With more data available than ever before, attributing marketing has become much easier. This means that optimizing for certain ad campaign goals is both possible and preferred–which brings us to the revolution of performance marketing.
What is Performance Marketing?
The term, “performance marketing” is easier to understand as performance-based marketing. In short, this means that advertisers will only pay marketing companies according to how well their ad actually performs.
Ad performance can be broken up in a variety of ways: CPM, CPA, CPC, CPE, etc. Keeping up with all of the digital marketing acronyms can be confusing, so here’s a breakdown of some of the most frequently used terms:
CPA = Cost per Action
In this case, an advertiser is only paying per completion of a desired action that they have predetermined. Examples of CPA’s could be website click-throughs or video plays.
CPC = Cost per Click
This one is fairly simple–the advertiser pays per click on the published ad.
CPM = Cost per Mille aka Cost per Thousand
CPM is all about impressions, so the advertiser will be charged a certain price for every 1,000 impressions a published advert gets.
CPE = Cost per Engagement
Ad “engagement” can be earned when a user hovers over the ad for a set amount of time or when a user clicks on the ad and spends more than a few seconds on the landing page.
Who needs performance marketing?
The answer is simple. Any and all advertisers who need to prove ROI on their work need to think about performance marketing. These companies can range anywhere from Fortune 500 companies to small businesses.
Performance marketing is ideal for advertisers who want to be able to accurately track their ads’ metrics (impressions served, CTR’s, etc.) and pay only for those results.
Why do they need it?
Just last year, digital ad spending in the U.S. hit an all-time high of $88 billion but ROI still remains unclear. Not only will performance marketers ensure that all of your ad metrics are both measurable and trackable, but they will also provide your company with benefits that traditional marketing can’t match:
Results are transparent.
Performance marketing allows companies to actually see which ads are the most effective through the metrics that the publisher provides them. With this information, the advertiser can then decide where to best allocate ad spending.
Tracking ad performance can only help the brand to better optimize its campaigns. Just don’t get caught in analysis paralysis with the data. Identify your goal, execute, and determine the why from the results.
Drive brand engagement in unique ways.
Results-driven performance marketers are incentivized to ensure that your ads are as compelling as possible so they tend to be more innovative with their advertising methods than traditional publishers are.
To generate publicity buzz around Sony’s newest thriller, the studio launched a 360-degree video immersive ad campaign for Escape Room. This also inspired the creation of an escape room 3D photo which is another innovative advertising tactic.
The Escape Room ad campaign performed drastically better than the standard entertainment industry CTRs.
Average Performance Benchmarks
This infographic depicts Google’s average display ad CTR’s which varies by industry. These industry benchmarks are below 1% which leaves significant room for improvement.
In-banner video ad completion rates are higher than display CTR’s but they could still be improved with more engaging advertising tactics.
Which Performance Marketing Tactics Work Today?
With so many innovative technologies breaking into the advertising industry, there are many new ways to drive ad engagement.
360° Video Ads
Cathay Pacific launched a 360-degree ad campaign that allowed users to virtually explore all of the luxuries that the airline had to offer before purchasing a ticket. This expandable banner ad resulted in higher than average CTR’s and outperformed all prior brand campaigns.
360-degree video ads are highly effective in earning higher engagements because they are a form of immersive content that pulls users in.
A/B testing is a practice commonly found in marketing and it can be used to compare two variations of an advertisement to measure which drives higher engagement rates. These ads could be distinguishing between colors, fonts, or CTA’s.
This can be helpful in performance marketing to test which types of ads will garner the best results for new ad campaign launches. Both the publisher and the advertiser are incentivized to produce the most effective ads and experimental testing is a reliable way to assess that.
These interactive photo ads result in significantly higher impressions and CTR’s than traditional display ads and thanks to Facebook–they’re quick and easy to create.