February 27, 2023

How Does Performance Marketing Work?

Table of Contents

Let us take a look at how performance marketing works, but first it is important for us to define what performance marketing is.

What is performance marketing?

Performance marketing, also know as performance-based marketing or performative marketing, is a type of digital marketing that focuses on measurable results and is based on a cost-per-action (CPA) model. In this model, clients of digital marketing agencies pay for specific actions such as a sale, lead, or click.

This type of marketing is a results-driven approach that allows the client to track and measure the effectiveness of their marketing efforts, and only pay for the results they receive.

In this post, we will first explore four performance models, and then we will talk about other key aspects of this science.

Performance Marketing graphic

Types of Performance Marketing Models:

  1. Cost-Per-Action (CPA) Model
  2. Cost-Per-Lead (CPL) Model
  3. Cost-Per-Click (CPC) Model
  4. Cost-Per-Impression (CPI) Model

What is the Cost-Per-Action (CPA) model?

The CPA model is at the core of performance-based campaigns, meaning all other performance models are derivative form of this model. Again, it is a pay-for-performance model where clients only pay for specific actions such as a sale, lead, or click.

The CPA model can be used in a variety of contexts, such as affiliate marketing, cost-per-lead (CPL), cost-per-click (CPC), and cost-per-impression (CPI) advertising.

This term is often used interchangeably with “cost-per-acquisition” in the digital marketing community.

What is the Cost-Per-Lead (CPL) model?

CPL advertising is a form of performative marketing where digital marketing agency clients pay for leads, rather than sales. A lead is a potential customer who has provided their contact information in exchange for a free offer or trial. These types of campaigns are often referred to as “lead gen” campaigns.

CPL advertising can be used in a variety of ways, such as email marketing or webinars, and is often used to generate leads for products or services.

What is the Cost-Per-Click (CPC) model?

CPC advertising is another form of performance marketing where clients pay for clicks on their ad rather than for specific actions such as sales or leads.

CPC advertising can be used in multiple contexts, such as SEM (search engine marketing), SEO (search engine optimization), or display advertising, and is often used to drive traffic to a website.

What is the Cost-Per-Impression (CPI) model?

CPI advertising is another form of performance marketing where clients pay marketing agencies for impressions (the number of times an ad is viewed).

CPI advertising can be used in a variety of contexts, such as display advertising or social media advertising, and is often used to increase brand awareness. It can also be used to increase product or service awareness.

What is affiliate marketing?

Affiliate marketing is a form of performance-based marketing where advertisers pay affiliates, or marketing partners, a commission for driving a specific action, such as a sale or lead. Affiliates promote the advertiser’s products or services on their own website or through other channels such as email or social media.

The mission of affiliates is to generate sales through referral traffic.

Affiliates are typically rewarded based on the CPA model and only earn a commission when a specific action is taken.

What are three key attributes of performance-based marketing?

  1. Pay for performance
  2. Tracking and measurement
  3. Ongoing optimization

Pay for Performance

With performance contracts written to favor the marketing agency only after client goals are met, the pay-for-performance pricing model is the most unique aspect of performance-based marketing services. Because of this, proper implementation of web analytics is absolutely essential in order to track user interactions with web properties.

Tracking and Measurement

Performance-based marketing relies on tracking and measurement to determine the effectiveness of marketing efforts. Marketing agencies use tools such as web analytics, conversion tracking pixels, and attribution modeling to track and measure the performance of their marketing efforts.

Accurate web analytics allows agencies and their clients to identify which marketing channels and tactics are most effective, and adjust their strategy accordingly. Likewise, they also enable the marketing agency to charge for performance.

Ongoing Optimizations

Performative marketing is an iterative process, and optimization is a crucial aspect of it. Digital marketing agencies use the data they collect to optimize campaigns and improve their performance over time, on the client’s behalf.

These optimizations can include adjusting targeting, refining the messaging, and testing different creative elements.

Considering Performance-Based Options?

You can see, this is a results-driven approach that focuses on measurable results and a cost-per-action (CPA) model, which can be incredibly enticing for organizations focusing on growth, as well as the bottom line.

Performance payout models tend to be written to favor the client, focusing on the client’s return on investment.

SEO Succor offers a complete team of performance marketing experts, obsessed with hitting target KPIs for clients. Our team brings diverse experience to your organization overnight, helping you to scale your marketing efforts.

Reach out to schedule a free initial consultation.

Leave a Reply

Your email address will not be published. Required fields are marked *

map-markerchevron-down linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram