Performance Marketing Guide for Beginners: Definition, Types & Tactics

Digital technologies changed marketing as a whole. Customers migrated from traditional media consumption to consuming online media. Thus, marketers have been chasing their audiences in the hopes of profitably engaging them. However, most marketing and advertising schemes require marketers to pay for placement at the onset of campaigns. It is almost like a “bet” on which channels and tactics would have the best ROI. Some marketers find this a bit problematic. As a result, they opt for performance marketing initiatives.

Put simply, this type of marketing pays for quantified performance by ad merchants and publishers. In essence, marketers pay for conversion and desired results only in this setup. This is a pretty enticing scheme especially for those who are quite risk-aversed. Moreover, these are easily managed by marketing automation programs.

So, in this article, we will discuss this very interesting scheme and how you can incorporate it into your business strategy.

2,300 performance marketers in the US and UK reported a combined annual sales of $16.6 billion in 2018. They attributed this more or less to adopting performance-based marketing. During their campaigns, marketers allotted around 62% of brand and enterprise marketing budget towards performance marketing. Also, about 18% of respondents stated that 100% of their budgets went straight to a performance scheme.

This shows that performance marketing is going more mainstream these days. 31% of performance marketers work for marketing platforms, 25% work for agencies (the same with brands), and 16% work for networks. So it’s not surprising that experts predict that performance marketing will grow at a 10% CAGR by 2020.

However, performance marketing is a relatively new term that kind of branched out from the more popular “affiliate marketing” moniker. This causes a bit of confusion, especially for beginners. Thus, in the next few sections, we will clear up some conceptual thickets and explore what performance marketing is today.

What is Performance Marketing?

So, what is performance marketing? The Performance Marketing Association’s (PMA) official performance marketing definition is:

“Performance marketing is a comprehensive term that refers to online marketing and advertising programs which advertisers (a.k.a “retailers” or “merchants”) pay marketing companies (a.k.a. “affiliates” or “publishers”) when a specific action is completed; such as a sale, lead or click.”

This might be one of the best definitions out there. However, the essence or ethos behind performance marketing is simply: “why should you pay for something that doesn’t work?” and “why pay before seeing conversions?”.

In performance marketing schemes, marketers only pay when an affiliate’s or a publisher’s efforts land them some key metric of conversion. On the other hand, conventional marketing schemes, publishers bill advertisers even way before they have shown acceptable performance. They bill advertisers upfront.

Why Choose Performance-Based Marketing? A Quick Answer.

This performance-based scheme drives affiliates or publishers to “work for their money” more instead of just passively placing ads on spaces (mostly automated). This scheme induces them to be more creative and engaging with their content. Also, this is the only way they can make money in the setup.

This helps ensure that merchants and retailers get bang for their buck. Moreover, this ensures that there is a competition amongst affiliates, publishers, influencers, and agencies. And, if you believe the free market dictum that healthy competition creates better products and services, the very discipline and practice of marketing will thus improve.

In a sense, performance marketing has turned the table. Performing publishers are now vying for affiliate deals instead of marketers fighting for top ad placements with no real end result in sight. Thus, if you are a marketer from the merchant’s side, this is good for you. On the other hand, if you are a marketer on the publisher’s side, then your work has been cut out for you. More on benefits later.

2. Performance Marketing vs. Affiliate Marketing

As mentioned, performance marketing has ties with affiliate marketing. In fact, it can be claimed that it sprouted out of the latter. However, performance marketing has grown to be a more comprehensive approach. Moreover, it is so comprehensive that it includes affiliate marketing.

But, what is affiliate marketing again? In this step-by-step guide to affiliate marketing, Neil Patel gives the following definition:

“Affiliate marketing is the process of spreading product creation and product marketing across different parties, where each party receives a share of the revenue according to their contribution.”

Yes, that’s a mouthful. However, it simply states that there are different parties–merchants and affiliates–share revenue in the creating and selling of products according to their contribution. It is a type of performance marketing executed mainly by websites and blogs. This is its main difference with the broader discipline of performance marketing where partners can be influencers or even agencies.

Furthermore, in affiliate marketing, both parties usually interact in affiliate networks that act as markets for affiliate programs. Merchants create the product. Affiliate marketers sell them for a share of the revenue on their sites. They interact on affiliate networks like ShareASale. A prime (pun intended) example of an affiliate program is Amazon Associates, offering up to 10% advertising fees.

Usually, affiliates get their own product links to help them and merchants track performance. Moreover, they use digital tools such as affiliate marketing platforms to accurately track efforts and get paid on time.

How Different is Performance Marketing from Affiliate Marketing?

Performance marketing is broader. It doesn’t just use affiliate networks but also employs a performance-driven scheme on other types of channels and techniques. What other techniques?

Well, in affiliate marketing, merchants have affiliate marketers promote their products and brand on their own websites. On the other hand, performance marketers do the same even for social media influencers. They implement a performance-based scheme to only reward results in most, if not all, of their marketing campaign channels. Also, a good example of this would be the placing of ads on podcasts where hosts plug their special affiliate links on “air”. This enables marketers and partners to track outcomes like sales, visits, engagements, and clicks.

Thus, performance marketing is just broader than affiliate marketing in this way. The approach includes affiliate marketing but it can also reward performance outside affiliate links per se as mentioned. Moreover, it is like rewarding partners a finder’s fee regardless of the platform they use. It is not just limited to affiliate sites or affiliates in general. It can be extended for other digital marketing metrics like website performance KPIs.

3. What is a Performance Campaign?

A performance marketing or advertising campaign is similar to other marketing campaigns in the way that you “get what you paid for” as Neil Patel has pointed out in his article explaining performance-based marketing. However, getting what you paid for in some contexts can somewhat be negative. But the best way of achieving this is through performance-based marketing. You simply pay for results!

If you do it yourself, you don’t pay for creating performance marketing tactics and strategies. That is extra savings. To wit, you can use these free marketing plan templates to come up with a strategic marketing plan. So, what’s a performance campaign?

First off, you have to remember that there is a difference between marketing and advertising. Advertising is part of marketing. It allows you to get your product known to your target customers. On the other hand, marketing is broader involving product creation and choosing which markets to engage. Thus, you should ask yourself whether you just want an advertising campaign to get your product out there or a marketing campaign that involves selling, and retaining customers.

Moreover, your performance marketing campaign should involve extra performance metrics not covered by advertising ones. It is not just limited to getting views and clicks–it should also cover the attainment of other desired outcomes like sales and engagement. So, in the next section, we will discuss the types of performance marketing and see which ones you can use for just advertising or marketing in general.

4. Types of Performance Marketing

One can actually just say that you can repurpose your conventional digital marketing arsenal into a performance-based one. That is largely true. But some aspects of it are truly performance-based right from the start. We’ll discuss these as well as some conventional ones that you can pivot into performance-driven setups.

Native Advertising

People hate ads. In fact, people hate them so much that 47% of consumers use adblockers. They are annoying, irrelevant, and very intrusive. They are bad for consumers (and marketers when they put on the consumer hat). However, this is, in general, bad for marketers in their jobs or businesses. Adblockers give them a hard time. Thus, many have found a way to circumvent this: native advertising.

Native advertising is not really that new. It has been around since mass media has been around. Marketers and public relations professionals always placed ads in TV shows and films.

The rationale behind native advertising is that your marketing or advertising message is passed on as part of organic content that audiences are interested in. Examples of native advertising include how-to videos or feature videos on YouTube that feature products organically.

Moreover, with native advertising, your performance partners or affiliates can always embed affiliate links or CTAs in their content. In this way, you can track the performance of said campaigns with them and pay accordingly.

Influencer Marketing

Marketers tap influencers to associate their brand with the good name of influencers for their peers and fans. Some marketers approach this with a traditional sponsorship approach where they pay upfront. Meanwhile, performance-based marketers would initially give out free products or services for them to try. However, they will stick to a performance-driven payment scheme for further results.

Many do this via traditional affiliate links. For example, you target an influencer that is also a podcaster. You give her an affiliate link that she mentions during her episodes for her fans to get discounts on your offering. In this way, you can track performance and pay accordingly based on solid results.

Moreover, you can do this with social media influencers. On social media sites, you can easily go for a cost per engagement campaign with them and easily track the series of posts. Simply add links for sign-ups and you get cost per lead. Furthermore, when you add an affiliate link, you get your cost per sale campaign as well. That said, influencer marketing can be very viable when executed properly.

Performance-Based Metrics

Experts suggest five common performance-based metrics that can help you guide a prospect’s journey to becoming a loyal customer. Also, each aligns with a step in the digital sales funnel. Here they are in the graphics below:

• Cost Per Impression – pay for every pageview where your ad is in place
• Cost Per Click – pay for every time your ad is clicked. Marketers use this to drive traffic to websites.
• Cost Per Engagement – pay for every time target customers engage with ads like taking surveys, playing a mini-game, etc. Marketers decide.
• Cost Per Lead – pay for sign-ups like in newsletters or subscriptions.
• Cost Per Sale – pay or share revenue for every sale made on a platform.

These are intrinsically performance-based digital marketing metrics. Some of them, of course, stay on the purely advertising side of the lane like cost per impressions. Others that go way down are part of the intersections between advertising and marketing really. However, all of these are important tools for performance-based marketers.

5. Performance Marketing Tactics and Strategies

In the previous section, we gave you an idea of the types of performance marketing. In this section, we’ll give you a hypothetical yet realistic situation where some performance marketing tactics and strategies are applied. So, let’s make up a scenario that is true to life.

First, let’s assume that the company we are talking about here is a website builder. Its products and services allow tech-averse users to create and design their own websites. Also, the websites are mobile-ready and optimized for search engine performance. Now, how would you go about creating a performance marketing campaign if you are the head marketer behind the product? Here’s our take (we based it from actual campaigns).

Case Scenario: Performance-Driven Marketing for a Website Builder

Let us assume that company X’s touchpoints are all digital. So, clients only get to reach their website and social media accounts. Thus, company X’s head marketer must funnel prospects into qualified leads and finally to all clients on the internet.

Firstly, the marketer should identify who their target customers are. This could be a profile of their past customers mixed in with new market research. After gathering relevant information, our marketer found out that it can segment its target market in this way: SMBs, freelance professionals, and NGOs.

Secondly, the marketer identifies where and how to reach out to its target market segments. So, he lists performance marketing techniques and channels.

• Affiliate Marketing Networks – These refer to websites and bloggers producing content for each target segments.
• Influencers and Podcast Marketing – These include podcasters and influencers whose content targets the same segments (and related demographics) that you do. Some examples of these are Twitter influencers and Content Creators on YouTube.
• Google Ads – This includes traditional performance-based marketing like cost per clicks, etc. on the popular search engine.
• Facebook Ads – This involves the same performance-based marketing like cost per clicks, etc. but only on Facebook.
• Coupons on Events and POS – This refers to distributing coupons to event organizers (with relevant events to target segments) with a revenue-sharing model using affiliate links.

Lastly, the marketer executes and tracks the performance of this marketing mix and pay accordingly to partners. Sounds simple? Well, it is simpler. Marketers don’t really have to do much creative work. They outsource it to their performance partners–the influencers, websites, and content creators.

A Note on Performance Partnerships

What the marketer is basically doing is partnering up with content creators for a revenue-sharing deal. Marketers for health/beauty/fitness products and even real website builders have partnered with podcast influencers for years now. As you may know, podcasts are very popular and influential. Hosts usually run organic ads or sometimes funny and engaging ads plugging partners and their affiliate links.

Experts consider the deal to be a partnership rather than a sponsorship. It is really a cost-per-action (CPA) model where both camps help each other attain revenue. The merchant camp finds ways to lower prices to get customers to try their products. The publisher camp finds interesting ways to drum up interest and sell these products.

It really doesn’t matter what technique you use (e.g. native advertising, etc.). The only point here is that it is performance-based. Also, both parties should perform and help each other. After all, as Acceleration Partners put it, a performance partnership is a revenue-sharing deal. It is a symbiotic relationship where both parties give and receive feedback to benefit one another.

6. What are the Benefits of Performance Marketing?

In the previous sections, we have discussed some benefits of performance marketing sparingly. Now, we’ll put them in one place and just briefly discuss them.

• Pay for performance (no or minimal upfront fees)
• Extends your advertising reach
• Diversifies your revenue channels
• Build lasting performance partnerships (something you can grow from)
• Risk sharing
• A big supply of interested partners
• Competition among publishers is strong

The Performance Marketing Association (PMA) said it right. One of the biggest benefits of performance marketing is that when you switch to it, you will have an “army of website publishers that will promote and market your brand, products, and services.” Moreover, many of these reach niche markets that are outside of your view many times. Also, these are not just websites but also social media personalities and other types of influencers. In this way, you don’t just reach new niches and markets. You also diversify your revenue stream without large upfront fees. Sure, you may need to give our products and services at the start. However, as the relationship continues, you only pay for their performance.

Also, you get to share the risks of putting out the campaign with these partners. You don’t have to mull over campaigns or advertising messages. They are already experts at what they’re evidenced by the audience based they acquired. Moreover, they compete with other content creators. They will try to innovate more to keep to their competitive advantages. So, there is virtually no downside to switching over to performance marketing. The only question now is how do you get started?

7. Performance Marketing: Getting Started

Firstly, you should look into the classic digital marketing platforms that are also performance-driven. One of the best platforms out there is Google Ads. You will find that there are many options for performance marketing like cost per impressions, cost per click, etc. Furthermore, you should also check out what Facebook Ads can help you out with. It’s essentially offers the same Google Ads features. The only difference is it’s created for Facebook.

Secondly, you should try good old affiliate marketing networks like ShareASale and Clickbank. In sites like those, you will find man partners that are willing to have a revenue-sharing relationship with you.

Thirdly, you should reach out to influencers on social media and even podcasters. You can identify them by using social media monitoring tools. In this way, you can determine needle movers in many different niches. Furthermore, these can help you in tracking your campaigns and performance. If you are interested in a comprehensive marketing platform, you can check out HubSpot Marketing features here. It comes highly recommended by our experts.

An example of a typical HubSpot Marketing dashboard.

You can easily sign up for HubSpot Marketing free trial here and get to know the features firsthand at no cost and without commitment. 

Lastly, you put all of these together and create a mix that is right for you. Of course, there is no single recipe. However, you can draw inspiration from the recent compilation of marketing data here.

Ready to be a Performance-Based Marketer?

We hope we’ve answered the question of “what is performance-driven marketing?” You can never go wrong with a performance-driven mindset. You certainly deserve to only pay for the results you want. This is true for consumer products to B2B ones. Also, if you switch to performance marketing, you’d get performance partners that work like in-house teams but you only have to pay for results. This is a good partnership to have in the digital age where tapping special niches on different parts of the internet can be challenging. With them, you will be able to reach even the most unreachable segments.

Also, it doesn’t hurt to learn what good performance partners do. If interested in how they do it, read about relevant inbound marketing facts here. After all, this article is but a rough guide to give you an idea of how to incorporate performance marketing in your own practice. Most marketers mix this with other types of organic marketing.

However, it is best to note that there are cons to performance marketing as well. One of which is when an ad agency or partner performs so well that merchants are better off with a retainer setup. There are many nuances and kinks in the game. Thus, marketers face the challenge of how to successfully mix this type of marketing setup with other known schemes that are also very effective.

Lastly, performance marketing is mostly an outlook or a scheme as mentioned. It is not a new type of doing marketing. Again, it is based on the idea and practice of rewarding people with finder’s fees. Thus, it takes wisdom and good judgment as to when and how you should implement this scheme.

By Jessica Stewart

Jessica Stewart is the resident marketing analyst at FinancesOnline and a pioneering member of our research team. She believes that data is at the center of business and marketing technology is its enabler, a point not lost in her articles published in major outlets such as BusinessInsider, USA Today and Entrepreneur. Beyond assessing the standard tools for workflow automation, campaigns, messaging, and real-time alerts, Jessica focuses on the software’s bottom-line ROI— how it helps marketers perfect their data-driven method to collect and process customer data, measure the KPIs, and, ultimately, realize profits.