
Performance Marketing: Advantages And How It Works
Definition of Performance Marketing
- As an introduction, let’s first understand what is meant by performance-based marketing? This term can be defined as an online marketing and advertising strategy that requires advertisers to pay after their business goals are achieved.
- One of the most common examples of business goals is sales. Assume you are a businessman who runs a performance marketing strategy. You will only pay for advertising if one of our products has actually been sold.
- With a strategy like this, advertising activities can have a direct and significant impact on overall business performance and goals.
- You will focus on optimizing the campaign so that it can generate more conversions through trials and making decisions based on data.
Advantages and Benefits of Performance Marketing
- The question is why is this one marketing strategy discussed by so many people? Of course because it has many advantages and is able to provide great benefits to performance marketers.
- The following are some of the advantages and benefits that you can get by running performance-based marketing.
1. Targeted Advertising
The advantage that you will feel first when applying this one marketing is more targeted advertising. This means that you are not showing ads to everyone on the internet.However, there are certain criteria for people who will see your product ads. What are the criteria?Of course, it is adjusted to the target market you want. The display can be targeted based on the interests and behavior of potential consumers, the type of gadget used, the type of class, age, and location.
2. Measurable Performance
When you have displayed targeted ads, the activity of the ad will clearly be more measurable. You can monitor its performance data, starting from the number of people who see the ad, the number of clicks, to the number of sales or sales that occur from the ad.The data displayed is so complete, you can even find out how many people watch the ad more than 75% of the total duration. This data makes it easier for you to measure the success of the ad.Next, you can conduct an evaluation to find out the various shortcomings of the ads that have been displayed. Of course, after that you can make the right decision to optimize so that the results are more optimal.
3. Paid After Action Occurs
The advantage of implementing performance-based marketing is that it is more budget-efficient. Because, you will only be required to make a payment if the desired action occurs. This depends on the type of action you choose.Unlike traditional advertising media such as TV, radio, or billboard ads that require you to pay in advance. It doesn’t matter whether there will be a conversion or not from the ad.
How Performance Marketing Works
- Performance-based marketing can be applied on various platforms. But the most common is on search engines like Google and social media like Instagram and Facebook. Generally, each platform will sort out which ads will be displayed. This is influenced by several factors.
- These factors include conversion rate, relevance, quality, and the offers you provide. Take Facebook for example. The ad serving system here prioritizes the relevance and quality of ads, the number of offers, and the outcomes expected by advertisers.
- You need to know that in practice, there are four groups that must run together in performance marketing operations. Here’s the explanation.
- Advertiser or Retailer
The first group is the advertiser or retailer. Included in this group are business owners who want to promote their products or services through affiliate partners or publishers.
- Affiliate
Affiliate is the second group in this marketing strategy whose role is to promote the advertiser’s services or products. There are various forms of affiliates, ranging from social media managed by influencers, product review sites, to blogs.
- Affiliate Network
Next is the affiliate network or can also be called a third party tracking platform. The role of this platform is no less important because it is a liaison or bridge between retailers and affiliates.
- Affiliate Manager
The last group is called affiliate managers or outsourced program management companies (OPM). Usually in the form of an agency company that provides and prepares the needs of advertisers and affiliates.There are several strategies that are usually implemented in performance-based marketing. Here are the details.
- Cost per Acquisition (CPA) or pay per sale requires retailers or advertisers to pay publishers if someone clicks on an ad and takes action such as purchasing or filling out a form.
- Cost per Leads (CPL) is a strategy where advertisers must make payments when there are new leads. An example of an action that is categorized as a lead is when a user fills in data such as a telephone number, email, and so on.
- Cost per Click (CPC) is the most widely practiced strategy. This requires advertisers to make payments to publishers if a user clicks on an ad.
- Cost per Impression (CPM) is also quite popular. If you choose this system, advertisers must pay a fee per ad impression. Usually payments are made per 1,000 impressions.
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