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What is performance marketing and what is it used for?

18 jul 2023

The definition of "performance marketing" can be found in many contemporary studies and articles. However, it is not always correctly applied. Sometimes, performance marketing is understood as actions that are only a small component of this concept. Moreover, these actions are originally intended to be applied in combination with other methods.

Moreover, the effectiveness is often assessed solely based on one of the tools. Today, it is easy to determine what exactly interested the user on the website, how much time they spent on a particular product or service, which keyword led them to the site, and so on. Based on these results, one can focus on SEO to stabilize traffic and improve search engine rankings. It is possible to expand contextual advertising to generate quick traffic. Social media can be utilized to enhance audience loyalty.

However, how do these promotion channels influence each other? And to what extent does the achieved result align with the business objectives? What changes should be made in internet marketing methods? The answers to these questions can be obtained through the concept of performance marketing, offered by the digital agency FIVE STARS.


What is performance marketing?

Performance marketing is a concept of internet marketing aimed at achieving specific and financially measurable results as quickly as possible. The concept integrates various internet marketing tools into a cohesive strategy that considers the goals and promotion methods of a particular business. The philosophy of this concept is based on the idea that every financial investment should yield measurable results.

The concept of performance marketing is built on thorough data analysis, precise goal-setting, comprehensive strategy development, and effective management of promotional channels. Let's explore each of these components in more detail.


Data Analytics

In performance marketing, qualitative and quantitative data related to the business are analyzed, directly and indirectly impacting interactions with the target audience. Analytics is employed at all stages of implementing the concept, from initial goal-setting to assessing the effectiveness of each advertising channel. A well-thought-out analytics system allows for the evaluation of the return on investment for each promotional method used in the campaign.

In this context, analytics includes not only the business metrics of a specific economic entity but also an examination of the characteristics, advantages, and disadvantages of the promoted product. It also involves a thorough study of the audience's interaction with the website, including:

  • Current website conversion rates.
  • Methods of attracting potential customers to the website.
  • Search engine results in the relevant industry.
  • Issues related to customer interaction with call centers, chatbots, and the ordering process.
  • Effectiveness of various internet traffic sources.

Competitor actions, market conditions, dynamics, seasonality, trends, forecasts, and other data that directly or indirectly impact the effectiveness of promotion are also subject to analysis.


Goal Setting

The starting point of any advertising campaign is a well-defined goal. The choice of advertising channels and tools depends on the goals set. Developing a comprehensive strategy, determining its implementation timeline, calculating budget sizes – all of this is directly related to goal setting.

The formulation of goals also plays a significant role. Objectives such as "increasing sales," "seasonal discounts," and "improving brand recognition" cannot be considered goals from the perspective of performance marketing. In this case, it is more appropriate to use the following terminology:

  • Business goals that take into account sales levels, profitability, and the company's position in the market.
  • Marketing goals that encompass tasks related to attracting new customers, reconfiguring the consumer base, increasing loyalty to the promoted product, and adjusting usage habits of goods or services.
  • Communication goals that involve creating a demand for a product or service, increasing recognition, changing attitudes towards the product, and encouraging purchases.
  • Media goals expressed in specific indicators of reach, communication channels, frequency, budget, and other parameters related to media planning.

The definition of goals and objectives in performance marketing follows the SMART methodology. Thanks to this technology, realistic deadlines are established, the required resources are determined, and tasks are specified. As a result, the set goals are characterized by specificity, significance, measurability, and achievability.


Development of a Comprehensive Strategy

The foundation for building a comprehensive strategy is the data obtained through in-depth web analytics of the website and all types of current online activities. An analysis of the specific business and industry indicators as a whole is essential. The results obtained are used to select the necessary tools for promotion.

The distinguishing feature of a comprehensive performance marketing strategy is the absence of template or universal solutions. All components of this strategy are aimed at addressing the promotion objectives of a specific business, company, and product. Depending on the set goals, the comprehensive strategy may include ready-made technologies for attracting the target audience, methods for guiding each website visitor through the entire sales funnel, customer retention and re-engagement strategies, as well as other individual solutions.


Channel Management

The management of advertising channels takes place at all stages of the sales funnel. This primarily applies to channels for reaching and attracting the target audience. The quality of incoming inquiries and leads, their connection to actual sales, the amount of budget spent, and the profit generated are constantly analyzed. Calls and personal visits from customers to the office, their email inquiries, and other forms of contact are also taken into account, with the internet advertising and company website being the sources. Based on the data collected, prompt decisions are made to adjust the promotion strategy.

The concept of performance marketing utilizes the method of end-to-end analytics, which allows for tracking the user's entire journey from viewing the advertisement to making a purchase through the sales funnel. Promotion channels are optimized considering factors such as cost per lead, conversion rate, cost per visitor, and other relevant factors. The effectiveness of advertising in performance marketing is measured by indicators such as:

  • ROI (Return on Investment), which reflects the return on advertising investment and the resulting profit obtained from that investment.
  • ROAS (Return on Advertising Spend) or ROMI (Return on Marketing Investment), determining the level of return on investment in relation to advertising expenses.
  • CLV (Customer Lifetime Value), indicating the profit generated from a specific customer over the entire duration of their relationship with the company.
  • CRV (Customer Referral Value), representing the profit obtained through the customer's referrals of the product to others.

End-to-end analytics can be implemented using tools such as Microsoft Power BI, Google Data Studio, Universal Analytics, CoMagic, Roistat, and other solutions, including custom web services.


Who Needs Performance Marketing

The concept of performance marketing is one of the best solutions for budget optimization. However, the full integration of online advertising systems, CRM/CMS, and web analytics can be a costly process. While significantly improving the quality of work with advertising channels leads to more efficient use of funds, it may take some time to achieve full profitability.

Nevertheless, certain performance marketing methods can be applied even with limited budgetary capabilities, especially when implemented by experienced specialists. The digital agency FIVE STARS is ready to develop individual solutions for you based on the principles of performance marketing. Everything you need for effective online promotion can be obtained at FIVE STARS AGENCY!

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