Every marketer’s dream? A guaranteed return on investment (ROI). And performance marketing does just that.
The best part? You only pay when a desired result is achieved.
Sit back and enjoy the ride as we dive into performance marketing for beginners, including: the definition of performance marketing, performance marketing examples, and performance marketing best practices.
Understanding performance marketing
Let’s start from the top.
What is performance marketing?
Performance marketing is a paid marketing strategy that drives specific outcomes for a brand such as conversions, clicks, leads, or sales. It’s a results-oriented strategy, which means it revolves around the model: money in equals money out. Advertisers pay based on the performance of their campaigns, ensuring a more cost-effective approach to marketing.
Performance marketing examples
Examples of performance marketing might include:
- An abandoned cart email that encourages shoppers to return to their purchase and convert
- A Facebook ad campaign that retargets high-intent shoppers (such as those who have recently viewed a product page)
- Text marketing campaigns that encourage previous shoppers to make a repeat purchase
- Performance marketing channels (such as Wunderkind) that can guarantee revenue
Key benefits of performance marketing
There are many benefits when using performance marketing, such as:
- Cost efficiency: Performance marketing means businesses only pay for desired outcomes, so they have better control over their spend and can reduce wasted dollars.
- Measurable results: Marketers have the ability to track and measure specific actions which provide valuable insights into campaign performance, allowing for data-driven decision-making.
- Targeted approach: Performance marketing allows businesses to target specific audiences and focus on individuals most likely to convert. This results in higher-quality leads and higher conversion rates.
- Flexibility and scalability: Businesses are able to adapt campaigns based on real-time data, scale successful strategies, and adjust targeting parameters for optimal results.
Performance marketing KPIs
KPIs are vital for evaluating the effectiveness of your performance marketing campaign. Use these metrics to understand how customers respond to your campaign, and where you can improve.
Advertisers pay for each click generated by their ads. This is commonly used in search engine marketing and display advertising, where advertisers bid for ad placements and pay when users click on their ads.
Advertisers pay for each lead generated. The lead could be a user downloading a whitepaper, subscribing to a newsletter, or requesting a demo.
Advertisers pay for each desired action or conversion, such as a sale, a completed purchase, or a sign-up. Advertisers only pay when the specified action occurs, making CPA an effective model for eCommerce businesses.
Performance marketing encompasses other KPIs such as cost-per-install (CPI) for mobile app installs, cost-per-view (CPV) for video advertising, and cost-per-engagement (CPE) for interactive ads. Each model focuses on specific actions or objectives, tailored to the campaign’s goals and industry.
Types of performance marketing channels
According to Shopify, brands with a top omnichannel customer engagement strategy see a 9.5% yearly increase in annual revenue, compared to 3.4% for poor omnichannel brand strategies.
Performance marketing operates across a range of channels, so striking the right balance is key. Here are the primary performance marketing channels you can invest in:
Search engine marketing (SEM)
SEM involves advertising on search engines like Google or Bing, primarily through paid search ads. Advertisers bid on keywords and pay when users click on their ads, driving traffic to their website or landing pages.
However, since the pandemic, some of the costs involved have doubled, and it’s not always a scalable or targeted strategy.
Affiliate marketing involves partnering with affiliates or publishers who promote a product or service on their platforms. Advertisers pay affiliates a commission for each sale or conversion they drive. Affiliates may include other brands marketers are partnering with, or influencers who are paid when they drive a sale.
Display advertising involves placing visual ads, such as banners or image-based ads, on websites, apps, or social media platforms.
Advertisers can pay for ad placements, impressions, or clicks, depending on the chosen pricing model. For example, on average, WunderKIND Ads drives +31% uplift in qualified traffic, and 5-10% lift in ad revenue for our clients.
Social media advertising allows businesses to target specific demographics and interests on platforms like Facebook, Instagram, Twitter, and LinkedIn. Advertisers pay for clicks, impressions, or desired actions, such as video views or app installs.
However, social media advertising faces a similar issue to SEM, as costs are rising and it’s not a fully scalable channel. For example, last year, Facebook’s CPM increased 61% YoY and TikTok increased 185% YoY.
“User growth is stagnant or declining on these platforms. There are finite resources and more brands than ever,” explains Tom Kaeding, CFO at Wunderkind. “It’s more expensive with fewer returns, as you repeatedly target the same audience. For many businesses, it’s becoming a cost-prohibitive way to reach people.”
Email marketing utilizes targeted email campaigns to nurture potential and current customers. Brands pay based on open rates, click-through rates, or conversion rates resulting from the campaign.
“It’s important to build your own lists and channels,” Kaeding says. “You can engage and interact through a multitude of channels without increased pricing dynamics. The larger your lists are, the better returns you’re going to see.”
Text marketing involves sending targeted SMS text messages to customers to promote products, services, or special offers. Marketers pay for each message sent in order to achieve the desired actions taken by recipients.
This channel is fully scalable. Marketers can build out a first-party data list, and use this to connect with their customers directly to their inboxes.
This may surprise some people, but treating your website as a performance marketing channel is of the utmost importance.
Consumers trust brand websites and turn to them for information on the brand. In fact, the most poignant driver of brand perception is your brand’s website (46%) followed by brand-owned channels (27%).
They’re a fully scalable performance marketing channel. The process goes like this:
Drive traffic to your website > Identify anonymous website visitors with a customer identification network > Capture first-party data such as email and phone number > Send one-to-one messages to these high-intent users > Users complete a purchase, driving revenue for your brand > Repeat!
Performance marketing best practices
Set realistic goals and expectations
While you want to see strong results, ensure that what you’re aiming for is achievable based on industry benchmarks and past performance.
Ensure that your expectations align with the capabilities of your chosen performance marketing channels and your available resources. For example, the industry benchmark for ads viewability is 61%, while WunderKIND ads achieve an average of 79% for clients. Choose wisely!
A/B test to optimize conversion rates
Don’t just let your campaign run and leave it be. Monitor what audiences are responding to, what they don’t like, and what’s resonating—you may find some real gold dust.
Experiment with different variations of your ads, landing pages, and CTAs to identify what resonates most with your audience. Continuously optimize your campaigns based on data-driven insights to improve conversion rates.
For example, you may test one ad by including a location tag that helps users find local stores where they can make an in-store purchase, while another ad may lead directly to a checkout page with home delivery. Which one works best?
Allocate budget wisely
Allocate your budget strategically, focusing on the channels and campaigns that yield the strongest ROI. Continuously track and analyze your ROAS to ensure that your marketing efforts are generating positive returns.
When monitoring your ROAS, look for which campaigns are seeing the highest returns and across which channels. Identify optimal pairings, then see what’s continuing to perform over time, and consider whether this can be scaled or repeated on other channels.
3 successful performance marketing examples
Display marketing: Popeye’s high-impact ads
One example is this Popeyes’ ad, which drives conversions by helping users locate the nearest Popeyes restaurant to the user. The ad drives both brand awareness and conversion—a great strategy to get the most out of your performance marketing.
Email marketing: Too Faced’s ‘20% off’ campaign
Too Faced’s performance marketing email offers customers 20% off, free shipping on orders over $100, and buy-now-pay-later options. This email could be triggered after a customer browsed Too Faced’s mascara but bounced without purchasing, or after a certain period of time has passed (say three months) and it’s time to restock. Emails like these can also be used as an excellent post-conversion marketing tactic to encourage repeat purchases and loyalty.
Text message marketing: Weezie’s abandoned cart text
Nearly 88% of online shopping carts are abandoned, so targeting your customer after that initial browsing session is invaluable. In fact, using hyper-personalized marketing techniques can help you regain 3-14% of lost sales. Wunderkind client Weezie—a home accessories company offering monogrammed towels and robes—opted to treat customers who abandoned their cart to a further $15 off when returning to complete their purchase. The company used first-party data to send a follow-up text message with a discount code and close the deal, instead of potentially leaving revenue on the table.
Your performance marketing superpower? Your website.
Performance marketing gives businesses a results-oriented approach, ensuring that every marketing dollar spent delivers measurable outcomes. By understanding the fundamentals, exploring different channels, implementing best practices, and continuously measuring and optimizing campaigns, you can harness the power of performance marketing to drive growth and achieve your goals.
But if you want to know your secret performance marketing superpower, then you need look no further than your own website. Your website is a prime opportunity to capture first-party data and build your own performance marketing channel.
Whichever performance marketing channels you choose to invest in, ensure you always lead the customer back to your site to convert. Build lists by identifying website visitors and collecting first-party data to send them tailored messages through email, text, and ads—whether that’s to foster loyalty or encourage a first-time purchase.
Want to take your performance marketing to the next level with Wunderkind? Download the Marketer’s Guide to the New Performance Marketing Era.