Digital marketing has undergone many evolutions in the last decade, continually innovating and improving to find better ways to reach target audiences. Now performance marketing is becoming increasingly popular with businesses, as a way to ensure the success of marketing delivery.
Why performance marketing can be worthwhile investment
Performance marketing is a strategy in marketing that can be between a client and a marketing agency, or be utilised in-house. The strategy creates a direct relationship between the performance of a marketing campaign and the outcomes it delivers. This creates an opportunity to build a relationship based on trust between a client and an agency, or between teams within a company.
What this means is that rather than a company or in-house team creating a campaign with goals it hopes it will achieve, it sets clear pre-campaign objectives which the performance can be measured against as the campaign progresses. This means that a relationship between marketing activities and the results it produces can be effectively quantified, thereby proving the return on investment of the activities.
How do you measure campaign success in a performance marketing context
Performance marketing requires using metrics to measure how a campaign is performing. These can vary depending on the situation and the marketing context, but the generalised term for these measurements is key performance indicators (KPIs). KPIs exist across the entire of marketing, but in the context of performance marketing, two primary KPIs are cost-per-lead (CPL) and cost-per-acquisition (CPA). This is because these two metrics show a direct relationship between the activity of an agency or in-house team and outcome delivery.
KPIs are essential to making sure that outcomes are delivered, but equally important is making sure KPIs are appropriate and realistic to probable outcomes. The way this can be achieved is through research prior to campaign activation, demonstrating how a campaign will work to meet or surpass a relevant industry benchmark. An industry benchmark is simply how well campaigns perform on average in the sector that the campaign will operate within, creating a point of comparison which marketing efforts can be contrasted against.
How to know what performance marketing strategy is right for you
A highly effective way of knowing which type of performance marketing strategy is right for your business, is by running pilot programmes with minimal capital investment. This is because it allows you to gain data sets which can then be analysed in post-campaign evaluations, meaning you can see what works in certain contexts. However, this cannot be taken as conclusive evidence, because as campaigns develop they can change and new patterns of consumer behaviour emerge affecting outcomes and their data representation. Alternatively, you could consider outsourcing to an agency which has established expertise.
Through post-campaign analysis and evaluation, it should become clear which strategies were most effective at delivering against predetermined KPIs. This can then inform future strategic decision-making, being factored into marketing activities within a particular industry or market context.
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