Performance marketing

The essence of performance marketing and its main task

Company promotion – in a broad sense it is a set of activities that covers many tools and is aimed at working with reputation, brand or company loyalty, image, attracting customers, etc. But not all results can be expressed in quantitative indicators. And this is where performance marketing comes to the rescue.

Performance marketing is a separate direction of marketing support, focusing on tools, the effectiveness of which can be expressed quantitatively. It is a strategy based on the achievement of specific results and the evaluation of performance indicators. Traditional marketing methods focus a lot on brand recognition and overall visibility in the media space. In contrast, performance marketing focuses solely on numbers (conversions, sales, costs and other quantifiable metrics).

The main task of performance marketing is to work with sales, without additional time and money spent on tools whose effectiveness is difficult to measure. This method helps to reduce the cost of implementing tasks related to the overall image of the company and to focus on return on investment in advertising.

Performance marketing efficiency indicators

All key performance marketing metrics are quantified, which helps to evaluate the effectiveness of each advertising channel, tool and ad. These include:

1. Conversion rate (CR) – the percentage of users who performed the desired action (purchase, form filling, click on the phone number).
2. Customer acquisition costs (CPA) – the average cost of attracting a new customer.
3. Return on investment (ROI) – the ratio of profit received from marketing activities to the costs of these activities.
4. Cost per click (CPC) – the average click cost on an advert or link.
5. Average Out-of-Pocket (AOV) – the average amount of money spent by a customer on a single purchase.

Performance indicators are applied depending on the direction of the company’s activity and the marketing channels and tools used for promotion.

Benefits of performance marketing

A strategy focused on quantifiable metrics, while not showing the full picture on promotion, has a number of advantages:

1. All results are trackable, measurable and have a specific numerical expression. This allows you to compare and pinpoint the most effective marketing campaigns and channels.
2. Cost Optimisation. By focusing on the most effective strategies and channels, you can easily optimise the costs of your marketing activities.
3. Improving the quality of interaction with the target audience. Through performance marketing strategies, it is possible to tailor advertising messages to the target audience better, shaping the offer in such a way that it has the maximum effect.

All planning and promotion strategy development in performance marketing is based on SMART goals.

SMART technology for goal setting

SMART is an acronym where each letter represents a specific property of the goal:

• Specific. The goal is clearly stated and specifically defined.
• Measurable. The objective is measurable so that its achievement or progress can be determined.
• Achievable. The goal is realistic and achievable within available resources and capabilities.
• Relevant. The objective is focused on a specific outcome, is linked to the overall strategy, and does not conflict with other objectives.
• Time-bound. The goal has a clear time frame within which it must be achieved.

Example of a SMART goal

An example of a SMART goal for performance marketing might be “Increase conversion rates by 15% within three months by optimising ad campaigns and landing pages”.

Used traffic sources

Performance marketing uses various sources of traffic to attract a targeted audience. Let’s consider the most popular sources:

1. Search Advertising (Search Advertising). This contextual advertising is shown in the search results for certain key queries, which allows you to attract a warm audience. Since these users are already actively searching for a particular product or service.
2. Social Media Advertising. This can include all advertising on popular platforms such as Facebook, Instagram, LinkedIn and others. Social Media Advertising extensively customises targeted advertising based on user’s interests, demographics and behavioural factors.
3. Email Marketing (Email Marketing). The use of email is relevant for mailings to an already formed database of users to inform them about current offers, promotions, and company news in order to increase their loyalty.
4. Content Marketing. High-quality content (articles, blogs, videos, podcasts, infographics and other formats) helps to attract and retain an audience, increase brand awareness and establish expertise in the industry.
5. Affiliate Marketing. Affiliate marketing aims to expand your audience by promoting your products or services on partner websites in exchange for a percentage of sales or reciprocal advertising.

Effective traffic analysis tools for performance marketing

In performance marketing, there are a wide range of tools that help in analysing traffic and evaluating the effectiveness of marketing campaigns. Below are some of them:

1. Google Analytics. It is one of the most popular tools for analysing traffic and user behaviour on a website. It provides detailed data on traffic, traffic sources, conversions and other metrics. Google Analytics helps you understand how users interact with your website and identify areas for improvement.
2. Facebook Ads Manager. This tool is similar to Google Analytics only for Facebook and Instagram social networks. In it, you can see statistics on adverts, their effectiveness and other metrics.
3. Hotjar. This is a tool for analysing user behaviour on your website. It provides heat maps, session recordings, surveys and other features that help you understand how users interact with your site and identify possible problems or improvements.
4. Crazyegg. This is another user behaviour analysis tool that provides heat maps, page scroll reports, click maps and other data. Crazyegg helps you visualise where users click, how much time they spend on pages and how they scroll through content.
5. Hotjar and Crazyegg analogues. Other tools provide similar user behaviour analysis features, such as Mouseflow, Lucky Orange, FullStory and others. You can choose the tool that best suits your needs and budget.
6. CRM (Customer Relationship Management). CRM systems help manage customer relationships and track marketing campaign results. They allow you to collect and analyse customer data, including information about purchases, contacts and preferences. CRM helps you understand which marketing channels are most effective for your audience and optimise your marketing efforts.
7. ERP (Enterprise Resource Planning). ERP systems integrate various business processes, including marketing, sales, finance and inventory management. They provide a centralised platform to manage and analyse data about your company. ERP helps you gather information on sales, profits, and other key performance indicators so you can more accurately measure the results of your marketing efforts.
8. Power BI. is a powerful data visualisation tool developed by Microsoft. It allows you to create interactive reports and charts based on data from various sources, including your CRM system and other data sources. Power BI helps you visualise information about the performance of your marketing campaigns and make better data-driven decisions.

These tools, combined with CRM, ERP, and Power BI, can help you better understand your audience, determine the effectiveness of your marketing campaigns, and make informed decisions to achieve your business goals.

5 cases with the use of performance marketing

As an effective tool for achieving SMART goals, performance marketing has many applications. Below are a few cases where the use of a performance marketing strategy will be relevant:

1. Increasing conversions in an online shop. A performance marketing strategy can be aimed at increasing conversions in an online shop. Analysis of traffic and user behaviour data will help to determine which pages and stages of the sales funnel need to be optimised. Marketing activity tests, content improvement, A/B testing, lead form optimisation and if necessary other site elements can then be carried out to increase conversions.
2. Retargeting. A performance marketing strategy can include using retargeting to show ads to users who have already shown interest in your brand or product. You can set up ad campaigns to show these users on other platforms using the tracking pixel and website visit data. This helps to keep in touch with potential customers and build loyalty to your brand.
3. Optimise marketing campaign costs. Performance marketing also allows you to optimise the cost of your marketing campaigns. You can identify the most effective and ineffective marketing channels and tactics by analysing data and metrics. This allows you to reallocate your budget and focus on the most impactful traffic sources, resulting in lower costs and an increased overall return on marketing investment.
4. Scaling a business through affiliate marketing: Performance marketing is often used in affiliate marketing, where businesses can work with partners or affiliates to promote their products or services. Under a pay-for-performance scheme such as CPA (cost per customer acquisition), marketing costs can be effectively managed and reach a wider audience through an affiliate network.

Each of these cases demonstrates the benefits and opportunities that performance marketing offers. It allows you to fine-tune and optimise your marketing efforts, achieve specific business goals and improve your overall marketing effectiveness.