What Is Performance Marketing: How it Works, Channels, and Benefits

Performance Marketing
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Digital Marketing is often used as an umbrella term, but in reality, Digital Marketing has many subtypes, and the features and advantages offered by each type are immense. One of the subtypes of Digital Marketing that is commonly overlooked is “Performance Marketing.”

What is Performance Marketing

Performance marketing refers to an online marketing campaign where advertisers pay marketing companies or advertising platforms based on the results achieved, such as clicks or conversions. It is perfect for organizations that want to reach out to their audience on a large scale because the payment is dependent on the users interacting with the content or advertisement.

How does Performance Marketing Work?

In this type of Digital Marketing, the advertisers put up their ads on any channel, be it social media, search engines, videos, etc., and then pay the channel based on the ad’s performance. Some of the ways of payment are:

1. Cost Per Click (CPC)

In this payment method, advertisers pay depending on the number of clicks that their ad gets. It is a perfect way to redirect traffic to the website of the advertiser.

2. Cost Per Impression (CPM)

Impressions refer to a ‘view’ of the advertisement. In this type of payment method, payment is made based on how many people saw the ad.

3. Cost Per Sales (CPS)

In CPS, payment is only made  if the advertisement leads to the sale of a product,

4. Cost Per Leads (CPL)

Like cost per sale, CPL means that the payment is made if someone is redirected to the website by the advertisement and then signs up for something like an email newsletter. It generates leads that can be used to follow up with customers

5. Cost Per Acquisition (CPA)

Cost per acquisition is an umbrella term used for payment methods like CPL or CPS. This payment scheme is made if the customer does a specific pre-determined action; this can be buying a product, signing up for an email newsletter, or simply visiting the website.

Performance Marketing Channels

Various types of performance marketing channels exist that agencies and advertisers use to drive traffic to their websites:

1. Banner (Display) Ads

These advertisements appear on the side of a social media newsfeed or at the top or bottom of that news web page. Even though the increasing popularity of ad blockers is causing Banner Ads to lose their appeal and effectiveness, many companies are still finding success with display ads that utilize interactive content, videos, and engaging graphic design. 

2. Native Advertising 

Native advertising refers to using the natural appearance of a web page or site to promote any sponsored content. One typical example is the appearance of sponsored videos in the “Watch Next” section of a YouTube page. Ecommerce sites also have a lot of Native Advertising interwoven in them — for example, the Facebook Marketplace. One of the most vital features of native advertising is that it allows the sponsored content to blend in seamlessly with other organic content. This kind of marketing makes the brand look more natural because more times than often, users won’t be able to differentiate between these kinds of content.

3. Content Marketing 

Content marketing‘s primary purpose is to make the audience aware. The main focus of this type of Digital Marketing is on providing helpful information to users and putting the brand in context. For example, a series of informative blog posts written by a vitamin company about the benefits of probiotics links back to the probiotics they sell themselves. Content marketing is a channel inclusive of blog posts, case studies, e-books, and more.

4. Social Media 

Social Media is of great importance to performance marketers. Not only does it offer the opportunity to reach users and drive them to the website — but the sponsored content can also be shared organically by users, extending the reach far beyond the original post. Even though Facebook provides the most extensive list of services for performance marketers, other platforms like LinkedIn, Instagram, and Twitter offer many opportunities to reach new customers.

Benefits of Performance Marketing

The main advantage of performance marketing channels is that they can help you scale your advertising efforts to meet your company’s needs without costing you a fortune since it is based on performance. Performance marketing is a creative and effective way to capture valuable data and diversify the audience and expand the reach, all at the same time. All in all, it is one of the most effective and proven ways to grow a business.

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