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The term 'performance marketing' has become a buzzword for marketers; however, there are many misconceptions about what performance marketing is. 

Broadly, performance marketing refers to digital advertising programs where advertisers only pay if their ad generates a specific action, such as a click, lead, view, sale, or download.

Performance marketing can produce measurable results and is an attractive advertising strategy for brands that want to drive ROI (return on investment) from their marketing spend. 

In this article, we'll guide you through the nuances of performance marketing and dispel four common myths about the discipline.

1. Performance Marketing is Simply Paying Per Click

The birth of performance marketing is closely linked to the creation of the first banner ad in 1994. A few years after the first banner ad went live, the concept of PPC (pay-per-click) advertising emerged — a program where advertisers only had to pay when their ad generated a click. 

Like PPC advertising, performance marketing is ROI-driven; however, performance marketing is a science that goes beyond just paying for clicks. 

Performance marketing encompasses a variety of ad types, content platforms and marketing tactics, including search, remarketing or behavioural retargeting, social media marketing, email marketing, affiliate marketing, influencer marketing and content marketing.

Modern performance marketing maps the above mentioned tactics against a consumer journey. This strategy allows marketers to choose the best tactic(s) to engage consumers at crucial decision-making moments to increase awareness, drive consideration and ultimately purchase.

2. Performance Marketing Is Only for the Bottom of the Funnel

While early performance marketers leveraged clicks as the ultimate measure of success, a variety of actions can measure marketing effectiveness.  

Looking at a simple sales funnel, here are some examples of some basic metrics you can use to evaluate the effectiveness of your campaign. 

From filling out a form to watching a 20-second video without skipping to the
end—different actions can be used to signal where the consumer is in their buying journey.

Each of these actions can be used to create new audience segments to market to, allowing you to leverage performance marketing thinking and tactics throughout a sales funnel or consumer journey. Note that while the cost per action may be how you evaluate the success of each tactic, it does not need to dictate how you purchase your media. For instance, you can buy your media on a CPM (cost per thousand impressions) basis but evaluate its effectiveness as a tactic on a cost per action. 

3. Performance Marketing is Only for Online Businesses

In the past, it was challenging to measure if digital performance marketing campaigns were effective at driving offline actions, like in-store purchases or store visits. However, location-based ad technology on mobile phones has made it easier to track if a consumer has visited a brand's brick and mortar store. 

Digital payment technologies such as Apple Pay, Alipay and PayPal also create unique customer profiles for shoppers, which enable companies to identify consumer shopping habits online and offline. In turn, this data helps brands better understand the total impact of a performance marketing campaign.

    4. Performance Marketing Needs Consumers to Share Personal Information

    While some advanced techniques leverage personally identifiable information (such as mobile phone numbers, email addresses, etc.), personal information is not required to run a strong performance marketing campaign. While these elements are helpful if personalization of messaging is needed, understanding the consumer journey and what the critical decision-making points are the necessary elements for a well-designed performance marketing campaign. For brands that decide to leverage their PII for performance marketing, designing a campaign that is mindful of protecting this information is equally or more important than just developing an effective campaign.

    The Bottom Line

    Performance marketing will continue to evolve as technology, platforms and consumer behaviour evolves. As long as we stay focused on the core elements, we can leverage performance marketing to drive measurable gains for our brands. 

    When developing your next campaign, ask yourself the following questions:

    • What are our key audience segments?
    • What does the consumer journey look like for each segment?
    • What are the critical decision making moments in these journeys?
    • What are the best performance marketing tactics to influence these moments?
    • What are the right actions to measure the effectiveness of each part of our campaign?