Performance Marketing: Everything you need to know in 2021

First things first: What is performance marketing?

If you drew a March of Progress equivalent for marketing and advertising, you would probably have your primate as early printed advertising, up through billboards, radio, TV, telemarketing and ending with performance marketing as your modern man. This isn’t to say that traditional marketing channels don’t work any more. The methodology behind performance marketing is increasingly shaping advertising in all forms.



Performance marketing is an umbrella term for when an advertiser (e.g. your business) pays a third party (e.g. Google Ads, Facebook Ads or an affiliate site) every time their platform delivers a defined action e.g. an impression of your ad, a click through to your site, an app download or a completed transaction. First you agree the action, then set your budget, launch your campaign and wait for performance data to tell you what is and isn’t working. The amount paid for one of these actions massively depends on the platform but typically the harder the action is to achieve and the more competition there is for the same target audience, the more you’ll need to pay to reach your goals.


Connecting the dots between advertising and tangible business objectives has revolutionised the decision making process behind how marketing budgets are spent. With the right approach, marketing professionals can hedge their bets and then use performance data to confirm which channels can deliver scalable return on investment.


Until the next revolution in marketing and advertising comes along, businesses playing at the cutting edge of performance marketing are always going to have an advantage over competitors. The better your marketing performs for your business, the faster you can grow.


In the world of marketing strategy, paradigm shifts often start out life as humble buzzwords. Performance marketing is now so ubiquitous, it can’t be ignored. By the end of this article, we hope you’ll approach your next attempt at performance marketing with confidence and a thirst for improving ROI.



How does performance marketing differ from other forms of marketing?

Performance marketing really helps put the power back into the hands of business owners. Obviously, like any realm of business, money talks. Traditionally big brands steamroll their way to success by saturating advertising channels. Although this is also still partly true for performance marketing, smaller businesses can participate and achieve positive return from a minimal budget.


Unlike old-school methods of advertising, performance marketing doesn’t require a big upfront, or minimum costs. Out-of-home advertising such as wraparounds on buses, double pages in magazines, trade shows or posters in tube stations usually have costs starting in the thousands of pounds. For many businesses, without a guaranteed return on investment, splashing the cash on too many of these marketing channels can quickly eat up a marketing budget. Performance marketing, on the other hand, can be started with spare change. In fact, Eric Ries in his book The Lean Startup talks about how he used a Google Ads budget of only £5 a day to find Product/Market Fit for one of the many startups he founded.



Are there any other benefits of performance marketing?

In addition to the low cost of starting a performance marketing campaign, advances in tracking and attribution that have emerged in the last decade have made it easier to understand the impact of your online advertising campaign’s on your bottom line. The lack of upfront costs therefore makes performance marketing an incredibly low risk strategy to acquire new customers. For example, if you decide your pay per click campaign it’s not working as well as you’d like, in most cases, you can simply pause the campaign and stop spending money. Similarly, if you see your cost per acquisition plummet as a result of a new campaign, you can scale your spend at the touch of a button. Finally, the very nature of performance marketing is that you pay for a specific action that has value to you, making your whole strategy focused on ROI.


The level of control and insight performance marketing offers allows you to fully understand how your money is being spent. With more control over who sees your brand, campaigns can be highly targeted at people in-market for your product or service. To reap the benefits of performance marketing, businesses need to constantly optimise their campaigns. Unfortunately too many marketing professionals still rationalise poor campaign performance by championing brand awareness. Unpopular opinion – unless your goal is to drive impressions, if a performance marketing campaign is not delivering your desired action, brand awareness is essentially a vanity metric.



What types of marketing count as “Performance Marketing”?

When it comes to talking about performance marketing there are several forms which your advertising campaigns can take. For the majority of businesses, successful digital marketing campaigns require a combination of performance marketing channels. Once you have a solid understanding of each area, it’s then up to you to decide which areas of performance marketing are best for you to start testing and measuring for ROI.


Some of these areas include:


Affiliate Marketing

Affiliate marketing usually involves working closely with an affiliate or publisher of content to reach your ideal customers on niche sites that they commonly use. Instead of paying a big advertising network like Google or Facebook for your desired action, you would likely negotiate with the affiliate partner themselves to get a cost metric. Because these cost metrics are less likely to be informed by mind-boggling algorithms, the cost per action you are charged will depend on both party’s ability to negotiate a fair price. Without the support of a performance agency, this process can be time-consuming and costly.


Native Advertising / Social Media Marketing

The beauty of this form of performance marketing is that these ad units look less like adverts; they look native to the page, hence the name. Although most sites will flag native ads to users, they are less disruptive to the experience of the user. Showcasing branded content to a target audience may be less direct than a sales driven banner ad but with the right image and headline, native advertising can seamlessly move users from a channel they have chosen to visit into your marketing funnel. Social media platforms like Facebook and Linkedin drive the majority of their revenue through advertising so are always developing new ways for businesses to share branded content with highly targeted audiences. Usually, these campaigns are targeted at achieving impressions clicks, but if you’re particularly savvy, you can instruct platforms to use information on who has converted to a sale to further narrow targeting to people also likely to convert.


Sponsored Content

This format is mostly used by content-focused sites. It involves a creating piece of content that is dedicated to promoting a brand or product in return for compensation of some form or another. For example, a form of sponsored advertising could be paying for a popular lifestyle blog to feature an article about your product or service. Although publishers will often make it clear when content is sponsored, well positioned content can blend in with the site’s editorial style and instantly build trust with loyal readers.


Influencer Marketing

Prevalent on visual social media platforms like Instagram and Youtube, influencer marketing involves paying someone with a relevant following to promote your product or service. Done well, targeting a specific niche audience, these advertisements can comfortably blend in with an influencer’s typical content output. Done poorly, these advertisements can be damaging to both party’s reputations. As a result, influencers with large followings often charge extremely high amounts to participate.


Search Engine Marketing

This is simply using a platform like Google Ads to pay for the clicks that arrive from users searching for a specific term. It is arguably the easiest method for a performance marketer to capture high intent users as they are actively using a search engine to find a solution to a problem. If your ad copy and landing pages provide a solution to the problem a user is trying to solve, SEM platforms will give higher your ad quality score, making it cheaper to appear. If there are lots of companies bidding for the same search terms or keywords, the cost for your ads to appear and deliver an action can skyrocket. To compete, smaller businesses need to perform detailed keyword research to identify where its possible to drive low cost actions.



Great, so once I start testing these different types of performance marketing how can I measure ROI?

First things first, ROI is an acronym for Return-on-Investment, it’s a metric used to understand how much profit is made for every penny spent. Since any activity that falls under the performance marketing umbrella is inherently easy to track, calculating return on investment is fairly straightforward. That is of course if your tracking process is set up correctly. If its not, then you’re in the dark.


The best and most common way to track the journey someone takes from seeing your ad through to engaging and convert on your website is with a UTM (Urchin Tracking Module). A UTM is a simple piece of tech that allows you to identify the exact source of a conversion down to the single ad variant and single platform. In other words, you can see the exact medium, source, campaign and content where your new customers came from. A correct usage of UTMs, which thankfully is not difficult to implement, will allow you to measure your performance marketing activity with very little error. The only way to be sure your tracking works is to test all the possible actions a user could take from your ad and ensuring this is reflected in the data you see in your ad platform.



By syncing the specific action that creates a conversion or other goals in your chosen performance advertising platform, for example by using Google Tag Manager, you will receive far more detailed data. This data will not only tell you which specific ads are performing best but it will also help your advertising platform to learn who, when and how to serve your ads to.


There are still some areas of tracking and measuring performance marketing that are yet to be solved; for businesses with smaller budgets such as cross-device tracking. Despite this, performance marketing is still immeasurably more measurable than other forms of marketing.



Are there any potential pitfalls and disadvantages of performance marketing?

Performance marketing has an incredibly low barrier to entry; starting running ads on Facebook or Google these days is as simple as creating an account and adding a billing method. This has led to it receiving a pretty bad reputation amongst business owners who have erroneously thought that good ‘performance’ is guaranteed.


The truth is, the days of simply switching on a campaign and expecting instant returns have disappeared. The low barrier to entry has created a lot of competition, and since more brands are competing for eyeballs and actions, your performance marketing campaign needs to be well thought out and part of a larger strategy to get good results.


Another misconception is that performance marketing is a way for brands to cheat their way to becoming a household name. Just think about how many ads there were the last time you scrolled through your Facebook or Instagram feed… our estimations are that on average 1 in every 5 posts in your feed is an ad. How many can you remember? The truth is, performance marketing will have very little impact on branding without ads that are relevant, engaging and speak directly to your target audiences’ pain points. You’re much more likely to trust a brand you know than one you don’t, so performance marketing campaigns should always be part of a wider multi-channel digital marketing strategy.


How do I go about creating a performance marketing strategy?

Step 1: Bidding

If you take one thing away from this article; performance marketing is all about paying for a specific action. Before you start your performance marketing adventure, it’s vital to have an understanding of what your trying to achieve and the bidding mechanism or strategy that supports your objective. Here are the most common actions that you can pay a performance marketing platform to deliver.


Cost Per Mille (CPM) (aka Cost Per Thousand Impressions)

This is the amount you pay to get a 1000 eyeballs on your ad. Focusing on, and optimising towards, this metric is important if your aim is to get the word out about your brand, promotion or new product but you need any further engagement to take place.


Cost per Click (CPC)

This relates to the amount you pay for a click on your ad. This is arguably the most common metric used in performance marketing because click an ad these days is a pretty strong sign of intent. This is great if you’re aiming to drive traffic to a landing page where visitors can then go on to convert.


Cost per Lead (CPL)

This is the amount you pay for each lead from your campaign, leads in this sense are usually people who sign up via a form on your website.


Cost per Acquisition (CPA)

Acquisition in this sense can mean a range of things. It can vary right from a click all the way through to a sale. The acquisition part usually relates to your conversion goal. How hard this goal is to achieve will decide how much you spend.


Each of the above strategies is an advertising objective in itself, therefore, which ever you choose largely informs and impacts your campaign build and any optimisation efforts. It’s important before starting any performance marketing campaign that you take your time and make sure you’re confident in how you bid for actions.



Step 2: Pre-launch plan

Once you’ve confirmed the goal and objective of your performance marketing efforts, it’s time to start planning! The pre-launch phase is really all about getting your assets together. If you’re building a tight marketing funnel, the last thing you want is delays as you get ad copy or creatives approved.


At this point it’s worth taking a breather, understanding what your own (or your teams) strengths are. Who is best equipped to write ad copy or landing page content? Do you have someone in your team who can respond to social media comments with wit and flare? These sort of questions will impact the practical execution of your performance marketing activities and usually are the deciding factor between whether a strategy sinks or swims. If you’ve got all the resource you need, great, pull your assets together, create your ad groups and launch!



Step 3: Post-launch plan

This is when things get really interesting. All your hard work is beginning to pay off and you can see the fruits of your labour in action. It’s up to the advertiser to optimise every step for the best possible performance. This involves having your head in a lot of numbers and getting super analytical. So crack out the calculator and nerd up!


Hints & Tips

  • Always use a few different variants of the ad, but stick to testing one thing. Choose either the text or the image and switch it out a few times. This helps you learn more about what works and means you don’t overly rely on one source of failure
  • Really understand how UTMs work, then create them so you are tracking all the information you need – AND THEN USE THEM!
  • In our experience automatic bidding strategies can work really well, but not always. Test them before you give up all control
  • Spend time forecasting numbers before you start. Knowing your target cost per action will help you no end when it comes to the optimisation stage



Sounds like I could have a go at performance marketing! Do I really need a professional?

The honest answer to this question is 90% of the time, yes you really do. We aren’t just saying that because we are the professionals, but we are saying it because too many times we’ve picked up accounts that have wasted a lot of money because they weren’t managed by a professional. With a combination of poor quality ads and bad account set up, you can end up spending thousands with no actions to show for it. Performance marketing can produce terrible performance!


A simple analogy for this is using a mechanic for your car. You might know how to change a wheel, and you can probably find a YouTube video on how to change the axle. Maybe you’ve even got all the tools in your garage and to do a fine job yourself. But when you’re bombing down the motorway and your mind is focused the decisions and calculations needed to drive safely, do you really want to be worrying if the axle is facing the right way? Its the same if you’ve spent years building your business. You need to be confident your marketing is pointing in the same direction as your business objectives.


In the long run, although you might be put off by the price of using a professional, it will invariably pan out cheaper to use one rather than spend your advertising budget inefficiently. Unless you have the time to fully learn the ins and outs of performance marketing, isn’t your time better spent doing the stuff you excel at? 



Want an expert opinion on how your business can make the most of performance marketing?