Performance Marketing: Everything You Need to Know

Ever wondered how people measured marketing success before computers? Well, in the 19th century, retailer John Wanamaker famously said:

It’s hard to imagine how tough that must have been, but thankfully, those days are behind. Today, we can easily measure every result and pay only for “marketing that performs.” That’s right — it’s called performance marketing, and today, we’ll dive deeper into what makes it so effective.

What is Performance Marketing?

At its core, performance marketing is a strategy where advertisers pay only when a specific action is completed. These actions can be anything: a click, lead, sale, etc.

The idea is simple: you get what you pay for. Unlike traditional advertising, where you pay upfront regardless of the results, performance marketing ensures that your investment is directly tied to the outcomes you’re looking for.

Is It the Same as Affiliate Marketing?

Many people confuse these two terms, but they’re not the same. Affiliate marketing is actually a type of performance marketing.

In affiliate marketing, businesses partner with affiliates who promote their products or services. The affiliate gets paid only when they attract a sale or achieve another action, like click, deposit, etc.

Performance marketing, however, is broader. It includes affiliate marketing but also covers other tactics like pay-per-click (PPC), social media advertising, and more. What’s more, performance marketing is more flexible, allowing you to adjust strategies, budgets, and targeting across various platforms. Affiliate marketing is more straightforward, relying mainly on the affiliate’s methods and audience.

Essentially, all affiliate marketing is performance marketing, but not all performance marketing is affiliate marketing.

Most Popular Performance Marketing Types

Affiliate isn’t the only type of performance marketing. It can be divided into many components, each having its own approach and strategy. Let’s take a look at the most popular types:

1) Social Media Advertising

You come across social media advertising whenever you visit Facebook, Instagram, Twitter, or LinkedIn. These are banners and sponsored posts that appear on your feed, which can be divided into two types:

• Prospecting — ads used to attract new people;
• Retargeting — ads used to bring people who have visited your site back.

Not all social media advertising is performance marketing. If the ad goal isn’t conversion, it’s brand marketing not performance.

2) Search Engine Marketing (SEM)

SEM means running ads on search engines like Google or Bing. These ads are designed to show up when the user searches for your targeted keywords. For example, when they type in “fancy hats,” your ad for a hat store will pop up.

Don’t mix it up with SEO. In SEM you pay for clicks and impressions to generate leads. SEO focuses on improving your site’s organic search ranking — a different marketing type.

3) Native Advertising

When an owner displays your ad on their website, it’s called native advertising. These ads are designed to match the look and feel of the site, making them less likely to be perceived as traditional ads. This “native” approach helps avoid the negative reactions often associated with more obvious advertising.

However, it’s important to note that some regions have legal requirements to disclose when content is sponsored.

4) Influencer Marketing

Working with people with a large social media following can be a powerful way to promote your brand.

In the past, influencer marketing was mainly about brand awareness. But nowadays, it’s more focused on conversions. For example, when you see sponsored posts for new lipsticks or kitchen gadgets on TikTok or Instagram, behind the scenes the brands are tracking how well those posts are converting into sales.

How Does Performance Marketing Work?

If you want to practice performance marketing, the process is straightforward. Here’s how it typically goes:

Step 1: Set Goals

First, decide what you want to achieve with your ads. Do you want to increase website traffic, or are you more interested in leads and conversions? That’s crucial to know as it’ll influence your approach greatly.

Step 2: Identify Audience

Identify which audience you want to target. For that, advertisers analyze their product and how people use it. Next, they create an ideal client profile (ICP), detailing their gender, age, GEO, interests, salary, favorite media, etc.

Step 3: Pick Channels

When you know your audience, you know where they consume media. It could be Facebook, Instagram, forums, news websites, search engines, etc. Launch ads for relevant platforms to attract high-quality traffic.

Step 4: Create Ads

First, you need to decide on the format. It could be video, text, banners, interactive ads, etc. Next, focus on making your creatives suitable for your target audience. Use the language they use, visuals they like, music they appreciate, and CTAs that are clear for them.

Remember, that your ad should be made for the people you want to sell your product to. Don’t just make it appealing for yourself — your audience is your focus. 

Step 5: Set Budget

Decide how much you want to spend and how much you want to pay for each action. Also, be prepared that the campaign might not work as intended from the start. Set some budget for testing to identify a working strategy.

Step 6: Launching

Start your ad campaign and let it run on the chosen channels. With performance marketing, you’ll only pay for actions. This means your budget won’t be spent until people click or buy.

This is one of the main benefits of performance marketing. You pay only for the results you want, which helps minimize losses.

Step 7: Track Results

Keep an eye on how well your ads are doing. Look at metrics like clicks, conversions, and overall return on investment (ROI).

Track performance in real-time with Keitaro Tracker! Try with a 14-day free trial.

Step 8: Make Adjustments

Based on what you see, change your campaign to improve its performance. This could involve changing your ad content, adjusting your target audience, or altering your budget.

How to Measure Performance?

When it comes to performance marketing, the goal is to get the best results for your money. To do this, you’ll want to track a few key metrics related to your costs. Here are the four main ones to keep an eye on:

Cost per Click (CPC)

CPC shows how much you pay for each click on your ad. The amount you pay per click is influenced by several factors:

• Your maximum bid: How much you want to pay for each click.
• Quality and relevance of your ad: How well your ad matches what users are looking for.
• Competition level: The number of advertisers, bidding for the same keywords or ad placements.

To get the best results from CPC ads, choose effective keywords or ad placements, create eye-catching banners, and optimize your landing pages to turn visitors into customers.

Cost per Mille (CPM)

CPM measures how much you pay to show your ad to 1,000 people. Why “mille?” In French this word means “thousand,” thus the name CPM.

Advertisers use CPM because the cost of showing your ad to just one person can vary a lot, but the cost for 1,000 impressions is more stable.

CPM helps you understand how pricey it is to advertise on a certain platform and how competitive it is to reach your target audience. For example, the CPM for “buy a fancy hat” will likely be higher than the “fashion tips” one — the first searcher is more likely to buy, so more brands target them.

Cost per Acquisition (CPA)

CPA is how much you pay to make a single sale. It’s specifically about the cost of converting a lead into a paying customer. For example, if you’re running a campaign to sell a product, CPA tracks how much you spend to get each sale.

Many marketers like the CPA pricing model because it allows them to define what counts as an acquisition — a sale, sign-up, or other action — before they start advertising. They only pay when this action happens, making it easier to track and manage costs.

Cost per Lead (CPL)

CPL is a metric that measures how much you pay to acquire a new lead, which is a potential customer interested in your product or service. Here, you track the performance of actions like filling out a form, signing up for a newsletter, booking a call, etc.

CPL helps you determine the cost-effectiveness of your marketing and how much you spend to gather potential customer information.

Best Performance Marketing Practices

Now that you know the basics, let’s dive into our top tips for succeeding in performance marketing:

Focus on Good Landing Pages and Offers

Bad landing pages and poorly written offers will result in fewer sales, visitors, and overall interest in your product. After all, if the benefit of your product isn’t clear, why buy it?

To avoid this, take the time to understand your audience and adapt your offers to them. Make your landing page eye-catching, add visuals, gifs, and catchy CTAs.

Choose Traffic Sources Carefully

Make sure that you target platforms that your audience uses. For example, running “fancy hat” ads on LinkedIn won’t be as effective as Instagram, because LinkedIn is a B2B-oriented platform. Advertising in the wrong place can lead to low-quality traffic, harming revenue.

Instead, carefully analyze the market to understand which platforms and influencers are popular in your niche. Partner with affiliates and platforms that can drive high-quality, relevant traffic, ensuring your marketing efforts are focused where they’ll have the most impact.

A/B Test to Identify Conversion-Driving Approaches

Sometimes, marketing can be tricky — what worked yesterday won’t work today. For that, you’ll have to test different techniques and strategies constantly.

That’s where you’ll need the help of A/B testing. It can help you find out which ads perform best in terms of CTR, conversion rates, average order values, and traffic. Tools like Keitaro Tracker allow you to control the percentage of showtime, helping you run multiple offers within one campaign and identify what works better.

Be Compliant

Marketing has a lot of rules and guidelines that one must follow to avoid legal issues. Read through relevant regulations, like the Federal Trade Commission (FTC), GDPR, and CCPA. Don’t forget that rules can change, so look out for any emerging changes.

Track and Monitor as Much as You Can

Tracking performance is the key, it’s literally said in the name of “performance marketing.” To understand how your strategies and ads work, you must analyze all important metrics: clicks, CTR, conversions, ROI, spending, etc.

All that can be done with Keitaro Tracker. This tool allows you to create campaign reports with 30+ metrics, run A/B testing, and manage your landing pages — all in one place.

You can see for yourself how Keitaro Tracker can improve your performance marketing via a 14-day free trial:

Now that you know how performance marketing works and which tool to use — try and test your strategies with confidence.