What Is Performance Marketing? Complete Beginner’s Guide

There’s no cut-and-dry formula for advertising success. In most instances, your marketing strategy will involve tons of research and a significant financial investment to yield results.

Yet, there’s a way to market your brand on a controlled budget while tracking progress in real-time: performance marketing.

Performance marketing is a subset of marketing with clear, measurable ROI, often in the form of sales and clicks. Unlike other marketing efforts, it's all about the results, making it a powerful tool for businesses.

Continue below as we explore in-depth: what is performance marketing, how does it work, and what are its benefits?

What Is Performance Marketing?

Performance marketing is a form of marketing in which you spend proportionately to the campaign’s effectiveness. Instead of investing money upfront, you pay once you see results, so you know precisely where each allotted dollar is going.

Performance in marketing takes a pragmatic approach, focusing on results rather than actions. One example is running social media ads, which allows marketers to target specific audiences and spend based on the number of engagements or conversions. This process can be automated using performance marketing software for easier progress tracking.

It’s important to remember that performance marketing is not a one-size-fits-all approach; its success is defined by your brand goal. For example, are you aiming to sell or introduce people to your brand? You’d measure sales for the former and impressions for the latter.

Key Metrics to Measure Results in Performance Marketing

From here, we can conclude that there are many ways to measure the success of a performance marketing campaign. Let’s look at the KPIs you may use for this:

CPC (Cost Per Click)

CPC means advertisers pay for each click on their ad. It works by setting bids on the cost per click, usually no more than US$1. The final cost per click is determined according to keyword competitiveness, Quality Score, maximum bid, etc. Well-optimized, high-quality ads tend to rank higher at a lower cost.

CPM (Cost Per Mille or Thousand Impressions)

CPM means advertisers pay for every thousand views of an ad. It’s different from CPC in that it doesn’t take into account whether the viewer has clicked on the ad. CPM primarily boosts brand awareness, creates buzz around a new product line, or promotes an event.

CPS (Cost Per Sale)

CPS means you pay a fee for every purchase originating from your ad. This advertising metric is primarily used by e-commerce businesses to generate sales revenue. The affiliate promotes the product, and businesses agree on a flat rate for every product sold.

CPL (Cost Per Lead)

CPL is another tangible ad metric that involves tracking leads based on their actions (e.g., signing up for a newsletter, filling out a form, signing up for a free trial). This metric is excellent for creating mailing lists and building a client database.

CPA (Cost Per Action)

The definition of “action” in CPA can mean many different things. For example, it may refer to both a potential customer signing up for a free trial or lead conversion, like making a purchase. Since it’s kind of an umbrella term, most performance marketers track progress using one of the KPIs above.

Finally, you can create a campaign performance dashboard to serve as a visual representation of your marketing efforts.

Top Performance Marketing Channels for Your Campaign

The right marketing channel for your campaign largely depends on your product, service, and niche. However, it’s also important to consider the primary social media platforms your target audience uses and the kind of content they interact with. From there, you can try one or more of the following marketing channels:

Native Advertising

Native advertising seamlessly blends in with a user’s feed. Whether scrolling through posts, reading articles, or watching videos, native ads appear as suggested posts or content, using sales-driven language and links to trigger action. Native ads are effective because they do not disrupt the user experience, making them more likely to engage with the content.

Affiliate Marketing

Affiliate marketing connects you with publishers who promote your product or service on their channels. It’s straightforward: You pay your affiliate marketer a flat fee per sale or click. Affiliate links can be posted on discussion forums like Quora, product review sites, niche-specific blogs, etc. This expands your reach by leveraging your partners' audiences.

Make sure to read performance marketing platform policies and disclose any affiliate links you include to avoid spam. Affiliate links should also be included mindfully, i.e., they should be related to the topic and provide real value to the reader.

Tip: Many businesses use partner marketing software to simplify collaborations with affiliates, helping them track affiliate sales and measure ROI.

Influencer Marketing

Influencer marketing allows you to connect with an influential social media figure in your niche to promote your brand. This form of marketing provides ample opportunities – the influencer may earn a percentage every time someone uses their coupon code, for example.

A 2024 survey revealed that 55% of Amazon shoppers made a purchase after seeing a product promoted by an influencer.

Search Engine Marketing

If you have trouble ranking at the top of SERPs, you can run paid ads to appear in the very top section of a search query. SEM is a powerful way to gain immediate visibility and attract high-intent traffic to your site, often leading to increased conversions.

Search ads continue to dominate global digital ad spending, with nearly $280B in 2023.

Benefits of Performance Marketing

In addition to boosting impressions and leads, here are the top benefits of a performance marketing campaign:

Transparency

Unlike traditional marketing, which may not show tangible results , performance marketing provides complete transparency into your campaign's effectiveness. If you put up a billboard, you could increase brand awareness but wouldn’t have a clear insight into impressions or conversion rates. With performance marketing, you're fully informed and aware of your campaign’s progress, making you feel more in control.

Cost-effectiveness

Performance marketing is cost-effective – each dollar you put towards your performance marketing strategy will impact the success of your campaign. What’s more, there are no upfront costs without guarantees – you get what you spend.

Scalability

A scalable marketing strategy can be tailored to a brand’s growth demands without compromising quality or exceeding budget constraints. Performance marketing makes it easy to keep track of the financial side of things, enabling marketers to easily adjust the cost per click, sale, lead, and more.

Increased Engagement

Performance marketing relies on audience engagement to drive results. This requires performance marketers to conduct in-depth audience research to understand their needs and pain points. The marketing campaign is then crafted to appeal to that audience specifically, naturally driving more engagement.

Conclusion

What is performance marketing? This form of digital marketing is all about maximizing your brand presence, fast. Running ads on social media is one example of performance marketing – it’s easy, quick, and you get out what you put in.

Your marketing strategy isn't limited to Instagram and TikTok ads alone; you can explore options like native ads, affiliate links, influencer videos, and search ads. Depending on your strategy, you can track your campaign’s progress via one or more of these KPIs: CPC, CPS, CPM, etc.

What are the main advantages? For one, transparency. Performance marketing allows you full insight into your advertising progress. It’s also cost-efficient because you only pay based on results, making it highly scalable.

Finally, the biggest benefit of performance marketing is increased engagement – it puts you right in front of your audience, maximizing your reach and sales potential.

FAQs

What is the difference between performance marketing and digital marketing?

Digital marketing refers to any internet marketing strategy intended to promote or sell. Performance marketing is a form of digital marketing that focuses specifically on clearly defined goals (e.g., gathering new leads, improving impressions, increasing conversion rates) that can be tracked and measured.

What are some performance marketing best practices?

Set precise marketing goals and use relevant KPIs to track progress. When running ads, filter your audience and use optimized content to increase your Quality Score and lower your campaign costs. Adjust your marketing strategy over time to fit your changing needs.