November 19, 2021 / Dario De Guz

What is performance marketing?

In 2018, the growing online advertising industry spent about $229 billion only in the US. So what is performance marketing? Performance marketing is most likely the most misunderstood and underappreciated forms of online advertising. But we’ll explain all here:

What is performance marketing?

The goal of performance marketing is to create a conversion funnel where at the end the user performs an action.

Advertisers only pay for performance; whether this is a purchase, a newsletter sign up, a request for more information (lead) or a follow one of the merchant’s social media pages.

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More simply put, it is a scheme where advertisers only pay for advertising on a per-action basis – or when a conversion has been completed. The key to performance marketing is that it is measured by this simple metric.

The Interactive Advertising Bureau is a trade organization of internet advertising firms and according to its Performance Advertising Group, the elements of a performance marketing campaign include the following:

An aim to drive consumer action
Actions that are clearly measurable
Buyers can optimize their advertising in near-real or real-time based on measurements
Payments are based on consumer action (though, this may not apply if the above three criteria are met)

Best practices for performance marketing

If you’ve ever watched AMC’s Mad Men, you know that marketing and advertising in the 1960s was an art, not a science. In the 1960s television was new, and so was television advertising. Essentially, radio advertising was just moved to TV with some added visuals, while advertisers and marketers struggled to figure out what worked best.

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Today, there are few who would argue that internet advertising is not science. Results are often measurable in real-time. Advertisers can easily adjust their strategy or spend based on those results. With tens of billions of dollars spent on performance advertising, the following best practices can help you to navigate the changing currents of internet marketing:

Top Level Executive Buy-in:

Without top management, people advocating and strongly supporting performance marketing strategies will often have less than the desired outcome. In fact, many will fail. The company must dedicate its marketing resources toward what it can measure, keeping the things that have good returns and dumping those that do not.

Align Marketing Goals with Corporate Goals:

When your marketing strategy aligns with corporate goals, it ensures you’re measuring the right key performance indicators and that resources go where they are best used. Marketing organizations that align goals can answer two key questions:

Was the advertising approach we used a success?
How much did it contribute to our overall company aims?

Investments are targeted:

By targeting investments in technology, people, and data systems, a company provides the necessary foundations to create excellent performance marketing team management.

Accomplishing this means separating the wheat from the chaff and keeping only what is necessary. With the right people, systems, and technology in place, performance marketing strategies are more likely to succeed.

Have Strong Processes:

Many companies have tons of data on hand but lack the organization and processes to use it all wisely. Strong and clear processes create the means to measure effectiveness, learn what works and what does not work, and ultimately allow you to improve your marketing.

Use Marketing Based Insights Outside of Marketing:

This means the company can use what it learned from the marketing results and data to inform other policies within the business. Cross-functional decision-making will lead to an improved bottom line.

For instance, if one of the metrics shows that customers prefer “clean layouts” over “clutter” in your marketing collateral, share this information with the design team. This might help them make better-informed design decisions. So they might opt for a rocker switch instead of using two buttons. Or they might incorporate more white space in their other designs. This cross-functional communication and decision-making is a winning strategy.

Digital performance marketing enlists highly targeted activities with measurable results that will boost your bottom line.

Related Reading:

This blog post is about:

What is performance marketing?
Performance marketing tips
Performance marketing best practices
A guide to performance marketing

Originally published: August 15th, 2014.
Updated: Nov 19h, 20201