Performance Marketing

Performance marketing, also known as pay for performance marketing, refers to...

Performance marketing, also known as pay for performance marketing, refers to online campaigns where advertisers pay marketing companies or advertising platforms for specific results achieved, such as clicks or conversions. 

The term is often used more broadly to refer to marketing campaigns that generate measurable data via multiple consumer touchpoints, that are then optimised to improve the return on marketing investment.

Why would I need this? 

Performance marketing is growing in popularity as it compliments the changing behaviour of customers and businesses, who are moving more to measurable digital channels to research, buy and consume goods and services.  

In most traditional forms of advertising, the advertiser pays a fee up front for ad space, regardless of its results. That could mean a huge amount is spent on an ad space without ever seeing a conversion. Performance marketing hands power back to the advertiser, helping them determine the action, then pay when that action has been completed – whether it’s a sale, lead, or click.

Performance marketing is often compared against brand marketing, which focuses on building and enhancing positive consumer perceptions of the brand and engaging consumers to help grow their affinity for the company, such as values, quality and trustworthiness. By contrast, performance marketing is driven by more immediate and easily measurable results. However, the two types of marketing are becoming more entwined as marketing tools become more sophisticated and emotional impacts become more measurable. 

Compared to traditional marketing practices performance marketing offers the following key advantages:

  • Easier analytics and data tracking of campaigns

  • Less risks on return on investment

  • Real time optimisation

  • Diversification of revenue streams to find the best returns

  • Exposure to new and hard-to-reach audiences

  • Pay only for results

Its key risks are:

  • Potential higher upfront costs and larger competition on ad marketplaces

  • Lack of transparency with partners and in ad supply chain

  • Can end up overpaying for ‘vanity metrics’ 

  • Fraudulent results (ad fraud and fake clicks/followers) 

  • Brand safety (appearing on inappropriate websites) 

How does it work?

Typical performance marketing channels include search marketing, email marketing, affiliate or partnership marketing, display advertising, social media, connected TV and video, and e-commerce. 

Automation is increasingly playing a larger role in performance marketing via programmatic ad exchanges and AI driven ad technology.

Real world examples

Brand versus performance marketing: is the classic ‘60:40’ split now defunct? 

Introduction: a not so Golden-Quarter for retail brands?

Case study: How H&M boosted paid search revenues by 70% with a ‘new customer’ metric