What Every Marketer Should Know About Performance Marketing

As the online advertising industry continues to grow, one crucial growth sector is often ignored: performance marketing. Comprising nearly 70% of the online advertising industry’s estimated $35 billion in annual advertiser spend, performance marketing is perhaps the most underrated and misunderstood media channel in all of advertising.

After more than a decade in existence, it suffers from a variety of misconceptions among senior marketing executives. These perception issues hold the industry back, just at a time when its prospects for growth couldn’t be greater.

It’s time for that to change. It’s time for digital marketers to understand the role of performance marketing and appreciate the value it can offer their brands.

As someone who has worked as an advertiser, affiliate, and network operator for more than 13 years, I bring to this discussion a realistic viewpoint of how performance marketing can benefit almost any advertiser.

Performance marketing basics
Performance marketing is the smartest online advertising investment. It’s no longer a “nice-to-have;” rather, it’s an essential part of any brand’s overall marketing strategy. Advertisers pay for performance, while affiliates, who are paid to deliver a specific action, promote the advertiser through various channels (for example, email, display, PPC, social media, etc.). Networks sit between the two sides, providing value in the form of tracking and technology, media planning, client support, and compliance.

Benefits of performance marketing
Performance marketing is entirely ROI-focused and results are 100% measurable. As such, the industry is incredibly lucrative and offers big gains for small investments. An initial investment of only $10,000 can deliver a strong performance marketing campaign in just one or two channels. Advertisers have access to multiple online marketing channels that provide a real return on investment. There’s also the opportunity to push campaigns to market faster than other types of offline or online marketing, and to the right price by media source or by source within each media channel.

Potential pitfalls
Like all types of marketing, there are potential pitfalls to initiating a performance marketing campaign. These include compromises to brand integrity, compliance-related issues (especially with media and regulatory rules), fraud, and placement transparency.

These problems are easy to avoid, however. There are dozens of tools available to help marketers thwart these problems, including ones that help monitor lead quality and compliance. Companies such as CPA Detective, LeadiD and LashBack offer a variety of compliance tools that any reputable performance marketing agency should use to protect its brand’s integrity.

Steps to success
Success for any marketer launching his or her first performance marketing campaign boils down to a five-step process:

Step 1: Define the goal. The desired outcome should either be a lead or a sale, which narrows the field of available and effective performance marketing channels.

Step 2: Choose the right affiliate network. Conduct due diligence before engaging an affiliate network by comparing areas such as tenure, financials, staffing, media channel, vertical expertise, technology, and services.

Step 3: Plan the media mix. Share budget, KPIs, demographic, and geolocation information with your performance marketing agency and/or affiliate network so they can provide a comprehensive online media plan for your campaigns with equal transparency.

Step 4: Monitor the campaign(s). Once launched, ensure the budget is being spent accordingly, brand guidelines are adhered to, and performance is tracked against plan.

Step 5: Optimize. ROI goals are achieved by optimizing each campaign source ROI by paying more for profitable sources to scale volume or paying less and/or cutting off unprofitable sources.

Testing a small performance marketing budget for immediate and measurable results, and on the agency’s own marketing spend, will ensure your first performance marketing campaign is both efficient and profitable. None of this is possible in traditional marketing campaigns.

Peter Klein is senior vice president of media services at performance marketing agency MediaWhiz, a Matomy Media Group company.

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