Marketing is continuously managed based on results.
All you need to know about Performance Marketing
1. What is performance marketing?
A beloved child has many names. What some call paid advertising, performance-based marketing, digital advertising, online marketing, or native advertising, we can also call performance marketing. The key points are internet ads and the best possible return on invested marketing dollars.
At Markedspartner, we have defined the term as follows:
Performance marketing is a form of digital advertising where you only pay when measurable results are achieved, such as clicks, form completions, orders, sign-ups, or purchases.
2. The Key Tasks of Performance Marketing
We define performance marketing to cover the following four tasks:
1. Results-Driven Activities
2. Strategic Segmentation
We have a clear goal regarding which target groups we want to reach.
3. Ongoing Optimization
All elements are tested and prioritized based on results: Ads, segmentation, placement, and landing pages.
4. Flexible budget frameworks
Within a total budget, we have flexible budget frameworks across activities, which are managed based on profitability/ROAS (Return on ad spend).
Digital advertising has become increasingly results-oriented, transitioning from a pure branding exercise to an initiative undertaken with the expectation of achieving tangible results, usually in the form of sales, leads, or customer inquiries. Traditionally, it has been common to pay publishers and ad platforms based on the number of views of your display ads. This is known as a CPM pricing model (Cost Per Mille), where the ad price is stated as the cost per thousand views.
Example calculation: 100,000 views at a price of 80 CPM costs 8,000 kroner.
All the provider commits to is showing your ad for the number of thousand views you have ordered. This is still a widely used pricing model, and with conversion tracking (attribution), you can still measure the performance of the ad campaign.
3. Five types of results with performance marketing
Here are the five most common types of outcomes often mentioned in performance marketing:
1. CPM (Cost-per-Mille)
It is a pricing model based on the number of times your ad is displayed. The price is given per thousand impressions, for example, CPM = NOK 50. Retargeting through banner advertising in online newspapers is often priced on CPM, and we have all noticed this after visiting a product page in an online store. You are often followed up with advertising. A good tip: Remember that you can usually control how many times an ad is shown to the same person in the target audience.
2. CPC (Cost-per-Click)
These are online ads where you pay for each click your ad receives. Google Ads (the ads you see at the top of the search results when you google) are very often based on CPC. The price per click will vary depending on the competition for the keyword you want to be visible on, as well as the quality of your ad and the homepage/landing page you link to.
3. CPL (Cost-per-Lead)
It is a pricing model where the provider charges for the number of specific inquiries from potential customers (leads) that the advertisement generates. To set a realistic price, one must first calculate what a new customer is worth (on average). Your sales department can also assist by indicating how many leads they need to make a sale. If a new customer is worth NOK 100,000 and sales typically close 1 out of 4, a lead would be worth NOK 25,000. This will then be the basis for negotiating a price both parties are comfortable with. Note: You must also agree on the criteria for what constitutes a lead, and more importantly, what a qualified lead is.
4. CPA (Cost-per-Action)
Is online advertising priced based on a specific action, usually a sale. The provider of the advertising product charges when there is a documented sale. This is a common model that can be optimized through Google Ads, social media advertising, programmatic media buying, or simply put − all digital advertising where the system used allows for the implementation of a tracking script for the desired actions taken on, for example, your website. It is also used in so-called affiliate marketing, which is based on the advertiser paying a commission to online newspapers, blogs, and websites that promote them through banner ads, text links, or entire articles.
5. ROAS (Return on Ad Spend)
Measures how much revenue you generate per advertising dollar you spend. When calculating ROAS, the formula often used is: Revenue/Advertising Costs = ROAS. This means that ROAS gives you a ratio between what you earned and the money spent on marketing. This model provides a good approach for evaluating which channels, methods, and ads work best in your campaigns. Remember that you need to decide whether to include attribution in the evaluation of the channels, among other things, so that you have a conscious understanding of the factors for both costs and the revenue generated by the advertising.
Here is a concrete example of how to calculate ROAS:
You spend 25,000 NOK on a digital advertising campaign in one month. During the month, you achieve direct revenue of 120,000 NOK. Your Return on Ad Spend will then be 4.8 to 1 (or 480 percent), as 120,000 NOK divided by 25,000 NOK = 4.8.
For every krone spent on advertising, 4.8 kroner in revenue is generated.
4. Why is Performance Marketing important?
A metaphor we often use in performance marketing is the gas pedal.
A gas pedal is a mechanical lever you press when you need to increase speed. At times, there may be enough traffic to your websites, and you can reach your goals without buying ads. But when you see that traffic and lead numbers fall below the dotted goal line, performance marketing will be the gas pedal that gets you back on track.
As marketers, we rely on reaching the market with our message. Few companies have a steady stream of free, qualified traffic to their websites and need to go out and buy attention to achieve their conversion goals (e.g., leads, sales, etc.). Then, performance marketing is a useful tool to have in the marketer's toolbox.
5. Benefits of performance marketing
Some of the most obvious advantages of performance marketing are:
- Easy to measure the effect
- Low risk
- ROI focus
Since performance marketing is partially measurable, it is easier to calculate an investment and the return/ROI (Return On Investment) it provides. Since you pay per completed action, there is no minimum threshold for a campaign on most platforms. This means low risk and the opportunity to test concepts on a smaller audience, at a lower cost, before expanding further.
6. Which advertising channels are the most popular for performance marketing?
Performance marketing is primarily purchased from three sources:
Search engines (Google, Bing)
Social media (Facebook, LinkedIn, Instagram, etc.)
Online newspapers and portals (vg.no, aftenposten.no, tu.no, dn.no, etc.)
Facebook Lead Ads is an example of a performance channel where you pay Facebook a price per lead generated from your ads. For instance, if your business has produced and published a lot of quality content without seeing significant results, more content may not necessarily be the answer.
7. How to approach working with performance marketing?
Simply put, one can say that there are at least three steps in working with performance marketing campaigns:
1. Set goals for the campaign
The goal should be quantifiable and reportable. Typical goals include traffic, return visits, engagement, lead generation, sales. Ensure that you link the campaign goal to the company's overall business objectives.
2. Planning the execution
Identify potential channels for your advertising campaign and choose a platform. The criteria you should consider include the business goal you aim to support, target audience, budget, timeline, and message. Create multiple ad formats that you can A/B test. This will provide you with valuable insights for the next campaign and the opportunity to optimize during the campaign.
Also, agree internally on who in the team is responsible for what during the campaign period. There are various scenarios to consider: ongoing measurement, analysis, and reporting of results, optimization of the message, and creative design both for the ad and any landing page.
On the sales side, there must also be a contingency plan for following up on incoming leads, and similarly on the delivery side, to ensure quick dispatch of goods or services. It is also wise to inform the organization that the company has an ongoing campaign, so everyone is prepared for the response (which can come from anywhere), and everyone gains an understanding of the marketing processes and ownership of what the company does and says in the market.
3. Execution
Når kampanjen er i gang må alle være på post. Du gjennomfører ikke en kampanje når nøkkelpersoner avspaserer eller har ferie. Dette er spesielt viktig dersom du planlegger et massivt medietrykk over kort tid (eks. en uke). For always-on-kampanjer som går over en måned eller mer, har du muligheten til å pause kampanjen for å gjøre endringer – en luksus du ikke har om du skal markedsføre et event som skjer uken etterpå eller en produktlansering som har en spesifikk dato.
8. Performance marketing as part of your digital marketing strategy
It is important to think holistically when working with digital marketing. We work closely with top management, sales, and marketing departments of our clients to put together a strategy that includes the best measures based on cost-benefit, and that is also mutually reinforcing and value-building over time.
Even though we are experts in inbound marketing and sales, we also have expertise in most disciplines within digital marketing, and would advise any leader and marketer to keep multiple thoughts in mind simultaneously.
9. Key takeaways about performance marketing
If we are to add some important concluding words about performance marketing, they must be the following three things:
Do not settle for measuring the effect in the channel you are advertising in, whether it is Facebook, online newspapers, LinkedIn, or Google. Experiment with advertising in other channels and gather a data foundation so you can compare them. This will likely give you aha moments and help you prioritize differently and get better returns from your digital marketing.
Measure the effect of the overall channel mix through attribution modeling. Even though, for example, programmatic display ads cannot be directly credited to many sales, they often prove to be an important contributor to an effective media mix.
Also remember that channel selection, ad design, and messaging are one side of the matter. They ensure that the potential customer is sent to your website. From there, however, you must make the sale yourself − and this requires that your unique landing page and the rest of the content on your homepage do the job.