What Is Performance Marketing?
With performance marketing, businesses only pay when they get results. While it doesn’t necessarily guarantee a good return on investment, performance marketing is often a contributor to success for ecommerce merchants.
Performance marketing is a broad term that can include many forms of marketing and advertising. Its key differentiator, again, is that advertisers pay only for measurable results, which vary from medium to medium, but typically takes one of five forms, including:
- Pay-per-click. Also called cost-per-click, pay-per-click charges an advertiser when a user clicks an ad. It’s popular for driving website traffic and is a must-have form of advertising for most new ecommerce companies.
- Cost-per-sale. Here the result is an actual sale. This model is common in affiliate marketing.
- Cost-per-lead charges the advertiser when a lead is captured. Usually, a third-party site or app collects the lead and then transfers it to the advertiser.
- Cost-per-acquisition. This term can overlap with cost-per-sale and cost-per-lead. But it may also be distinct. For example, cost-per-acquisition might describe having a visitor complete a survey, which would not necessarily be consistent with cost-per-sale or cost-per-lead.
- Cost-per-impression, or CPM. Here the advertiser pays a set price for every 1,000 impressions — meaning the ad appears 1,000 times. The “M” in CPM stands for the Roman numeral “M,” which means 1,000.
Performance marketing ads can be placed in one or more channels, which are sometimes called media.
When used together, these channels are a performance marketing mix. It’s generally a good idea to employ more than one performance media or channel.
Modern ecommerce marketers will typically use these forms of performance marketing, in order. But, it can and will vary given a company’s situation.
- Search engine marketing.
- Social media advertising.
- Digital display advertising.
- Affiliate marketing.
- Video advertising.
- Programmatic audio.
- Digital out-of-home advertising.
Search engine marketing has evolved. The term once described both search engine optimization and search engine advertising. But over time, SEO has become so important that it has outgrown the SEM label.
Thus, for us, SEM describes advertising on search engines and ad networks, such as Google Display Network and Microsoft Audience Network.
SEM may also include sites like YouTube or even Amazon’s marketplace since users often treat them like search engines.
Social media advertising describes the use of social media platforms to connect with an audience of customers and prospects.
Examples include Facebook, Instagram, YouTube, Snapchat, Pinterest, TikTok, and Twitter.
“Social media marketing” is broader than “social media advertising” since the former may also include (free) content posted to social media platforms, such as a video on TikTok. Despite this minor difference, the terms are used interchangeably.
Digital display advertising. Digital display advertising, or sometimes just display advertising, may appear on a search engine’s ad network, on social media platforms, or on just about any third-party website or app. So in this way, digital display advertising includes search engine marketing and social media advertising.
Affiliate marketing. With affiliate marketing, a business pays a third party, called an affiliate, to promote its products or services.
Your affiliate might put ad banners on its website, include links in popular content, or even promote your products via a live stream.
Affiliate marketing can require more effort to manage than, say, search engine marketing since you will want to monitor how affiliates are promoting your business.
Video advertising describes video ads placed on YouTube, social media platforms, and streaming services such as Hulu, CBS All Access, and NBC Universal.
Video ads are typically purchased via the CPM model and can be an excellent way to augment and diversify a performance marketing media mix.
Programmatic audio. Audio ads inserted in podcasts, digital radio, or music streaming services are generally called programmatic audio. These ads can be extremely targeted, like most other performance marketing formats.
Digital out-of-home advertising, among the newest forms of performance marketing media, is a modern use of outdoor ads. It uses digital billboards, signs, and screens to show targeted ads to potential customers.
Where to Start?
New or smaller ecommerce companies should likely start with search engine marketing, social media advertising, and digital display advertising. These are the most effective and easiest to use in my experience.
For example, Google Ads facilitates both search and display (network) ads. The process is simple, and, as with all performance marketing, the results are easy to see and measure.
Social media advertising, such as on Facebook and Instagram, can be particularly useful and is also relatively easy to employ.
The key is to have a level of proficiency with whatever performance channel you choose. Start, again, with search engine marketing, social media advertising, and digital display advertising before tackling affiliate marketing or video advertising.
Channel diversity will make a business less dependent on, say, Google or Facebook, which is a good thing.
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