What is Performance Based Marketing: Definition, Benefits, & Strategy

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    Marketing has become more versatile and data-centric since the introduction of digital media. A 2018 report by Performance Marketing Association revealed that the industry was worth over $6 billion. The digital ad spend will likely exceed $600 billion by the end of 2022, and 1/3rd of that budget is dedicated to social media marketing. Hence, performance based campaigns are incredibly popular right now.

    Performance marketing is often used synonymously with digital marketing because the platforms for the latter provide measurement metrics for the former. However, not all digital marketing campaigns fulfill the criteria to qualify as performance based campaigns. 

    This blog will briefly describe performance based marketing and share the essentials of designing an effective campaign. Additionally, we explain why this method is beneficial.

    What is Performance Based Marketing?

    Performance based marketing is a strategic approach where businesses pay for specific outcomes or actions achieved as a result of their digital marketing efforts, rather than for the mere exposure or delivery of advertising content. Unlike traditional marketing models where payment is based on ad placement or impressions, performance marketing focuses on measurable results that directly contribute to the business objectives.

    In this model, advertisers establish clear goals or objectives for their campaigns, such as increasing website traffic, generating leads, driving sales, or enhancing brand awareness. Payment to the advertising platform or publisher is contingent upon the achievement of these predefined objectives.

    For instance, if a company aims to boost website traffic, they would only pay for the actual clicks or visits to their website generated by the ad campaign, rather than paying a flat fee for ad space regardless of the traffic generated. Similarly, if the goal is to generate leads, payment may be based on the number of leads acquired through the campaign, such as form submissions or sign-ups.

    The key principle of performance marketing is accountability. Advertisers are held accountable for the effectiveness of their campaigns in delivering tangible results, and payment is directly tied to the performance of the campaign in meeting the established goals.

    This approach shifts the focus from merely reaching a target audience to driving desired actions or conversions, ensuring that marketing budgets are allocated more efficiently and effectively. By paying only for the desired outcomes, advertisers can maximize their return on investment (ROI) and achieve greater transparency and control over their marketing spend.

    Performance marketing encompasses a range of pricing models, including:

    Pay-Per-Click (PPC): Advertisers pay a fee each time a user clicks on their ad, typically used in search engine advertising and paid search campaigns.

    Cost-Per-Acquisition (CPA) or Cost-Per-Action (CPA): Advertisers pay only when a specific action is completed, such as a purchase, form submission, or app download.

    Cost-Per-Lead (CPL): Advertisers pay for each qualified lead generated through the campaign, based on predefined criteria for lead quality.

    Cost-Per-Sale (CPS) or Revenue Share: Advertisers pay a percentage of the revenue generated from sales resulting from the campaign.

    Cost-Per-View (CPV) or Cost-Per-Impression (CPI): Advertisers pay for each view or impression of their ad, commonly used in video advertising or display advertising campaigns.

    Overall, performance marketing offers advertisers greater flexibility, control, and accountability in achieving their marketing objectives, making it a preferred choice for businesses looking to optimize their advertising investments and drive measurable results.

    How to Create Performance Marketing Campaigns?

    Creating performance campaigns requires knowing about the digital advertising tools available for your usage. Additionally, you will need to incorporate specific details when structuring the performance marketing strategy to increase your chances of success. 

    Let’s dive into the core steps you need to take to create performance marketing campaigns:

    1. Define Campaign Goals

    Performance marketing focuses on specific business objectives. Adding a little of everything will make the campaign ineffective, and you’ll lose your money. Hence, you need to define a campaign goal or objective. 

    This goal will help your strategists find a direction for the campaign and performance marketing strategy. Following are some examples of objectives:

    • Website Traffic
    • Brand Awareness
    • Sales
    • Lead Generation
    • Customer Engagement

    Each of the mentioned objectives has corresponding KPIs that will help you measure the results of the performance based campaign. Sometimes, the purpose is self-evident. For example, a newly launched brand should ideally run awareness campaigns followed by website traffic and lead generation campaigns.

    A brand struggling with revenue generation can offer discounts and run sales and lead generation campaigns. Focusing on improving customer relationships will result in customer engagement campaigns to increase consumer interaction with your brand.

    2. Identify Performance Measurement Metrics

    Defining performance metrics or KPIs is just as important as objectives because they help measure performance marketing campaign success. Firstly, each of your goals has an associated KPI. Website traffic is measured with CPC, sales with CPA, awareness with reach, etc.

    Hence, review the objectives and decide the relevant KPIs accordingly. Remember that achieving planned KPIs will require creating a sustainable strategy, related, relevant, and practical content, and more. So, you will need to adjust other factors for maximum productivity to make the strategy work.

    Here’s a detailed exploration of the process of identifying performance measurement metrics:

    1. Align Metrics with Campaign Objectives: The first step in identifying performance measurement metrics is to align them with your campaign objectives. Each campaign objective should have corresponding KPIs that directly reflect progress toward achieving that objective. For example, if your goal is to increase website traffic, relevant KPIs may include click-through rate (CTR), cost per click (CPC), and total visits to your website. By ensuring alignment between objectives and metrics, you can accurately measure performance marketing success of your campaign.

    2. Select Relevant KPIs: Once you’ve established your campaign objectives, the next step is to select the most relevant KPIs for measuring performance. This involves carefully considering the specific goals of your campaign and choosing metrics that provide meaningful insights into progress toward those goals. For example, if your objective is to drive sales, relevant KPIs may include conversion rate, cost per acquisition (CPA), and return on ad spend (ROAS). By selecting KPIs that directly relate to your campaign objectives, you can focus your efforts on tracking the metrics that matter most.

    3. Consider Industry Benchmarks: In addition to aligning metrics with campaign objectives, it’s essential to consider industry benchmarks when selecting KPIs. Benchmarking allows you to compare your performance against industry standards and identify areas for improvement. For example, if the average conversion rate for your industry is 2%, setting a target conversion rate of 3% for your campaign may be realistic and achievable. By benchmarking your performance against industry standards, you can set realistic goals and track your progress more effectively.

    4. Review and Adjust KPIs as Needed: As your campaign progresses, it’s essential to review your chosen KPIs regularly and adjust them as needed based on evolving business objectives and market conditions. This may involve adding new metrics, removing irrelevant ones, or modifying existing KPIs to better align with changing campaign goals. By staying flexible and responsive to changes, you can ensure that your performance measurement metrics remain relevant and meaningful throughout the duration of your campaign.

    5. Ensure Data Accuracy and Consistency: Finally, it’s crucial to ensure the accuracy and consistency of the data used to measure your chosen KPIs. This may involve implementing tracking pixels, setting up conversion tracking, and integrating data from various sources to provide a comprehensive view of campaign performance. By using reliable data sources and maintaining consistency in measurement methods, you can trust the validity of your performance measurement metrics and make data-driven decisions with confidence.

    Identifying performance measurement metrics is a critical step in developing a successful performance marketing campaign. By aligning metrics with campaign objectives, selecting relevant KPIs, considering industry benchmarks, reviewing and adjusting KPIs as needed, and ensuring data accuracy and consistency, performance marketers can effectively measure campaign performance and optimize their strategies for success.

    3. Shortlist the Required Digital Marketing Channels

    Digital media has several channels for you to choose from, and you need to pick the most relevant ones for your brand marketing. This knowledge will require an audience analysis to see where your customers are. YouTube, Facebook, Instagram, and TikTok are among the most popular social media applications.

    most used social media platforms 2022

    However, you need to check which platforms your audience prefers the most and choose them for performance based advertising. Search engine marketing should always be a part of your strategy because it is always relevant and necessary.

    Prioritize Top Performance Marketing Channels with High Engagement

    Focus on marketing channels that offer high engagement rates and interaction opportunities with your target audience. Look for platforms where users actively participate, share content, and engage with brands. Channels that foster two-way communication, such as social media platforms and interactive websites, can be particularly effective for driving engagement and building meaningful relationships with customers.

    Consider Multi-Channel Approach

    In many cases, a multi-channel marketing approach yields the best results by diversifying your reach and maximizing exposure across various touch points. Instead of relying solely on one or two channels, consider incorporating a mix of channels that complement each other and offer diverse opportunities for audience engagement.

    For example, you might combine social media advertising with email marketing, content marketing, influencer partnerships, and search engine optimization (SEO) to create a comprehensive marketing strategy that reaches audiences at different stages of the customer’s journey.

    Leverage Data and Analytics

    Make data-driven decisions when shortlisting marketing channels by leveraging insights from analytics tools and performance metrics. Monitor the effectiveness of past campaigns, track key performance indicators (KPIs), and analyze audience engagement data to identify which performance marketing channel has yielded the best results and where there is room for improvement. By continuously monitoring and optimizing your marketing efforts based on data-driven insights, you can refine your channel selection and maximize the impact of your performance-based marketing campaigns.

    4. Develop a Performance Marketing Campaign Strategy

    Once you have decided on the basics, you need to move on to designing the strategy. You can choose to distribute the campaign into phases or launch everything together. This step will also involve creating the content strategy for your campaign.

    Remember that the platforms have unique user interfaces, native content dimensions, and formats. Hence, you will need to create a big idea that will act as the communication umbrella. Under this umbrella will be the marketing and content strategy for each platform.

    Videos tend to have the highest engagement, but you can always review your insights and decide accordingly.

    5. Create a Media Buying Strategy

    Your digital media strategy has two aspects: the general marketing strategy and the media buying strategy. The media buying strategy determines the spending strategy on the search engines and social media ads to push the communication to the target audience.

    performance based marketing: what is a media plan


    The media buying strategy for performance based campaigns includes the following factors:

    • Ad frequency per viewer per day
    • Ad space
    • Channels for running the ads
    • Time for the primary push of content
    • Budget allocation for each channel

    The more synchronized the media strategy is with the general marketing strategy, the better the results.

    6. Actively Manage Your Social Media Marketing Profiles

    Social media management is part of your performance marketing campaigns and is critical to your campaign performance. Your social media management team will need to monitor each channel and observe the conversations happening. 

    They will need to use the brand’s voice to thank customers, interact with them, try resolving potential disputes, etc. This responsibility is especially relevant during campaign launches or focuses on engagement. Someone will always find an aspect to complain about, and your team will need to manage the negativity.

    7. Track Your Performance Marketing KPIs

    Lastly, tracking your KPIs allows you to have a clear picture of how your campaigns are performing and calculate your ROI. It doesn’t have to be done on complicated excel sheets. You can use a data analytics platform to help you automate your reporting and create dashboards for you or your customers.

    ecommerce ads performance dashboard

    See the live dashboard here

    Performance Marketing Benefits

    Performance marketing has gained significant traction in the marketing landscape due to its ability to deliver tangible results and drive meaningful outcomes for businesses.

    Here are some key benefits that make performance marketing a preferred choice for marketers:

    1. Objective Driven and Measurable

    This marketing method follows specific objectives and targets measurable deliverables. Website visitors, conversions, reach, and engagement are all measurable values and make it easier to determine if the campaign was successful or not. These features also make it transparent, which is a bonus.   

    2. ROI-Centric

    The general format of performance marketing makes it very ROI-centric. The data involvement means clients check how much value they gained per dollar spent.

    ready to use marketing dashboard pack banner

    Additionally, each platform mentions best practices, so one can usually tell why a particular ad could not meet its expected target. Hence, you’ll know what to correct.

    3. Provides Valuable Marketing Insights

    The best part about all data-centric marketing models is that they provide actionable insights. You’ll have exact data about consumer behavior against the money spent on ads, allowing you to get insights into ad performance.

    These insights are precious. For example,  they allow you to see how many viewers saw the complete video and how many dropped in the middle. Overall, these insights can provide more information about consumer preference, and you can use them to improve targeting next time.

    4. Gain Competitive Advantage

    Lastly, performance marketing is a source of competitive advantage. Most paid advertising campaigns help you outperform competitors, especially paid search ads. They will place your content on the first page, allowing viewers to see it before they check the remaining links.

    Take Your Marketing Efforts to New Heights

    Performance marketing is the ideal model for brands that want a more data-centric and objective-driven approach to marketing. Performance based campaigns allow you to narrow down your communication to achieve a targeted goal and leverage paid ads to facilitate the strategy.

    ClicData offers advanced solutions for BI and will be happy to help you achieve your goals. Please contact our team to learn more about our products and services.