What Is Performance Marketing?

You may have heard the term a lot ‘performance marketing’, but what actually is performance marketing and how does it work?

Performance marketing is a general term that refers to online marketing and advertising programs were retailers and marketing companies are paid when a specific action is completed, e.g a sale, lead, or click. You basically only pay in the event of a conversion or a sale, a bit like affiliate marketing. Performance marketing is a combination of advertising, helping retailers and affiliates to continuously change their business. Campaigns are highly targeted for each retailer, so that everyone can be successful. When done correctly, performance marketing creates amazing win win opportunities for retailers and website publishers!

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Other forms of advertising traditionally mean you must pay up front, regardless of the success of any advertisements. Performance marketing means you only pay for successful transactions. It’s great for many businesses as you get a real time measurement of return on investment.

That’s one of the great things about performance marketing – if you don’t see measurable results, you won’t pay anything. It’s gaining popularity at the moment, especially with the spread of electronic media.

Pricing Models

CPM
This stands for cost per mille, or cost per thousand. This pricing model charge advertisers for impressions, like the number of times people view a particular advertisement. The only problem with this is that advertisers are charged even if the target audience doesn’t click on the ad.

CPC
Cost per click advertising overcomes the problem of CPM by charging advertisers when a visitor clicks on an ad. The competition for this is high and search keywords have become expensive.

CPL
In this pricing model, cost per lead, you only pay for a qualified lead. These are the most advertiser friendly. CPL campaigns perform best with a short form and an attractive incentive for the user, for example a casino could use the promotion – free spins no deposit win real money and then pay per user which signs up, this would result in more affiliates promoting the campaign.

CPA
In these campaigns the advertiser pays for a completed sale involving a credit card transaction. It focuses on encouraging customers to buy at that very moment.

Benefits

A lot of advertisers can have limited budgets and might not understand the most effective method of advertising. With performance marketing, the risk of paying lots of money for ineffective advertising is none existent. You literally pay for the results that you can measure.

The advertising agency is really the only one taking a risk, so they are more motivated to make sure your ad is well targeted with the best chance of being successful.

Performance Marketing in a Nutshell

Performance marketing is a general term, referring to advertising programs where an agency only get’s paid per action completed.
These actions vary depending on the pricing plan discussed. You may pay per click, per lead, per mille, or per credit card transaction.
The agency is taking the biggest risk, giving them an incentive to make your campaign the best it can possibly be.
The campaigns are highly targeted for each retailer.
It’s a great, low risk option for people who don’t know the best method of advertising their business.
You don’t have to worry about paying a shedload of money for ineffective advertising.