Marketing performance is marketing aimed at results. This may seem strange, because any work is done not just like that, but for some purpose. Ringostat will tell you what performance marketing is and how it differs from other types of marketing. We also asked specialists from the agencies SODA , Elit Web and Raskrutka to tell us about the advantages of Performance.
What is performance marketing?
Marketing performance is a service, a special type of cooperation, in which the advertising contractor works to achieve specific indicators, most often financial ones.
Let’s look at a small example. Let’s say a company needs a landing page to collect warm leads.
- A contractor under a standard contract that does not imply a performance approach will complete everything according to the technical specifications and receive payment for the work done.
- A performance agency will not just create a page, but will test and improve it even after the release. The agency will get paid based on how many leads or customers the page generates.
This is a very simplified example, because usually performance marketing tasks concern complex promotion. The described service would also include SEO promotion of the landing page, setting up contextual advertising on this page, A/B testing with further improvements – everything, up to repackaging the product for a different audience, if necessary.
Performance marketing should be distinguished from the performance approach in marketing. The performance approach is used by companies to build the work of their own marketing departments. Its essence is to regularly measure key indicators and work on improving them. For example, at Ringostat, we constantly track the number of leads and coverage using a special dashboard.
Performance Marketing KPIs
In performance marketing, a specific goal is set. It must be measurable, otherwise it will be impossible to understand whether it has been achieved or not. “Improve SEO” is an abstract goal; you can work on it endlessly and consider that you remain at the starting point. In performance, the goal is more likely to be: “Increase the audience from organic search by 100% by December 20”. By the specified date, it will be clear whether the desired result has been achieved or not and whether the number of visitors has doubled.
Analytics is the foundation of performance marketing. The customer and the contractor initially determine what indicators they will work on. Let’s look at the main ones:
- Traffic – how many people visited a particular site;
- Number of leads – how many leads were generated by the contractor’s advertising campaigns;
- customer acquisition cost, CAC – the ratio of the cost of marketing activities to the number of clients acquired;
- customer lifetime value, LTV – average income from a customer during the period of cooperation;
- return on marketing investment, ROMI – how much money a company received from every dollar invested in promotion.
Some indicators are easy to evaluate, the same traffic can be viewed in Google Analytics. Others are calculated using complex formulas and to work with them, you will need to improve the analytical system. For example, to obtain ROMI, end-to-end analytics is needed , which will link data on advertising costs with sales data from CRM.
Which indicators to choose depends on the promotion goals. Online stores are usually interested in conversion, information portals need traffic and engagement, and, for example, companies with a long sales cycle want warm leads.
Stages of performance marketing
performance marketing is a flexible service. Personal terms are discussed with each client, depending on the needs and characteristics of their business. However, there are several key points that make the work impossible.
Setting goals. The client and the contractor formulate what result needs to be achieved and in what time frame. Thus, the goal “I want more sales” turns into “Reduce the cost of attracting a client by 25% by the end of the year” or “Increase the number of applications from organic search.”
Definition of Key Performance Indicators. Audience growth can be tracked via Google Analytics, attracted leads will be displayed in the CRM, new newsletter subscribers will be displayed in the newsletter service, etc. It is important to provide the contractor with access to analytical services so that he can determine the effectiveness of his actions.
Analytics. The agency studies the client’s business: gets acquainted with the product, studies the target audience, monitors competitors, conducts an audit of current activities.
After all these approvals, the work begins. It usually goes iteratively – in small stages. The contractor starts an advertising campaign, measures the results, and adjusts further actions based on them.
The basis of performance marketing is web analytics. Without knowing the indicators, it is impossible to improve them. It is like playing “hot and cold” with a silent opponent. So those who want to order a performance need to be ready to open access to accounts in the analytics system and improve it.
Benefits of Performance Marketing
The obvious advantage of performance is that the customer gets a full-fledged ally. Not just “hands” that will do something, but a partner interested in business development.
At the same time, the company gets an outside perspective, new ideas, and the opportunity to work with new promotion channels. You can compare this to hiring a new Senior-level employee – one who has much more than 24 hours in a day.
But the main advantage of performance is that it helps to look at the situation objectively. Subjective assumptions are replaced by real numbers. And what can be measured can be changed.
Disadvantages of Performance Marketing
The main disadvantage of performance marketing is that it is not suitable only for activities with a delayed or difficult to measure result. It is difficult to say what impact, for example, branding has on sales, separately from other activities – therefore, it is unlikely that anyone will do it according to the principles of performance.
Our friends from Elit-Web told us about the doubts that plague their clients when ordering performance marketing.
Conclusion
Performance Marketing is a specialized service offered by top digital marketing agencies, where the contractor is focused on achieving tangible results. This approach involves selecting key performance indicators (KPIs) and working to improve them. Marketers use analytical systems to measure and understand the outcomes of their efforts, such as end-to-end analytics that connect marketing investments with revenue data from each channel in the CRM.
Web analytics form the foundation of performance marketing, requiring constant measurement and improvement of key indicators. Clients must be prepared to grant access to their analytical accounts and enhance these systems by adding new modules for better insight.
One of the main benefits of performance marketing is partnering with a top digital marketing agency that is invested in your business’s growth. This partnership provides an objective perspective, fresh ideas, and access to new promotion channels.
However, performance marketing may not be suitable for activities where measuring results is challenging, such as those aimed at increasing brand awareness.