Your 101 Guide to Performance Marketing - Digital Ratha
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Your 101 Guide to Performance Marketing

Are you looking for an affordable performance-based digital marketing company? We can help you maximise your marketing efforts and drive tangible results. Performance marketing, at its core, is a simple concept where you only pay for the aspect of the marketing that performs, be it in the form of ad clicks, lead generation, conversions, etc. While performance marketing is a term unheard of, it is much older and has been around since the mid-90, which began with Pay-per-click campaigns.

Performance marketing, at its core, is a simple concept where you only pay for the aspect of the marketing that performs, be it in the form of ad clicks, lead generation, conversions, etc. While performance marketing is a term unheard of, it is much older and has been around since the mid-90, which began with Pay-per-click campaigns.

The current hype of the performance marketing approach can be attributed to the advancement of digital technology and digital platforms and the possibility of gathering valuable data and insights such as traffic and campaign performance. This enables the marketers to access data to better access value and efforts, which are the core factors to the success of a company or brand.

In this blog, we will discuss, in length, everything that comes under the umbrella of performance marketing.

What is performance marketing?

According to the performance marketing association, “Performance Marketing is a comprehensive term that refers to online marketing and advertising programs in which advertisers and marketing companies are paid when a specific action is completed; such as a sale, lead or click.”

In traditional terms, digital marketers invest in marketing efforts that would return the desired action from target customers. This includes paying for the display ads to get more reach and generate leads, and CTAs, hoping to drive customers to your website and store. With performance marketing, brands pay only for the actual performance of the marketing partner and not just the effort in promoting the product or services.

Types of Performance Marketing

Performance marketing encompasses various types of marketing. Below we have narrowed down only the most important ones which are employed for performance marketing.

Affiliate Marketing: Affiliate marketing is a type of performance marketing where a brand is affiliated with advertisers and is paid out after the desired action takes place. In many cases, it involves partnering with coupon providers, eCommerce businesses, loyalty programs, and incentive sites which could involve working with influencers, YouTubers, and bloggers.

Native advertising: This is a form of paid media where the ads follow the natural form and function of the site they’re placed on, such as blog sites, news, and social sites. They fit natively on the page, which creates dynamic ads based on the user’s content viewing activity. The most common payment models for native ads are CPM and CPC.

Sponsored content: A form of native advertising and content marketing where content is curated in a natural tone of the websites that publish similar content but is actually sponsored. This form of the content blends in with the rest of the content but contains mentions and indications that a specific brand or product sponsors it.

Social media marketing: Social media marketing is a form of performance marketing where advertisers use social media platforms to run various campaigns to acquire more traffic, sales, and brand awareness. It includes the likes of content showcased on Facebook, LinkedIn, or Instagram. It uses various ad formats and targeting options to measure KPIs such as engagement, CTR, CCP, and ROI.

Paid search marketing: Paid search marketing occurs when an advertiser pays for the actions taken on sponsored ads on search engines such as Google Ads, Bing ads, etc.

How to Create a Performance Marketing Strategy?

There are many different performance marketing channels and campaigns, and there is no one way to go about it. However, these are the main steps to building a performance marketing strategy of any kind and for any audience.

Step 1: Establish Campaign Goals

Step 2: Choose Digital Marketing Channels

Step 3: Create and Launch Campaign

Step 4: Measure and Optimise Campaign

Step 5: Handle Pitfalls

Establish Campaign Goals: Before measuring the success of any campaign, it is essential to establish your campaign goals; either to generate brand awareness or to sell products. Defining campaign objectives before launch gives performance marketing campaigns their direction. Many ad platforms require you to establish goals; the campaign goals determine where your ads are shown, who they are shown to, and other factors essential to success.

Some of the most popular digital marketing goals are:

Choosing the Right Digital Marketing Channel

For better performance in marketing, it is essential to diversify the channels instead of focusing exclusively on one digital channel. It helps spread the campaign’s exposure and reach, thereby broadening the chances for success. For affiliate marketing, native advertising, or social media platforms, marketers must look for channels that best compliments your required conversion where you are most likely to find your target audience.

By diversifying different social media networks or widening simple display ads to native ads, you can exponentially increase your chances of getting a higher conversion, reach, clicks, and purchases which directly links your performance campaigns to a much wider audience.

Create and Launch Campaign

Much work is needed in performance marketing, and a lot goes into creating campaigns: Marketers need to identify the target audience, understand pain points, customer needs, ad type, and other insights to create a campaign that grabs their attention.

The more insights you have regarding what your target audience needs and how you can present your products and services that best appeal to them, the easier it will be to create the best ad copy, design, and scheduling.

The technical side of the campaign, such as ad sizes, character limit, and acceptable images, also depend specifically on the platform or channel you are using.

Measure and optimize your campaign

More than launching a campaign, a lot of work is involved post-launch. Performance campaigns begin to generate data the moment they are launched. Marketers then need to optimize individual campaigns for performance across all channels in use.

The marketers would then need to keep track of analytics and metrics to determine which sources of traffic are performing best and then allocate the ad funds accordingly. Performance marketing campaigns are used not just to grow company sales but also to determine the best channels and other metrics such as audience and streamline campaign objectives that would increase the return on investment.

How is Performance Marketing Different from Branding?

Brand marketing is all about creating awareness about your business, products, and services. Still, from a data point of view, brand marketing is hard to quantify. In contrast, performance marketing is quantifiable, where marketers can acquire hard data on how their marketing campaign performed and how they can optimize their strategies for better ROI.

From a business perspective, brand marketing is more suitable for established brands that only need to create awareness of their brand as they already have solid strategies in place for ROI. Performance marketing is more suitable for start-ups who want to launch their business, as performance marketing campaigns are based on KPIs such as CPA, CPC, CPM, and LTV (more on this later). A performance marketer would say, “I spend ‘X’ amount of money, and I am getting ‘Y’ amount of return!” which is not feasible in brand marketing as it is designed only to keep the company’s already established reputation intact and probably reach out to even more customers.

Combining Branding and Performance Marketing

To stay competitive in today’s market, marketers need to combine branding and performance marketing to achieve the kind of success that has a significant and long-term influence on the target market. Employ performance marketing campaigns to get the data needed to create strategies and branding to stay relevant and updated for your consumers.

Performance Marketing: A Result-Oriented Approach

B2B marketers can now keep track of dollars spent on various media and the successful outcomes of certain ads. If you are a B2B marketer looking to transform your marketing strategies to measure the impact of your marketing spending better, then performance marketing is your golden cup of tea.

Performance marketing is effective for B2B tech companies as it generates measurable results, which enables them to optimize and modify their marketing strategies faster to walk alongside the changing digital space.

Key performance indicators (KPIs) for B2B marketing include Pay Per Click (PPC), Cost Per Click (CPC), Cost Per Mile (CPM), Lifetime Value (LTV), and Pay Per Lead (PPL).

Top marketing channels for performance marketing are social media advertising, programmatic display advertising, and native advertising.

Refer to the later part of the post for a detailed discussion on the KPIs and marketing channels.

Performance Marketing for B2C

The marketing metrics and KPIs B2C marketers use to measure their campaign performance is different from B2B marketers. To be honest, performance marketing is more geared towards B2B marketing than B2C marketing. In this blog, we will share seven B2C marketing metrics which you should prioritize to get the most ROI.

Social Engagement: Social engagement metrics are one of the most important indicators for B2C marketing; social engagement metrics include likes, followers, comments, and shares on social media or your website. Optimizing for social engagement simply refers to the measurement of the same. For instance, on Instagram, track your post engagement rate to know what types of content your audience is rooting for.

Post engagement = {(Likes+Comments)/(Followers count)} X 100

If your posts have 90 likes and 20 comments from an audience count of 3000 followers, then your post engagement is 3.6%

Website Traffic: Website traffic is yet another marketing metric crucial to strategizing performance marketing tactics. B2C marketers explained that their survey showed sales ranked highest on metric importance, more effectively based on website traffic. Attribution turns traffic into people and gives businesses the insight to optimize customer experience with the brand. This enables most companies to benefit from measuring at least basic analytics such as traffic and conversion on their sites.

Conversion Rate: Conversion rate is where you can see what percentage of traffic delivers tangible results. Conversion is about turning a website visitor into a customer. Businesses may want marketers to subscribe to a newsletter, download a mobile app, or follow on social media. All these can be considered a conversion.

Conversion rate = (number of conversion / total number of visitors)*100

For example, if you have 500 visitors to a landing page and 60 visitors out of it convert, the conversion rate is (60/500)*100 = 12% conversion rate.

Customer Retention and Loyalty: The success experienced overnight would mean nothing if the customers don’t pin their faith in your product or services. So, customer retention and loyalty are a priority for B2C marketers. Here’s a simple formula to measure the Retention rate:

Retention Rate = (CE-CN/CS)*100

CS = Customers you have at the start

CE = Customers you have at the end

CN = Customers acquired during the period of measurement.

For example, at the start of the month, you had 200 customers (CS = 200)

You gained 30 new customers (CN = 30)

You lost 5 customers

By the end of the month, you have 225 customers (CE = 225)

So, your retention rate = {(225-30)/200}*100 = 97.5%

Marketing ROI: (Gross Marketing Revenue – Marketing Investment)/Marketing Investment

You can also calculate ROI for each individual campaign spent to understand your marketing effectiveness better.

Audience Segmentation

Audience segmentation is the next most important step if you want to run campaigns targeted to the right audience. Instead of aiming just to sell, you should build relationships with people based on the stage of the buying process they are in.

Audiences can be segmented into three categories:

In marketing terms, they are categorized as:

Cold Audience: Cold audiences are those who have never heard of your business and need an introduction. They are casual browsers who are looking for a solution to their problem. You could have the solution to their problems, but since they have never heard of your business, it’s highly unlikely that they would purchase your products or services. That said, you still have the opportunity to convert them to customers in the later stage of the audience funnel.

Objectives to Target Cold Audience:

Warm Audience: Warm traffic consists of people who already know about you and your brand. They may have visited your site before and have probably engaged with you in some other way, but they have not shown any interest in buying from you. The objective of running campaigns for warm audiences is to encourage warm traffic to make a purchase. Content types you could target to drive warm traffic include Product demos, webinars, ebooks, whitepapers, free sign-ups, free trials, event invitations, offers, deals, discounts, etc.

Hot Audience: Hot traffic encompasses people who have already made a purchase and didn’t ask for money back, which suggests that they are well aware of your brand and the products or services you offer. You should target to pitch additional product purchases or service upgrades at this stage. Your goal in targeting hot traffic should be to upsell more products and prompt your audiences to do business with you again. The best type of content suitable to target hot audiences includes sales, landing, product, offer, and services.

Performance Marketing Channels

Your site deserves only the best. And in search of the best possible channel, there’s no need to burn a hole into your pocket. So, here we bring you carefully selected performance marketing channel platforms.

  1. Display Ads:

Display Ads, AKA banner ads, fall under the umbrella of the most common methods of performance marketing. While gliding your way through any website, you might have stumbled upon banner-like structures featuring ads.

Gone are the days when the display ads only signified posters with appealing quotes and pictures. In the present world scenario, the display ads incorporate videos, graphic design, and interactive content. Here are some of the platforms specializing in this area.

  1. Native Ads:

Native Ads is one of the most natural-looking approaches that you could opt for. Native Ads are disguised in the form of links attached below to articles, blogs, news, and other forms of content. The best part about these ads is that they don’t appear intrusive like other ads.

This is a major reason why the audience is more likely to engage with native ads as compared to others. Predictions suggest that the native ads sector will account for $400 billion by the end of 2025. Mentioned below are some of the well-renowned platforms having expertise in the area.

  1. Search engine marketing:

Incorporating search engine marketing into the performance marketing approach will help you stay ahead of others. In this way, the search engines such as Yahoo, Google, and Bing will showcase your ads. Whenever someone uses a term related to your niche while browsing, your ad will flash on their monitor.

Pay only when the ad gets a consumer to click on it. Keep track of the click either by hiring an SEM company or measuring it yourself based on the performance.

  1. Social media marketing:

Social media’s importance in our lives doesn’t need any explanation. Checking social media as soon as we open our eyes in the morning has become a part of our reflexes. Monthly active users account for 2.6 billion users. And honestly, the figure reveals the potential of social media for boosting ad engagement.

Some of the widely known platforms are:

  1. Affiliate marketing:

Affiliate marketing will push the growth and engagement of mobile users through the roof. Plus, its cost-effectiveness is a cherry on top. Therefore, you must take affiliate marketing into consideration to boost ROI.

See below for some of the reputed platforms specializing in the niche.

LTV (Lifetime Value)A/B Test Affise

Creating a Performance Marketing Campaign

The performance marketing campaign goes through a few stages called a performance marketing funnel.

Phase 1- Outline company market goals: Before you can plan any campaign, you need to understand and outline a few marketing goals. Define your business objectives based on the following parameters: (Specific, Measurable, Attainable, Realistic, and Timely)

Phase 2- Determine your budget: Determine how much money you can spend early in the campaign planning process. It will help determine your goals, strategies, and how much content you can create.

Phase 3- Perform market research: Determine who you want to market to and engage with. Describe your product and services, its features and benefits, and how it’s unique to your competitor’s approach. Some factors to consider include market dynamics, seasonality, product, industry benchmarks, potential vendors, and partners that you will need to rely on.

Phase 4- Determine target persona: To determine your target audience, you need to ask yourself a few questions: what do your customers need? How do they like to communicate? Where do they find information? What marketing channels do they use? What are they passionate about on social media?

Phase 5- Determine campaign objectives: A successful campaign includes the following elements such as social media, PPC, marketing automation, demand generation, landing pages, content marketing, events, press releases, coupons, demos, trials, etc.

Phase 6- Content creation: A comprehensive list of content and creatives suitable for performance marketing is: videos, images, infographics, case studies, ebooks, guides, social media posts, user-generated content, newsletter, webinars, podcast, and interactive content.

Phase 7- Marketing campaign promotion & execution: Not every channel will be right for your business. After finalizing the content and creatives, you could use various channels mentioned earlier to promote your brand, such as landing pages, event invitations, telemarketing calls, etc.

Phase 8- Marketing campaign analysis and optimization: Here are some effective ways to measure and analyze campaign performance: Number of organic website visits, time spent on a page, click-through rates, referrals from paid ads, number of prospects earned at an event, social engagement, and social sharing.

How To Measure Performance Marketing

Every activity and effort performed in performance marketing is measured, reported, and analyzed against pre-defined KPIs. This enables marketers to improve and optimize their marketing efforts for better ROI.

Measurable ROI is what makes a successful performance marketing, so it’s important to track it on a regular basis. There are multiple performance metrics and performance optimization tools available on the market. The key metrics and KPIs that are commonly used in performance marketing are:

CPM is the cost or money an advertiser spends for 1000 impressions of a digital ad. In simple terms, it is the cost paid for every 1000 times an ad is displayed to the viewers.

Cost Per Click refers to the money spent for each click on the ad. CPC is a better indicator of engagement than CPM because, unlike CPM in CPC, the user has taken action indicating actual engagement with the ad. A higher CPC usually means that the value of the conversion is higher. For instance, a luxury brand might set a higher CPC and target only a smaller audience base who are more likely to purchase the product. Here the cost per click is more expensive because the potential return is much higher.

CPA stands for Cost Per Action, which is a metric for campaign performance according to a specific desired action where you want your target audience to take a concrete action such as downloading an ebook, registering for an event, subscribing to an email letter, purchasing an item, and the likes. In performance marketing, the action taken by potential customers is considered the most important and tangible form of measurable result.

This metric concentrates on the predicted lifetime value of an individual customer during their entire relationship.

This metric concentrates on the predicted lifetime value of an individual customer during their entire relationship.

This metric concentrates on the predicted “Lifetime Value” of an individual customer during their entire relationship with the brand or company. LTV estimates the expected spending of acquired customers based on their ongoing activity, using advanced methods like predictive analytics. Thanks to increasingly sophisticated measurement capabilities, LTV is fast becoming a popular metric, as it helps marketers plan their overall strategies towards the ultimate goal of boosting ROI.


Testing and measuring your campaign is an essential part, more important than launching the campaign. In performance marketing, advertisers may try many different techniques and strategies for CTR optimization. Hence, by doing A/B testing, it becomes paramount to know what works and what doesn’t.


Handling Pitfalls

Just like any other marketing campaign, there are some challenges and pitfalls that come with performance marketing which may include: privacy regulations, click frauds, bot traffic, compliance issues, brand safety, placement discrepancies, publisher fraud, etc. One way to reduce these problems is to focus on top-performing ad networks and platforms where issues such as brand safety and data privacy can be handled responsibly and reliably.

Benefits of Performance Marketing

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Native ads are the best example of performance marketing where advertisers create ad campaigns for a specific conversion goal and only pay for clicks earned or other conversion actions such as email registration, product purchase, ebook download, etc.

Because it is done on a digital platform, conversion action can be measured and modified to outperform previous campaigns. Compared to a TV ad, where brands have to invest a fortune to run just a simple video for a short duration, which doesn’t guarantee any conversion nor the metrics that are much easier to generate and measure in performance marketing.

This gets to the heart of the benefit of performance marketing because performance marketing focuses more on tracking and attribution, which gives marketers much more control over their budget and efforts.

Campaign performance tracking: Performance marketing campaigns are set up considering their post-campaign performance tracking and performance measurement, which generates valuable metrics only to be used in fine-tuning and upgrading the marketing efforts for even better ROI.

Low-risk factor: With performance marketing, there is little to no risk factor because marketers know exactly what is going on with their campaigns at every stage, which puts them in a much better position to optimize and reduce risk when needed. Moreover, with less risk and quicker launch time, performance marketing becomes the most effective marketing effort in the digital marketing space.

ROI-centric marketing: Performance marketing is driven by marketers focusing solely on ROI. This ROI-centric approach ensures that performance campaigns are continually moving towards better results than the last.

Performance Marketing Best Practices

Here are our proven tactics on how to make your performance marketing success.

Focus on Landing Page and Giving More Value

When it comes to landing pages, they must be designed and optimized to convert. A poorly designed landing page can deter visitors from taking any action; moreover, if it doesn’t offer value, users will simply skim through without clicking on the page.

As a digital marketer, ensure that you provide an offer that your users just can’t oversee. Next, run a website audit for any potential problems visitors might run into before launching your campaign. Test the entire user experience starting from the landing page to the shopping cart, as well as audit links and offers after the ad launch to ensure that the landing pages are not underperforming. 

A/B Test

Testing and measuring your campaign is an essential part, more important than launching the campaign. In performance marketing, advertisers may try many different techniques and strategies for CTR optimization. Hence, by doing A/B testing, it becomes paramount to know what works and what doesn’t.

Target Traffic Source Carefully

Ensure that traffic comes from genuine sources, which is important in performance marketing to generate high-quality prospects. If the sources are sketchy, your consumers may not trust your brand and may even deter from visiting your site again. Instead of generating more traffic, marketers must invest their efforts in partnering with the right affiliates that will drive meaningful traffic to the site.

Camping Tracking and Monitoring As Must as Possible

Bounce rate, mobile responsiveness, attribution, etc., provide essential campaign data points for better insights into what worked and what didn’t. Just like A/B testing, tracking and monitoring your campaign performance, conversion rates, and sales are important to get the most out of your performance marketing campaigns.

Be compliant

Performance marketing is designed to build relationships with publishers in order to engage and convert your target audience to build your brand. This makes it paramount for marketers to follow the rules like The Federal Trade Commission (FTC), GDPR (General Data Protection Law) and the CCPA (California Consumer Privacy Act), and other national data protection laws.

Experiment, Experiment, Experiment

Keep an experimental approach to performance marketing which is more leaned toward growth hacking. If you are not experimenting and testing your campaigns, you are likely doing it wrong. Ensure that you are taking the time to fully understand what it is you are testing ng the goals you want your campaigns to achieve. Identify what works and what doesn’t and then improve with an interactive process.

Keep Long-Term Goals

Although performance marketing is driven to give you more ROI, marketers shouldn’t lose sight of the higher-funnel campaigns which helped brands acquire their consumers in the first place and let them discover their products and services. Implementing lower-funnel keywords such as brand terms and affiliate sites into marketing strategies doubles down on sources that gave you the most conversions, says the last-touch attribution.

Combine Data Across All Channels

By focusing all your efforts on a single channel, you lose sight of how you impact your customers. Therefore marketers should have an omniscient view of customer behavior by implementing other channels so that you don’t miss any business opportunity by aligning your marketing across all channels.


Performance marketing shows huge promise for businesses apart from other marketing trends such as digital marketing, social media marketing, advertising, etc. Performance marketing is their best bet for businesses looking to engage and convert more buyers at lower costs.

Working with publishers and affiliate networks enables businesses to acquire an added reach which may not be possible with the conventional approaches.

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