Updated on 04/06/2024

Digital advertising has seen exponential growth since the dawn of the internet.  Every time we scroll through our devices, we're bombarded with endless ads vying for our attention, from mobile to desktop, tempting us with products and services.

Companies are investing more in digital ad spending as it proves to be the most potent way to reach audiences where they are: online. 

The pandemic of 2020 produced global challenges in terms of how companies were forced to reevaluate business practices and models.

Consumers faced difficulties in making purchases and had to closely monitor their finances because of job instability.

As you’ll recall, a large portion of the planet was indoors for some time, yet even in the face of these challenges and changes to consumer behaviour industries such as e-commerce saw a 43% rise in online shopping! 

But how did companies capitalise on shifting buying habits and market changes?

One way was through performance marketing, enabling businesses to create targeted campaigns to drive results.

Have a quick look at: 

1. What is performance marketing? 

2. How does it work? 

3. Measuring performance marketing 

4. What are the best performance marketing channels?

5. What are the benefits of performance marketing?

6. Final thoughts

7. Become a Certified Digital Marketer!

8. FAQ

What is performance marketing?

So, we know that companies are investing heavily in digital marketing to reach audiences and there are many digital marketing types.

But, today we’re focusing on performance marketing. 

It's a type of marketing that refers to an online campaign strategy whereby companies pay marketers and advertising platforms based on agreed-upon results. 

Unlike traditional marketing, where you would pay upfront for ad space in a magazine with no real way to measure whether that ad had been effective, performance marketing allows companies to pay only when the desired outcome has been achieved.

For example, a marketing company might want more impressions on their social media profile or get customers to click a specific link on its landing page.

With performance marketing, the company only pays the affiliate when this action has been completed.

Making for better budgeting decisions and more measurable data to see what’s working and where to divert time and resources.

How does it work? 

Imagine a performance-based partnership where you only pay a salesperson when they close a deal.

That's the core principle behind performance marketing.

It's a digital marketing approach where advertisers (you) only pay publishers or marketing channels when they achieve specific goals.

Here's how it breaks down:

• Goal Setting: You define your desired outcome. This could be anything from website traffic and app downloads to lead generation and sales.

• Channel Selection: There's a performance marketing channel for almost any goal. Search engines, social media platforms, and influencer marketing are just a few examples.

• Bidding & Budgeting: Depending on the channel, you might set a bid for each desired action (e.g., cost per click or cost per acquisition) or allocate a total budget for the campaign.

• Tracking & Measurement: Every click, impression, and conversion is meticulously tracked. This allows you to see which tactics are working and which ones need tweaking.

• Payment & Optimisation: You only pay the publisher or platform when they deliver the results you specified. This data is then used to optimise your campaigns for better performance over time.

Here are some of the key players in the performance marketing game:

• Advertisers: Businesses like yours, looking to attract new customers and drive conversion rates.
• Publishers: Websites, apps, or social media platforms that display ads.
• Performance Marketing Agencies: Experts who can help you craft and manage your campaigns.

By leveraging data and focusing on measurable results, performance marketers create a win-win situation for everyone involved.

Advertisers get targeted traffic and conversions, publishers earn based on performance, and consumers discover products and services that interest them.

Measuring performance marketing

The principal motivation for any marketing strategy is positive ROI.

Companies aim to maximise their return on investment when investing in digital marketing strategies, with performance marketing being particularly focused on delivering results.

Technically, you can track and measure performance-based marketing against any metric or KPI but these are the most commonly used:

Cost Per Click (CPC) 

CPC is where advertisers pay when someone clicks their ad.

Determining how much an advertiser pays for each click depends on several factors including relevance, quality and competitor's ranking.

As well as which platform they are advertising on, whether that’s Google, Facebook or YouTube.

CPC is a popular method of performance marketing because it shows advertisers definitive actions the user has taken.

This leads to a more accurate analysis of campaign performance and actionable data.

Check out this guide on CPC for a full breakdown.

Cost Per Impression (CPM)

Also referred to as cost-per-mile, this performance marketing model refers to how much an advertiser pays to generate 1,000 views.

So if your ad gets 10,000 views you’ll pay ten times the base rate. 

Bear in mind that CPM is designed to show your ad X number of times, it does not account for clicks or other actions.

Simply displaying your ad counts as one view, which makes it less about driving action and more about raising awareness by getting your ad out there as much as possible.

Check out this guide on CPM for Facebook.

Cost Per Sale (CPS), Cost Per Acquisition (CPA) & Cost Per Lead (CPL)

We’ve bundled these three together as they’re closely linked:

CPS refers to how much you pay when a sale is generated as a direct result of an ad (used in Affiliate Marketing).

CPA refers to the price paid for the user completing an action like making a purchase, downloading an ebook or completing a sign-up form for example.

CPL refers to receiving customer information as a result of completing a sign-up form, subscribing or submitting a contact form for example.

The company then follows this lead-up using the contact info.

This graphic gives an example of how Google determines which ads are shown and where:

Which performance marketing model you choose ultimately comes down to your objectives for the campaign but remember to test them and restructure ads based on your data.

Performance marketing is iterative at its core so don’t be afraid to try new things as you discover what works best for your business goals.

What are the best performance marketing channels? 

Now that you have an understanding of the performance marketing terms and models, let’s turn our attention to the most effective channels used by agencies and advertisers: 

1. Native Advertising & Sponsored Content 

Native advertising is designed to circumvent users' ad fatigue after being bombarded with irrelevant content.

This works by seamlessly blending ads into pages or sections that follow the same style and function of the platform.

For example, a news website might suggest a sponsored article based on the user's viewing history, or how YouTube will suggest a video related to what you’ve been watching.

The same applies to the Facebook marketplace where you might search for surfboards and you’ll see an Ad from a surfboard company every few rows. 

This organic or “native” approach is less intrusive and increases the chances of a customer responding positively to the ad. 

2. Social Media Advertising

There is no shortage of social media platforms to advertise on that’s for sure!

Each comes with its own set of nuances that should be researched before diving in but the most common channels include:

• Facebook
• Twitter
• YouTube
• Instagram
• TikTok
• LinkedIn
• Snapchat

Social media is typically associated with raising brand awareness through reach and impressions.

Still, in performance marketing terms, it’s a great place to drive traffic to websites (CPC, CPA, CPS) and to have sponsored content promoted throughout follower networks.

3. Search Engine Marketing (SEM)

SEM also applies to organic marketing methods (SEO) such as blogs but here we’re focusing on paid marketing to promote visibility and clicks. 

Google Ads is by far the most popular SEM platform but Bing and Yahoo are also alternatives.

Advertisers pay each time a user clicks on their ad, sending them through to a landing page or website. 

Most searches are conducted through search engines which makes the marketing efforts of SEM a vital component of a performance marketing strategy.

It’s also worth noting that for Google Ads, the cost advertisers will pay is based on an auction-style system where keywords are matched with user queries and then ranked on bid amounts, quality and relevance.

4. Affiliate Marketing

Affiliate marketing serves as an extension of your business whereby a third party - be it a website publication, influencer, blogger etc - directs traffic to your business and receives a commission upon completion of an agreed-upon-action, typically a sale.

Affiliate software platforms allow businesses to assign tracking IDs and measure the impact of campaigns, this means you can see who, when and where an action has been taken.

What are the benefits of performance marketing?

Performance marketing is all well and good but what are the key benefits of employing this strategy?

Here are the leading reasons why performance should be in your marketing mix:

Increase awareness and reach

Getting your business in front of as many eyes as possible is paramount to driving traffic and ROI.

Due to performance marketing’s targeted approach, you can segment customers and test campaigns using specific parameters, narrowing your search but appealing to relevant customers who are more likely to interact with your ads.

It’s highly measurable and trackable

Modern data analytics software lets companies see a user’s entire journey from point of contact through to purchase (or whatever the desired action is!).

This unprecedented level of insight means that campaigns can be monitored, measured and adapted on the fly, leading to more accurate results and positive ROIs.

Less risk 

Due to its performance-based nature of only paying when an action has been completed, performance marketing absorbs the risk factor.

Compared to traditional advertising methods such as radio or print media where there is no real way of knowing how well your investment paid off.

Everything revolves around ROI

Unlike other marketing strategies like brand marketing which focus on spreading awareness or brand image, performance marketing is solely preoccupied with improving ROI.

Whether it’s driving a sale through affiliate networks, gaining customer info to generate leads or measuring click-through rates on a Google Ad, performance marketing is only concerned with how this data can be used to increase revenue.

Final thoughts

So as we come to the end of our performance marketing beginner’s guide, let’s recap what we’ve learnt today:

Performance marketing is measured by:

• Cost per click (CPC)
• Cost per impression (CPM)
• Cost per sale (CPS) 
• Cost per acquisition (CPA)
• Cost per lead (CPL)

The most popular performance marketing channels are:

• Native and sponsored content 
• Social media advertising 
• Search engine marketing (SEM)
• Affiliate Marketing 

There are plenty of benefits to performance marketing as described in the previous section and if the trend continues, it’s only going to grow more popular as we move ahead over the next few years.

Become a Certified Digital Marketer!

Master the fundamentals of digital marketing as you learn about:

• What it is and why we need it
• Customer personas and journeys
• How to set up and use tracking and analytics (such as Google Analytics)
• Organic content marketing (SEO)
• Paid marketing and targeting using ads
• How to optimise sites and landing pages for maximum performance

See the full course overview here.

Learning with Growth Tribe couldn’t be easier. 

All of our courses are designed to be flexible for the learner with self-paced content so you can manage your time and learning, to best suit your lifestyle.

With Growtn Tribe, you can learn the best online marketing strategy for your digital marketing campaign.

Join a community of over 25,000 certified alumni who share a passion for growing their skills and making a positive impact in their careers.

 FAQ

What is performance marketing all about?

Performance marketing is a form of online advertising where you only pay when you achieve specific goals. Imagine paying a salesperson only when they make a sale - that's the core idea! There are many types of performance marketing, from search engine ads (where your ad appears on search engines like Google) to social media marketing (where you target potential customers on platforms like Facebook and Instagram).

How can I define my goals for a performance marketing campaign?

Your goals depend on your business objectives. Do you want to drive more website traffic, generate leads, or increase sales? Once you know your goals, you can identify the conversion events that signify success. This could be a sign-up for your newsletter, a download of your e-book, or even a purchase on your website. By tracking these conversions, you can measure how well your campaigns are performing.

What are some of the common types of performance marketing?

There's a whole toolbox of performance marketing tactics at your disposal!

Here are a few popular types of marketing:

• Search engine marketing (SEM): Reach potential customers who are actively searching for products or services like yours.

• Social media marketing: Target your ideal audience on social media platforms with engaging content and ads.

• Affiliate marketing: Partner with other websites or influencers to promote your products or services. They only get paid when they drive sales or conversions for you.

• Email marketing: nurture leads and convert them into paying customers through targeted email campaigns.

Online marketing is the way to go!

Is performance marketing a good fit for my business?

Limited marketing budget? Performance marketing is a great option! You only pay for results, maximising ROI.

Benefits:

• Trackable Success: See what drives sales across channels (search ads, social media ads, mobile apps).
• Target Your Audience: Reach the right people, those most interested in what you offer.
• Scalability: Easily adjust campaigns based on your needs.

Good fit for businesses with:

• Limited budgets
• Defined marketing goals (e.g. sales, leads)
• Clear target audience

Ready to try it? Consider your goals, target audience, and budget. If it seems like a fit, research channels and find marketing partners to help you launch successful campaigns.

How can I get started with performance marketing?

There are plenty of resources available online to help you get started. Consider working with a performance marketing agency - they can help you craft and manage your campaigns for optimal results. Remember, the key to success is understanding your target audience, setting clear goals, and constantly optimizing your campaigns based on data.