Performance marketing: what is it and how does it work
Performance marketing (performance marketing) – what is it? How does performance marketing work? What are the benefits of performance marketing tools?
Advertising technologies continue to develop: professionals create new directions, develop tools. Performance marketing cannot be called a new step in the field; rather, it is the logical result of prevailing trends. But today, digital promotion cannot be imagined without it.
There are many tools for determining the effectiveness of an advertising campaign. Some marketers are guided by the principle: “let’s try a few methods, look at the output.” In this case, the result is evaluated for each tool separately: social networks bring a loyal audience, SEO optimization increases positions in search engine results, contextual advertising provides traffic.
How does advertising change sales performance? Do promotion channels influence each other? Performance marketing allows you to answer these questions.
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Performance marketing: what is it
This term appeared in the United States, back in the early 2000s. It meant a link to the result: marketing agencies with the prefix “performance” received payment for a specific referred buyer.
Performance marketing has become very popular, because the client is not interested in the work performed, dry metrics and even abstract “recognition”. He pays for specific results: users who completed the target action (followed the link, purchased the product, used the company’s services, etc.).
Thus, performance marketing is based on the following principles:
- cover as many channels as possible;
- work with all stages of the sales funnel;
- thorough analytics;
- direct dependence of payment on the result: for 500 referred customers, the company will receive less than for 1000.
Performance marketing implies not only the achievement of specific results, but also the rational expenditure of the budget. For example, let’s say a car dealership has been running for 10 years and has achieved a 15% sales conversion rate. The management of the salon decided to increase this figure to 20%, and the price of the application should not exceed 2000 rubles. Initially, its cost is too high, and the marketing agency identifies the following reasons for this:
- A big investment in contextual advertising that doesn’t pay off.
- Usability issues: filters for car search are inconvenient, and fields for filling in information blend into the background.
Based on this data, performance marketing allowed us to develop a comprehensive strategy that bore fruit within a month.
Thus, performance marketing tools help evaluate the effectiveness of advertising channels, identify problems, draw conclusions, and make informed decisions.
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Performance marketing: how it works
Performance marketing tools are expensive, but effective. Within a month, with the proper approach, the number of applications grows many times. This approach saves the budget, while getting a return on each advertising channel that is involved in the promotion.
Performance marketing includes the following components:
- Data analysis;
- Setting a specific goal;
- Developing a comprehensive strategy;
- Connect advertising channels.
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Data Analysis
At the initial stage, the company’s business indicators are analyzed, the positive and negative aspects of the product or service being sold are identified. They also pay attention to the market: trends, dynamics, forecasts are important. Interaction with existing and future customers, as well as solving marketing problems, depends on statistical indicators.
The following indicators are analyzed:
- target audience (primarily traffic sources);
- conversion rate;
- semantics;
- advertising campaigns;
- performance of certain traffic sources.
If a marketer analyzes the indicators during an advertising campaign, then he will be able to control the invested funds, monitor the payback and income from advertising, not only on the Internet, but also offline.
Setting a Specific Goal
Setting a goal at the start of an advertising campaign is a necessary part of promoting goods and services. Based on it, a comprehensive strategy is formed, the budget and deadlines are determined.
Marketers often hear the following goals from entrepreneurs:
- “The company has seasonal discounts. Let’s have an action.”
- “We urgently need to increase the number of applications.”
- “Just opened a business. Recognizability is needed.”
These goals are common. But from the point of view of performance marketing, they are abstract and will not help develop a comprehensive strategy. There are four kinds of goals:
- Business: improve the position of the company, increase sales and profits, respectively.
- Marketing: attracting new customers, increasing product loyalty.
- Communications: creating a need for the company’s goods and services, stimulating a purchase.
- Media: increase ad reach, frequency, budget reduction, etc.
Performance marketing is combined with SMART technology, which helps to summarize the data received, set deadlines and the number of resources, and formulate specific tasks. For example, consider how a company selling computer equipment online would set SMART goals:
- The target must be Specific.
- The goal must be Measurable.
- The goal must be achievable.
- The goal must be Relevant.
- The target must be Time Bound.
Incorrect: “Increase website sales”.
Correct: “Double the sales of power supplies from the site.”
Incorrect: “Bring the company’s brand to the market.”
Correct: “Increase revenue from the newest Ryzen 3995 PRO processor before January 1 by 10%.
Incorrect: “Sell monitors to most residents of St. Petersburg.”
Correct: “Increase the number of sales of Samsung monitors by 2 times.”
Incorrect: “Increase the conversion of traffic from Google to tickets for the query “system block”.
True: “Increase the number of requests from the site for blocks by 2 times and increase the company’s profit in this direction by 15%”.
Incorrect: “Double the number of applications from the site.”
Correct: “Double the number of calls for offers from the Promotion page within three months.”
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Developing a comprehensive strategy
Performance marketing involves the selection of effective advertising tools for a particular company. Advertising attracts users to the site, retains customers, returns those who have already used the company’s products to the stage of re-purchase.
To launch effective advertising, you need to analyze the business in detail, study the features of a particular industry. Performance marketing tools make it possible to do this.
Connecting advertising channels
After correctly setting up the display of advertisements, the company begins to receive requests and requests from customers. To analyze the effectiveness of each advertising tool, a comprehensive analysis is carried out. As a result, it will be clear through which advertising channel the company received applications, how much money was spent and what profit was received from investments in advertising. You can collect this data using end-to-end analytics.
End-to-end analytics is an analysis of the effectiveness of advertising campaigns, which is based on sales information by tracking customer actions throughout the entire sales funnel.
End-to-end analytics provides an opportunity to evaluate the performance of each advertising tool, and within a certain reporting period. Let’s name the main analytics tools for performance marketing:
- Universal Analytics is a useful tool for setting up reports on ROI, integrating with online advertising systems.
- Microsoft Power BI – suitable for any online entrepreneur. This program collects information from CRM, advertising platforms for analysis and decision making.
- Google Data Studio is a tool for collecting statistical information, analyzing and visualizing data.
The process of creating effective end-to-end analytics is time-consuming, given that full integration of CRM / CMS, web analytics and online advertising systems is needed. But in the end, the marketer receives information that will increase the number of sales while saving the budget.
Performance marketing is a holistic approach and may require a large investment to get the best results. But it is not always the case. In any advertising campaign, you can apply the general principles of this tool: monitor the distribution of funds among channels and use only those directions that will be profitable.
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