In this article
Performance marketing as a channel often has multiple interpretations, definitions and applications in a brand’s overall marketing mix, so we thought we’d break it down for you into the following 101 guide.
Updated: January 3, 2022
While performance marketing may seem new, it’s actually been part of the digital marketing mix since the early days of the internet. You are likely already aware of performance marketing and may not even know it.
Read on to find out more. If you’re already a performance marketing pro, check out our blog on how to get started in financial services.
Performance marketing defined
Performance marketing is a one type of marketing in the overall marketing mix. In this case, we’ll be talking specifically about affiliate marketing.
A brand wishing to sell a product partners with publishers (marketers, influencers, bloggers) and will pay them a performance-based commission for any new customers that make a purchase.
Have you ever referred a friend to a new app to earn a reward? You’re already operating in the world of performance marketing!
Here’s another example. Imagine you have a blog. You’re a passionate runner and on your blog you talk about your experiences and tips on how to become a better runner. You might choose to promote a pair of sneakers in a relevant story because you are a member of their affiliate program. If one of your readers clicks the link and goes on to purchase those shoes, you’ll earn a commission.
How does performance marketing work?
There are three key aspects to make this channel possible:
1. Merchant (Brand)
There needs to be a product or service for a publisher to promote.
Scotiabank Gold American Express Card
Publishers are the influencers, bloggers, personalities or websites that have followers or visitors that match the target demographic of the brand.
The greater the number and diversity of publishers promoting a brand, the more successful the channel.
Affiliate networks are a great way to amplify a brand’s reach, and niche affiliate networks exist to help connect a specific type of brand with the right type of audience. See more in the next section.
Scotiabank Gold American Express Card being featured on Ratehub.ca, a publisher in the Fintel Connect Network
3. Affiliate Marketing Platform
The engine behind the campaigns that allows the channel to scale. Affiliate marketing technology supports the campaign hosting, tracking, performance reporting, commission calculations, and payments from merchant to publisher, all in one easy-to-access platform.
Note: The most important thing to remember about affiliate marketing and performance-based campaigns is that partnership is key. The relationship between the brand, publisher and platform is important and works best with trust, transparency and clear communication.
Performance marketing in the overall digital mix
The performance marketing channel is a post-transaction channel, meaning marketing spend is tied based on results.
Pre-transaction channels are typically channels like display, paid search, and social media, where brands will spend on exposure and traffic as opposed to conversions.
Post-transaction means spend based on conversions past the click-through.
See below for a breakdown:
What is the opportunity for brands?
If you’re a marketer looking to increase sales, there are three key benefits of performance marketing as a channel:
1. Get free impressions or exposure of your brand
Customers often convert after 6-10 touch points with a brand, so the more visibility you can get for as little cost as possible, the better.
2. Earn a third-party brand endorsement by a trusted source
Bloggers and publishers are trusted voices in their fields. If they’re talking about your brand, you’re likely to earn the trust of their readers.
3. Only pay for results
The most compelling aspect of this channel is that your budget will be spent on real converting customers. By doing so, you’ll be able to optimize your budget and provide lucrative rewards to your publishers.
What is an affiliate (publisher) network?
A publisher network acts as a facilitator between brands (merchants) and publishers.
They have a database or network of publishers (broad or niche) that brands can leverage to promote their products.
Often networks have a specialized technology with key features that allow for optimal program performance:
- Flexible tracking solutions depending on an advertiser’s technical capabilities
- Robust reporting interface and platform for campaign monitoring and optimization
- Campaign management tools for hosting and serving a range of creatives
- Third-party login to online dashboard to allow publishers to view performance in real-time
- Built-in commission calculations and finance modules
In many cases, publisher networks have a team of expert affiliate marketers that can act as extensions of a brand’s team to support with the day-to-day program activities, performance and growth.
Types of compensation models
Performance marketing is based on results, and compensation can happen in a number of different ways:
1. Cost-per-acquisition (CPA)
A CPA is a flat fee amount based on a number of potential criteria. These are:
- Customer sign-up to a product or program
- A customer purchase
- A successful application (approved customer)
2. Revenue share (rev share)
This model is typically a percentage of the net revenue gained by an advertiser that is paid out to a publisher. This can be based on a single purchase, multiple purchases, or multiple transactions over time.
3. Hybrid CPA + revenue share
Sometimes brands will choose to reward publishers for recommending a customer who signs up to a program or product with a CPA, and then sharing in the revenue earned from the customer when they go on to make purchases.
To recap, here are the top things you need to know about performance marketing:
- Performance marketing is directly tied to results – spend your marketing dollars on real customers
- Partnership is key – the relationship between the brand, publisher and tracking platform is symbiotic and based on transparency and trust
- Don’t underestimate the power of performance marketing – while it’s not widely known, it is one of the most impactful digital channels out there