The Beginner's Guide to Performance Marketing (2023)

As the digital world continues to expand like any respectable universe does, businesses who intend to ride out the evolution must constantly look for innovative and cost-effective ways to reach their target audience. That’s common knowledge. 
One of the most effective and efficient methods of digital marketing that tends not to be is performance marketing: a digital marketing strategy that's all about driving measurable results and optimizing campaigns based on data analysis.
In this beginner's guide, we'll explore the ins and outs of performance marketing, including what it is, its benefits, how it differs from traditional marketing, how to create a strategy, and more.

What Is Performance Marketing?

Performance marketing is a type of digital marketing in which businesses only pay for results, such as leads or sales, rather than for the placement of their ads. This data-driven approach involves targeting specific audiences through various digital channels, including search engines, social media, and email marketing using strategies that include Pay Per Click (PPC), affiliate marketing, email marketing, influencer marketing, and social media advertising, among others.

Types of Performance Marketing

In keeping with digital marketing flavors, performance marketing takes various forms that accommodate different business needs and goals. The most popular types:
  • Pay Per Click (PPC) advertising involves paying for each click on an ad. PPC ads can appear on search engines, social media platforms, and other websites.
  • Affiliate marketing is a partnership between a business and an affiliate, in which the affiliate promotes the business's product or service and earns a commission on each sale or lead generated as a result of that promotion.
  • Email marketing involves sending promotional emails to a target audience. This type of marketing is frequently used to promote products, services, or events.
  • Influencer marketing is the practice of partnering with an influential person or entity on social media to promote a product or service to their followers.
  • Social media advertising involves placing ads on social media platforms such as Snapchat.
You’ll find more details on these later in this article.
laptop with a world map and graphs on it

Benefits of Performance Marketing

With the proper mix of the right channels and tools, performance marketing can amount to a highly effective way for businesses to reach their target audience and achieve significant growth by driving conversions — the ideal outcome. Some more specific key benefits of integrating performance marketing into your overall marketing strategy include:
  • Cost-effectiveness: With performance marketing, you only pay for results — which means you can control your marketing costs more effectively.
  • Measurable results: Performance marketing allows you to track your results in real-time and make adjustments to your campaigns accordingly.
  • Targeted audiences: Performance marketing enables you to target specific audiences, based on demographics, interests, behavior, and other factors.
  • Flexibility and control: Performance marketing gives you more control over your marketing campaigns, allowing you to adjust your strategy as needed.
  • Increased ROI: Performance marketing can help businesses increase their return on investment by generating more leads and sales.

How Performance Marketing Is Different than Other Kinds of Marketing

When compared to other digital marketing strategies, performance marketing stands out for its focus on results and measurement. While other strategies such as brand awareness campaigns or social media marketing can be valuable, they’re often harder to measure in terms of their impact on the bottom line.
From another angle: Traditional marketing typically involves broadcasting a message to a wide audience with the hope of reaching a few interested people who will convert into customers. This approach is typically expensive and, at best, semi-effective, as many people who see the message are not part of the target audience.
Performance marketing, on the other hand, is focused on driving measurable results and achieving specific business goals, such as sales or leads. This approach is highly targeted and efficient because it only reaches people who are likely to be interested in what you're offering. What’s more, with performance marketing you have access to real-time data and insights that enable you to make informed decisions about your campaigns and optimize your approach over time. Want to drive meaningful results and maximize your ROI? Choose performance marketing.
Man packaging products into a shipping box.

How Performance Marketing Works

Developing a performance marketing experience that’s right for your business’s journey involves a handful of steps that are readily executable and well worth the effort. Here's how it works:
  1. Identify your target audience based on demographics, interests, behavior, and other factors.
  2. Set clear goals for your performance marketing campaigns, such as generating leads or sales.
  3. Choose the right performance marketing channels, such as search engines, social media, or email marketing, based on your target audience and goals.
  4. Create an effective landing page that will convert visitors into leads or customers.
  5. Test and optimize your performance-marketing strategy — continuously monitor your campaign and adjust your targeting, messaging, and creative based on performance data. Doing so will help you to identify what works and what doesn't, putting you in the best position to optimize your campaigns for maximum performance.

Measuring Success

Measuring the success of a performance-marketing campaign is critical to optimizing it and ensuring that your marketing budget is well spent. Some key metrics to consider when evaluating your performance-marketing campaign:
  • Click-Through Rate (CTR): CTR measures the number of clicks divided by the number of impressions. It tells you how many people clicked on your ad after seeing it.
  • Conversion Rate: This measures the number of people who completed the desired action, such as making a purchase, divided by the number of people who clicked on the ad. This metric helps to identify the quality of your traffic.
  • Cost Per Acquisition (CPA): CPA measures the cost of acquiring a new customer, and is calculated by dividing the total ad spend by the number of conversions.
  • Return on Ad Spend (ROAS): This measures how much revenue is generated for every dollar spent on advertising. It’s calculated by dividing the total revenue generated by the ad campaign by the total ad spend.
Need some inspiration? Here are some examples of successful performance-marketing campaigns that are worth investigating and emulating:
Dollar Shave Club
Dollar Shave Club used a humorous video ad to promote its subscription-based razor service. The ad went viral, helping the company acquire over 12,000 customers in the first 48 hours following its introduction.
Uber
Uber uses a variety of performance-marketing channels to acquire new customers, including search engines, social media, and display advertising. The company also offers incentives to new users, including discounts on their first ride and additional services (Uber Eats, etc.).
Airbnb
Airbnb uses targeted ads to reach potential customers based on their interests and travel habits. The company also uses retargeting ads to reach people who have previously visited the Airbnb website but did not make a booking.

About Performance Marketing Channels

Now that you have a workable understanding of what performance marketing is, its benefits, and how to measure success and build a strategy, let's explore the top performance marketing channels.
Performance marketing channels refer to the various platforms where businesses can advertise their products or services and pay only for the results achieved. Here are the most popular options:
  • Search Engine Marketing (SEM) involves placing ads in search engine results pages (SERPs) based on keywords searched by users. One advantage of SEM is that it allows businesses to target users who are actively looking for their products or services. An example of a successful SEM campaign is when L'Oréal Paris used SEM to increase their online sales by 57%.
  • Social media advertising involves placing ads on social media platforms such as Snapchat and enables brands to target users based on demographics, interests, behaviors, and location. Airbnb used Instagram ads to target users interested in travel, resulting in a 13-point lift in ad recall.
  • Display advertising involves placing ads on websites and mobile apps and allowing businesses to target users based on their online behavior and interests. Booking.com used display ads to increase bookings and revenue by 15%.
  • Affiliate marketing involves partnering with other businesses or individuals to promote your products or services in exchange for a commission on each sale. The advantage of affiliate marketing is that it helps businesses reach new audiences through the network of affiliates. Dropbox partnered with bloggers and websites to increase their sign-ups by 60%.
  • Email marketing involves sending promotional emails to a list of subscribers who have opted-in to receive them. With email marketing, brands can target users who have already shown an interest in their products or services. Grammarly used personalized emails to increase their free trial sign-ups by 10%.
Arrow shot on a bullseye

Performance Marketing and Snapchat

With over 200 million active users, Snapchat can be a valuable platform for making performance-marketing progress, particularly with younger generations. Between our targeting tools, variety of ad formats, analytics tools, and high engagement rates, Snapchat puts your business in a perfect position to better understand, address, and grow your customer base.