PERFORMANCE MARKETING - DEFINITION, ADVANTAGES, METRICS
WHAT IS PERFORMANCE MARKETINGPerformance marketing
is a form of marketing that focuses on achieving specific performance metrics (such as sales, registered users, conversions, etc.) and is measured based on concrete results or user actions. In this approach, it is crucial for advertisers to pay only for the achieved results.
Performance marketing emerged in response to the growth of digital technologies and the Internet in marketing, which enabled the measurement and analysis of campaign results in near real-time. Traditional marketing methods, such as print or television advertising, often lacked accurate measurement of results and campaign effectiveness.
Tools such as website analytics, conversion tracking, and affiliate marketing emerged, allowing advertisers to pay only for desired results. Performance marketing enables advertisers to effectively utilize their budgets, relying on accurate data about campaign performance. They can also adjust their strategies and tactics in real-time to achieve better results. The main advantages of Performance marketing include increased marketing cost efficiency, reduced risk, and improved relationships between advertisers and ad space owners.
The difference between Performance marketing and traditional marketing
lies in the approach to measuring results and the payment models for advertising services. Here are some key differences:
- Measurement of results. Traditional marketing struggles to accurately measure the effectiveness of advertising campaigns. For example, in the case of print or television ads, it is difficult to determine how many people were interested in or purchased a product after seeing the ad. Performance marketing relies on precise data about conversions, sales, registrations, and other metrics to evaluate campaign performance.
- Payment for results. In traditional marketing, advertisers typically pay for ad space or time regardless of whether it leads to desired results. In Performance marketing, payment is made for achieved results, such as conversions, sales, or registered users. This allows advertisers to control their spending and ensure better utilization of their marketing budget.
- Tracking and analytics. Performance marketing places a strong emphasis on tracking and analyzing campaign results. Thanks to digital tools, advertisers can measure and analyze performance indicators in real-time. Traditional marketing often has limited capabilities for precise tracking and result analysis.
- Flexibility and optimization. Performance marketing allows advertisers to change their strategies and tactics in real-time, optimizing campaigns to achieve better results. Traditional marketing usually requires significant effort and time to make changes and improve advertising strategies.
In general, Performance marketing is focused on achieving specific results and payment based on those results, while traditional marketing employs more general methods and payment models for advertising services.KEY METRICS
Performance marketing utilizes various metrics to measure and evaluate the results of marketing programs
. The key metrics used include:
- Conversions: This metric measures the number of users who have performed a desired action, such as making a purchase, filling out a form, downloading an app, etc. Conversions can be measured based on different actions, depending on the campaign's objectives.
- Return on Investment (ROI): This metric evaluates the effectiveness of advertising expenses by measuring the profit generated from the advertising campaign relative to the costs incurred. It allows advertisers to assess how effectively they are spending their money on advertising.
- Average Revenue Per User (ARPU): This metric measures the average revenue generated from a single user. It helps understand the value of users who visit a website or make purchases through advertising campaigns.
- Cost Per Action (CPA): This metric measures the cost that advertisers pay for a specific action, such as a click, download, phone call, purchase, or registration. CPA helps determine the efficiency of expenses in achieving specific results.
- Cost Per Thousand Impressions (CPM): This metric measures the cost that advertisers pay for 1,000 views of an advertising material. It is particularly used in the context of impression-based advertising and helps determine the cost of reaching an audience.
- Conversion Rate (CR): This metric measures the ratio of conversions to visitors or views. The conversion rate provides insights into the effectiveness of a campaign in converting potential customers into actual buyers or participants.
These metrics are not an exhaustive list and are used depending on specific goals and strategies of an advertising campaign. It is important to choose metrics that align with business objectives and help measure campaign success.
Performance marketing is often confused with digital marketing. Performance marketing and digital marketing are two different but interconnected concepts.
Digital marketing encompasses the use of digital communication channels such as the Internet, social media, mobile devices, etc., to promote products or services. It includes a wide range of strategies and tactics such as content marketing, email marketing, social media, paid advertising campaigns, and more.
On the other hand, performance marketing is a specific subset of digital marketing that focuses on achieving specific results and measures the effectiveness of advertising campaigns based on specific metrics. The core idea of performance marketing is to pay for results, such as conversions or purchases, rather than traditional payment for ad placement.
Therefore, performance marketing is one strategy that can be used within the framework of digital marketing. It has gained popularity due to the increasing availability of data and analytical tools, which allows advertisers to more accurately measure the results of their campaigns and optimize them for better outcomes.
In summary, digital marketing is a broader concept that encompasses all types of marketing that utilize digital channels, while performance marketing is a specific branch of digital marketing that focuses on achieving metric-driven results and payment for performance.
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