What Is Performance Marketing and How Does It Work?

There’s a fine line that separates profitable marketing from a complete waste of time and money.

The problem is that it can be tough to know where that line is and when you’re at risk of crossing it. This is especially true with traditional marketing efforts, which are often hard to track and measure.

That’s where performance marketing comes in.

Performance marketing helps to alleviate these problems by ensuring that brands are only paying for real, tangible results, versus the “spray and pray” approach that we all know so well.

Whether you’re looking for new leads, sales, traffic to your website, or downloads for your company’s app, the performance marketing model means that you pay only after those goals are complete.

performance marketing

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In this article, we’ll look at:

  • An answer to the question, what is performance marketing?
  • The importance of performance marketing
  • Common performance marketing tactics and examples
  • A few tips to help you build your own killer strategy

Shall we?

What Is Performance Marketing?

As the name suggests, performance marketing is a type of digital marketing where brands pay based on the performance of their campaigns.

Performance-based marketing comes in all shapes and sizes. But at its core, there are two main parties involved: the brand, or the company that wants to be promoted, and the publisher, or the person or company that promotes it.

These two entities work together to set specific goals, build a plan and set of agreements for accomplishing them, and set up tracking to be 100 percent clear when those goals are met.

When all this is completed based on the established terms, the brand pays the publisher for a job well done.

In addition to working together directly, there are several types of networks, platforms, and agencies that can manage and oversee the process.

Let’s take a closer look at the key players and how they play together.

Performance Marketing Players

There are four entities that are typically involved in building and executing a performance marketing strategy:

  1. The brand, also referred to as the merchant, retailer, or advertiser. This is a company that sells goods or services and wants to accomplish a specific goal, like more leads or sales.
  2. The publisher, also called the affiliate, marketer, or partner. This is a person or company that uses various strategies and techniques to promote the brand and accomplish its goals. Publishers carry out this promotion on their own media, like their website, blog, or social media accounts.
  3. Networks and platforms. Networks and platforms are third-party entities that connect brands and publishers, manage campaigns and payments, and track the performance of campaigns. Brands don’t necessarily need to go through a network, but they’ll likely still need a platform to track clicks, sales, and other key performance indicators (KPIs).
  4. Outsourced program managers (OPMs). These firms and agencies run full-service performance marketing campaigns for brands that don’t want to manage them in-house. OPMs offer services like marketing strategy, publisher recruiting, and campaign design and compliance with regulations. They can also help to optimize performance through landing page optimization, search engine optimization (SEO), and other online marketing best practices.

Now, you know what performance marketing is all about. Next up, let’s look at why it’s important. 

Importance of Performance Marketing

Performance marketing is a direct solution to one of today’s biggest obstacles in marketing: attribution.

Often, brands simply can’t pinpoint which of their efforts are creating positive results for their business. Attribution is the act of directly linking an effort to its outcome.

As eMarketer lays out in its marketing measurement hierarchy, attribution for all of a brand’s marketing channels is a critical step toward getting a holistic view of how and why a customer buys.

This understanding helps you optimize the customer journey, which is the path that starts with their first exposure to your brand and ends with the sale.

Once you can unlock these insights, your brand will be unstoppable.

marketing measurement hierarchy

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Let’s look at a few of the most common types of performance marketing.

Types of Performance Marketing

Here’s where many can get confused: performance marketing is a broad term that can be applied to virtually any type of marketing initiative where payment is based on tangible results.

This means that several types of digital marketing can fall under the performance marketing umbrella, as long as they operate on performance-based terms.

This includes other marketing forms like:

  • Social media marketing
  • Sponsored content and native advertising
  • Paid advertising (in certain cases)

Let’s look a bit closer at each of these.

Affiliate Marketing

The most common type of performance marketing is affiliate marketing.

Some marketers say that affiliate marketing and performance marketing are interchangeable terms. That’s because they look quite similar: both of these are performance-based marketing approaches that involve an individual or company promoting a brand, then receiving compensation based on the results.

But many experts agree that affiliate marketing is a subset of performance marketing, as performance marketing can take more shapes and sizes than an affiliate marketing relationship.

To paint a picture, let’s look at a quick affiliate marketing example. This example also falls under the umbrella of influencer marketing, as many affiliate marketing examples do.

Say that a dropshipping store selling women’s clothing partners with a popular Instagram influencer in the fashion niche. The brand wants the influencer to host a contest that generates 100 registrations.

To promote the contest, the influencer posts a custom tracked link on her Instagram profile and creates several posts, videos, and Stories that direct her followers to the registration link.

The brand can then see how many people registered through that link and pay out the influencer accordingly.

performance based marketing

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Other Types of Performance Marketing

In addition to affiliate marketing, here are some examples of other types of performance marketing.

Social Media Marketing

Social media marketing can take place on various platforms, most commonly including Instagram, Facebook, Twitter, LinkedIn, and Snapchat. These types of performance marketing campaigns might include influencer marketing and paid advertising techniques.

This example is a crossover: it can be counted as social media marketing, influencer marketing, and affiliate marketing. Instagram influencer @eatingthroughatlanta partnered with cookware company Le Creuset to host a giveaway.

digital performance marketing

Disclaimer: While we’re not positive whether this specific campaign is being measured and compensated based on giveaway entrants, it’s a great example of what one of these partnerships might look like to potential customers.

Sponsored Content

In sponsored content performance marketing, a publisher posts content like a dedicated blog, and the brand compensates based on certain goals for the blog’s performance.

This can include native advertising, which is ad content that’s designed to fit in with the medium it’s posted on.

The key difference between sponsored content and native advertising is that in a sponsored content scenario, the publisher develops the content to post on their own media. Conversely, in a native advertising scenario, the advertising brand develops the content and gives it to the publisher to post.

This native advertising video from Altran was featured in The Financial Times. As you can see, the Altran logo is in the top right, as well as a “Paid Post” icon at the bottom right.

sponsored content performance marketing

Paid Advertising

Paid advertising can counts are performance marketing in cases where the brand is paying for ads based on performance, versus more traditional measurements like cost-per-thousand (CPM) or cost-per-click (CPC).

While some experts consider CPC to be a form of performance marketing, we use a stricter definition that’s better represented by terms like cost-per-action or cost-per-acquisition (CPA) marketing, and pay-per-action or pay-per-acquisition marketing (PPA).

Now that you’re familiar with how performance marketing comes to life, let’s look at some tips you can use to build your campaigns.

4 Tips for Killer Performance Marketing Campaigns

There’s no single right way to do performance marketing, but there are some guidelines that can help increase your chances of success – regardless of whether you’re in the role of the brand or the publisher.

What are those guidelines, you ask? Allow us to enlighten you.

1. Set Clear, Actionable Goals

The whole point of performance-based marketing is to draw a distinct line that connects actions and results.

In order to do this, you’ll need to start with a clear, actionable goal. What exactly do you want each campaign to accomplish? To keep it clean and attainable, try to stick with just one or two goals per campaign.

Here are some common campaign goals and examples of how those might look over the course of a campaign:

Goal Examples
Sales based on customers 50 new customers
Sales based on revenue $1,000 in total revenue
Lead generation 50 new leads in the form of people who entered a contest, signed up for a newsletter, or downloaded an app
Website traffic 1,000 unique visitors to your company website
Returning visits A retargeting campaign where ten percent of your unique visitors come back to your website at least once
Brand engagement 1,000 “likes,” 50 comments, or 20 shares on a social media post

To make sure everything is smooth and functional, it’s critical that all parties are 100 percent clear on what the end goal is.

2. Choose Your Partners Wisely

If you’re a brand or publisher who’s using a network, OPM, or other type of third party to find partners and manage campaigns, you’ll have an extra level of protection from things going sour.

These third parties are also usually helpful in ensuring that you’re a good match for each other and that things go smoothly.

But say that you’re a brand looking to keep costs down by running your own affiliate marketing campaign. In this case, you’ll want to be careful when vetting potential partners.

Here are a few questions to ask yourself as you evaluate your options:

  • Is this publisher relevant to my brand’s niche?
  • Does their style and voice mesh well with my brand?
  • Do they have an engaged, interested following that regularly interacts with their content?
  • Do any of the interactions seem fishy or generic, like they might be from fake followers?
  • Have they done any other performance marketing programs?
  • If so, is it possible to learn how they went or how satisfied their partners were?

Similarly, if you’re a publisher approached by a brand, look at questions like:

  • Is this brand relevant to my niche?
  • Does the brand’s style and voice mesh well with my own?
  • Will my followers be interested in what this brand has to offer?
  • Are there any conflicts of interest with other brands I’ve worked with?
  • Does the brand have a good reputation, as seen through social media engagement and reviews on various platforms?
  • Has the brand any other performance marketing campaigns?
  • If so, is it possible to learn how they went or how satisfied their partners were?

3. Track, Track, Track

There are many tools and platforms out there that can help businesses track their own performance marketing campaigns.

If you’re a brand looking to track links, such as links you’ll create for an affiliate marketing campaign with one or more publishers, Google Analytics is a simple solution. Check out this tutorial on tracking links with Google Analytics.

There are also performance marketing software and tools that help with link tracking, like ClickMeter.

If you have a WordPress website, you can use a plugin like MonsterInsights or Pretty Links.

Alternatively, some marketing platforms like HubSpot have an included feature to add UTM codes, or trackable snippets, to your URLs.

how to create tracking URLs

4. Consider Going Through a Trusted Third Party

It’s totally possible to run your own performance marketing campaign and see awesome results.

But it’ll take some work – and time. In some cases, it’s a more efficient use of your resources to use a third party to streamline certain aspects of the process.

Here are a few networks and agencies that can help optimize your performance marketing efforts, from finding partners to designing campaigns to making sure the proverbial T’s are crossed and I’s are dotted:

No More Marketing Guessing Games

Every marketer has felt the pain of wasted marketing dollars spent on campaigns that don’t show any meaningful results.

Performance marketing is a direct solution to this dilemma. It ensures that your budget is spent wisely and your business is constantly growing.

And if you’re a publisher, you’ll find that partnering with the right brands can be a great source of income.

There’s a virtually infinite amount of options for creating performance marketing campaigns. The keys to success lie in choosing the right partners, making sure you’re setting clear and attainable goals, and always reviewing your progress to ensure that you’re on the right track.

Want to Learn More?

Have you ever tried performance marketing? If so, which strategy worked best for you? Let us know in the comments below.

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