What is performance marketing and why is it worth optimising advertising activities in e-commerce?

The importance of performance marketing is constantly growing. Its impact on e-commerce becomes more and more visible. At the beginning, let‘s face the question: what does performance marketing stand for? Basically, the performance marketing includes all activities in which payment depends on the implementation of a specific marketing activity (for example, entering the online shop, registering on the website or filling out the form). This means that the affiliate or agency receives the money only in the event of the success. This is an extremely useful tool for retailers and advertisers, which allows them to better understand the behaviour of the target group and to estimate the advertising budget rationally.

The nature of performance marketing

It is important to translate individual marketing activities into specific recipients’ activities. It does not matter here how many people saw the banner posted in the online shop. It will be important how many people click on it, enter the appropriate page, register on the site or fill in the form, place a product order and make a purchase. 

What’s more, we can monitor all these activities, thanks to which we will find out which marketing campaigns have brought the best results. This data is important because it provides us with key information on the effectiveness of our actions.

We should always remember that the effectiveness of the performance marketing campaign is not determined by the number of people who viewed the advertisement. The measure of success is the conversion rate, which allows you to find out how many of them completed the activities you expected.

Potential customers are encouraged to perform the action you expect with a variety of different tools. This translates into methods of accounting for marketing campaigns. In this model, you do not pay for the number of ad views, but for specific actions performed by users, such as filling out the form or entering the website of the online shop.

What payment models are used in performance marketing?

  • CPC (Cost Per Click) – means the actual price you pay for each click on PPC marketing campaigns (pay-per-click), e.g. an advertising link.
  • CPL (Cost Per Lead) – in this model, the advertiser pays only for the person/customer who will leave their personal data in the form of the name, phone number, e-mail address or other. e.g. registration on the site or for subscribing to the newsletter.
  • CPA (Cost Per Action) – allows an advertiser to pay for a specified action from a prospective customer, e.g. sending a request for an offer.
  • CPO (Cost Per Order/ Cost Per Acquisition) – it is the amount spent on advertising in order to make a sale. This payment model is particularly important for those companies that have a very small budget on the advertisement or are just entering the market.
  • CPS (Cost Per Sale/ Cost Per Conversion) – is the amount an advertiser pays for each sale (conversion) generated by a particular ad.

Effective marketing can be conducted with the help of many advertising tools, such as:

  • display advertising,
  • social media marketing,
  • e-mail marketing,
  • mobile marketing,
  • loyalty programs.

“You can’t manage what you don’t measure” – also in marketing

This famous phrase told by Peter Drucker is still valid when we look at advertising activities on the Internet. Today it is difficult to imagine making business decisions and implementing any marketing plans without properly measured data. New tools based on data analysis allow for optimisation of activities undertaken by marketers.

Performance marketing can be used in almost any form of online advertising. It is important to monitor and optimise your campaigns to get the best possible conversion level. What factors do you need to consider when optimising performance marketing activities?

1. Customer journey

The indispensable element of performance marketing is the customer journey. To put it briefly, the customer journey analyses the behaviour of the customer at each phase of interaction with the brand. The research has shown distinctly that the proper estimating of the marketing budget and adjusting marketing activities to the customer journey can result in increased sales.

We need to know the exact way that particular customers reach our offer. Try to figure out, what made customers interested in your offer? Which advertisement encouraged them to enter the online shop website? We must analyse each stage of the sales process through which potential customers pass and gain accurate knowledge about their behaviour.

2. Multiscreening

Modern consumers use mobile devices as well as desktop models in order to make a purchase or to find a specified product. An effective marketing strategy should take into account the specificity of actions undertaken using different devices and include various activities. The most important thing is that performance marketing strategy must be consistent in every communication channel.

3. Commitment

What’s more, customers who have bought something from you or who are involved in your actions become more likely to buy another item or join your social media groups. Remember about it especially during remarketing campaigns. Retargeting is an extremely efficient pillar of performance marketing.

Is it worth choosing campaigns based on performance marketing?

The advantage of performance marketing is the ability to measure its results. Thanks to this, we have known about the costs that we incur for specific promotional campaigns and their final effects.

The famous words of marketing pioneer John Wanamaker do not work here: “Half of the money I spend on advertising is wasted, the problem is, I do not know which half.”

This situation can’t take place in performance marketing. We know the exact effects of the actions taken and their impact on customer behaviour. The costs of the marketing campaign in this model is closely related to the effects they achieve.

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