Performance marketing is a promotion strategy whose results can be measured and their impact on business can be determined. Let’s look at the channels and tools used in performance projects.
What is performance marketing
How Performance Marketing Works
Performance Marketing Tools
Performance Marketing Channels
Analytics in performance
An example of using performance marketing
Expert advice
What is performance marketing?
Table of Contents
Performance marketing is one of the areas of marketing where you can accurately measure the results of advertising. A marketer can predict and estimate the cost of an impression, clicks on a given audience or a list of consumer search queries. As a result, you can estimate the effectiveness of the funds invested.
Digital marketing can be divided into performance and non-performance
A business can grow without advertising, but it may take years, or there may be no growth at all. Performance marketing is used to reach an audience multiple times and ultimately increase sales. This is especially important for companies that have just entered the market, have not yet scaled sales and have not acquired loyal customers.
Read Also:How to Start Selling on Marketplaces: A Detailed Guide
How Performance Marketing Works
The marketer sets KPIs for advertising — indicators of the effectiveness of marketing goals. For example, the number of sales or new users. Then — launches advertising campaigns at each stage of the sales funnel . Metrics — indicators that reflect the desired results or dependencies — will help evaluate the effectiveness of these campaigns.
Example.
An adequate cost per click in a performance project is about 50 rubles. If the cost per click increases, it means that the marketing campaign is losing its effectiveness.
Performance marketing has key and supporting metrics. Key metrics help evaluate how marketing efforts affect the business, while supporting or intermediate metrics help evaluate how well a marketing offer or channel works, and they also affect the achievement of key metrics. For example, the number of clicks is a supporting metric that reflects user transitions from advertising, while the volume and dynamics of traffic is the starting point of the sales funnel. If traffic in the sales funnel falls, then the number of orders will also drop.
What metrics to focus on in performance marketing depends on the type of business, product, and industry. For example, a car is bought once every few years or even once in a lifetime. That is, on average, you can only make money on one user once. Therefore, for a car dealership, the metric will be the final cost of attracting a consumer – CAC, customer acquisition costs. For a coffee shop owner, it is important that customers come regularly, so the main metrics will be retention and lifetime value – they will help evaluate the effectiveness of the entire cycle of interaction with the consumer.
Key metrics
Retention Rate
the percentage of customers who continue to use services or buy products in a certain period of time. Shows the systematic nature of purchases and allows you to predict user behavior and revenue.
Customer Acquisition Cost (CAC)
is the cost of attracting (the sum of all advertising costs) a new customer.
Lifetime Value (LTV)
the amount that the average customer brings to the company over the entire period of interaction with it. Helps to assess the customer’s profitability for the business.
ARPU (Average Revenue Per User)
is the average revenue that a client brings to a company over a specific period of interaction, for example, over a month. Helps to assess how changes in marketing strategy affect profitability.
ROMI (Return on Marketing Investment)
profitability of monetary investments in marketing. Helps to evaluate the effectiveness of investments.
CPA (Cost Per Action)
the cost of attracting (the sum of all marketing expenses) one new user. The lower the CPA, the more effective the marketing campaign.
CPO (Cost Per Order)
the cost of promotion for the sale of one order. Helps to estimate how much the company spent on average on one sale.
Auxiliary metrics
CTR (Click-Through Rate)
is the ratio of users who clicked on an ad to those who saw it (%).
CR (Conversion Rate)
is the ratio of users who performed a target action (ordered a call back, added a product to the cart or purchased it) to those who interacted with the company at the previous stage of the sales funnel (for example, those who clicked on an advertisement).
CPM (Cost per mile)
how much it costs to place an ad per 1000 views. Most often used to measure the effectiveness of advertising on websites and social networks.
CPC (Cost Per Click)
the cost of clicking on an ad. Together with other metrics, it helps evaluate the effectiveness of an advertising campaign and optimize its costs.
If you managed to achieve the KPI, then the advertising was successful. If not, this is a reason to review the marketing strategy or change channels to improve the results.
Performance Marketing Tools
The two main tools in performance are contextual and targeted advertising.
1. Contextual advertising
ads that are displayed in search results based on a specific user request. For example, for the request “how to mix tracks course” the user receives not only regular results, but also those that advertisers have paid for. Contextual advertising can be seen even after the user has closed the search engine. For example, after a couple of days in the mail or after a week on a social network. When an advertiser uses contextual advertising, he pays only for clicks — actual user transitions to his site. Examples of contextual advertising sources: Yandex Direct — for the Russian audience, Google Ads — for campaigns outside the Russian Federation.
The course “Internet Marketer” teaches how to work with marketing tools, work with customers and metrics, launch advertising campaigns, including launching contextual advertising: a separate module is dedicated to it. Students learn how to set up and support advertising campaigns on the Yandex Direct platform.
2. Targeted advertising
designed primarily for users who are at the top level of the sales funnel: they may be interested in a product, but have not yet searched for it. Or they are thinking about buying, but have not yet decided. For example, they visited a website or product page, but did not perform any actions there. At the same time, they are similar to the company’s target audience – age, interests, place of residence. The marketer uses this data to customize the display of ads. The user sees them, for example, before videos on video platforms, in social networks and blogs. Examples of sources of targeted advertising: VK Advertising, MyTarget.
The choice of channel depends on the type of business, product and audience, budget, sales and expenses plan, marginality, average check. For example, the average check in a coffee shop is 500 ₽. The marketer calculated that it would take 300 ₽ to attract one client. If you add the cost of coffee, a cup and baking products to this amount, it turns out that advertising is unprofitable. This means you need to choose a reach campaign – promote posts on the coffee shop’s social networks. You will be able to reach a wide audience and reduce the cost of attracting one client.
Performance Marketing Channels
● Advertising networks
Partner platforms of large advertising tools. Allow advertisers to place ads on different websites and mobile platforms. Example of advertising networks: Yandex Advertising Network (YAN) , Appnext. For example, you need to set up advertising for an online store that sells shoes. This can be done through Yandex Direct to show ads to users who are looking for shoes or interested in fashion. Ads will be visible not only in search, but also on partner sites: popular news portals, blogs and forums that are part of YAN, etc.
● Search services
Allow you to display ads directly in search results based on keywords that users enter. Let’s say a travel agency wants to attract clients for trips to Baikal. A marketer creates a campaign in Yandex Direct, selects keywords, for example, “tours to Baikal” or “trips to Baikal”. When users enter these queries in Google, the ad appears at the top of the search results. If they click on the ad, they will be taken to a site where they can book a tour.
● Social networks and blog platforms
Allow you to place targeted advertising based on the interests and behavior of users. VK is one of the popular social networks in Russia, which is focused on targeted advertising. Among blog platforms, Zen provides such opportunities. Advertisements on the site are configured through VK Advertising.
For example, a fitness club can create an advertising campaign on VK for users interested in fitness, sports, or a healthy lifestyle. The ad is shown to users from Moscow aged 18 to 45 who are subscribed to fitness-related pages or regularly visit such groups. The ad can be an image, video, or carousel that will be shown in the users’ news feed.
Analytics in performance
In performance marketing, several approaches to analytics are used:
● Analytics of Yandex Direct or VK Advertising advertising accounts
Allows you to see what is happening at the top level of the sales funnel – when the client is just getting to know the company. For example, how many people and by what ads went to the site.
● Web analytics
A system that analyzes user actions and parameters on a website. For example, Yandex Metrica and Google Analytics allow you to find out the number of visitors to a website for a certain period, their socio-demographic indicators, time spent, location, target actions, bounce rate — closing a page in less than 5 seconds.
● End-to-end analytics
A comprehensive approach that helps combine data from different channels to evaluate the entire customer journey from first contact to purchase. For an online store, end-to-end analytics will show that the user, for example, first saw an ad on VK, then went to the site through a search engine, subscribed to a newsletter, received an email, and ultimately made a purchase. This will allow you to evaluate the contribution of each channel to conversion. At the start, you can use Yandex Metrica and Google Analytics, for large businesses, choose paid tools like Roistat.
Read Also:Analysis of product demand
An example of using performance marketing
A performance marketing campaign takes place in several stages. Let’s look at an example:
● Preparation
Goal and KPI. Let’s say a company wants to sell fashionable handbags at affordable prices for the middle class. They launched an online store, but no one knows about the product yet. It is important to attract 1,000 customers by the end of the year, while the cost of attracting one customer should not exceed 800 rubles.
● Market and competitor analysis
to understand what advantages can be shown in ads. The company has an ethical business – handbags are made of eco-leather. This can become a unique selling proposition.
● Media planning of the campaign
Determine the budget, advertising channels and forecast approximate metrics.
● Preparing an advertising campaign
Setting up advertising accounts, preparing creatives, landing pages, determining audience segments that will see the ads. The company has a rough idea of its audience — girls under 30, possibly students, living in Moscow.
● Conducting an advertising campaign. Funnel levels:
1. Target audience coverage. Launch outreach campaigns in social networks, set up targeted advertising for female students in social networks: select region, age, gender, potential interests in the advertising account.
2. Buyers visited the website, learned about the company. To remind them about themselves and bring them back, use retargeting – show ads to those who have already been on the website and spent, for example, 30 seconds there.
3. Demand for handbags has formed, people have already started buying them and searching for them on the Internet. The marketer uses contextual advertising – sets up ad display for brand searches. It is easier to buy, conversion increases.
4. Regular customers have appeared. Personalized offers are suitable for them, which can be set up using non-performance tools – SMS or mailings.
● Optimization and a new advertising campaign
At each stage of the funnel, the marketer analyzes how the advertising indicators relate to the set KPIs. If you manage to attract customers for less than 800 rubles, you can set new KPIs and launch new advertising. For example, set up a target audience of competitors and show it to potential buyers of textile bags.
