Performance marketing is a comprehensive term that refers to online marketing and advertising programs in which retailers and service companies pay a commission to publishers (also known as affiliates) when a specific action is completed, such as a sale. With traditional display advertising, advertising fees are paid up front and do not depend on a specific transaction taking place. With performance marketing, since advertising fees are only paid upon completion of a sale or lead, it is the most measurable way to tie marketing program costs directly to results.
It’s trackable and measurable
In performance marketing, advertisers and marketers only pay for successful transactions. Each transaction is based on a consumer taking a defined action, such as making a purchase from the advertiser or signing up for a subscription. Instead of spending money to advertise your product via traditional media and not knowing if those ads generate sales, you will be able to track every click. Department store magnet John Wanamaker once said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” That is not the case with performance marketing. The trackability of performance marketing isn’t based on estimates. It’s based on actual results — meaning that a marketing program’s effectiveness is accurately determined, down to the mouse click.
Performance marketing extends your advertising reach. You will essentially have an army of website publishers that will promote and market your brand, products and services. Many of these publishers have reach into very specific niche markets that you do not. You may find that sales are increased when your message is targeted to specific groups and vertical markets. For example, an affiliate could have a site targeting stay-at-home moms, giving your products exposure to their loyal users, and attracting sales in a market you might not consider.
It helps diversify your revenue stream. Instead of simply relying on your existing sales channels you will have another method for generating revenue. This can be valuable in tough economic times – especially if sales begin to lag in other channels.
Affiliates add innovation and creativity to your marketing. Affiliates are aggressive and very creative. Remember, the more traffic and sales they drive to your business, the more commissions they earn. So, they are willing to try new methods that your company may not have the time or resources to leverage. Affiliates are quick to jump on new trends such as using social media campaigns. They are also often more nimble and can launch a new campaign in just a matter or a day or two, whereas it might take your company weeks to coordinate the effort.