketplaces. Native ads allow you to promote a brand in a natural way that many might not notice that it is an ad. It allows the sponsored content to live seamlessly beside other kinds of organic content.

3. Content Marketing
   Content marketing is all about educating your audience. Its primary aim is to provide useful information to users and put your brand in context. This includes blog posts, case studies, e-books and more.

4. Social Media
   For performance marketers, social media is a heaven providing opportunities to reach audiences and drive them to your site. This includes a wide range of social media platforms ranging from Facebook, Instagram, Twitter, LinkedIn, etc.

5. Search Engine Marketing (SEM)
   Having a business site that is optimized for search engine marketing (SEM) is important because most online research is done using search engines. It focuses primarily on cost-per click (CPC) for paid ads. Many performance marketers rely on content marketing and SEO-optimized landing pages for organic SEM.

Benefits of Performance Marketing

• Using performance marketing channels can help you scale your advertising efforts to meet the needs of your company without breaking the bank.

• It helps you to effectively diversify your audience and expand your reach, and also help you capture valuable data.

• You’ll discover the never-ending benefits of performance marketing once you start using it. Growing your business will just get easier.

What are KPIs in Performance Marketing

KPIs are key performance indicators that you need to measure from time to time if you’re using performance marketing for your business. The following are the five main KPIs that you need to track:

1. Visitors:
   The count of visitors to your website is the first marketing key performance indicator that should be taken into account. This will help you to know how many of them have to move to each stage of the funnel in order for your business to close the number of customers it needs.

2. Leads:

   Tracking your leads over time will help you to see the patterns in performance and guide you to what your visitors find the most valuable.

3. Qualified leads:

   Not all your leads might fit for a B2B business and hence qualified leads help to show how effective your website or content is at bringing in leads that perfectly fit your business. This also includes marketing qualified leads (MQLs) and sales qualified leads (SQLs) that help identify any kind of gaps in your funnel.

4. Opportunities:

   Opportunities indicate the people who are interested and are a perfect fit for your business. It helps you identify how many of your visitors actually became your customers.

5. Conversion rates:
   This measures the percentage of people who moved from one stage to another in your marketing funnel. This helps as an ally to close the gaps that exist and create a better marketing and sales process for everyone involved.

What are Performance Marketing Agencies

Performance marketing agencies help you to grow your business by using various marketing analytics tools and track the growth of your business. With the increasing popularity of performance marketing, many performance marketers have bloomed in India. One such performance marketing agency is MeDigit.