As the marketing field continues to evolve, one key component has exponentially increased in value and necessity: digital marketing. More specifically, implementing data analytics in concert with digital marketing is essential for understanding and improving upon advertising and promotion strategies, campaigns, budgets, and more. An integral part of this developing world of digital marketing, performance marketing involves measuring the success of paid campaigns.
Performance marketing emphasizes measurable results based on consumer reactions to digital campaigns. 1 This might look like a paid Instagram ad that results in a boost in site clicks or increase in clicks converting to sales. This type of marketing is closely associated with paid marketing such as pay-per-click (PPC) and search engine marketing (SEM), which drive customer conversions through paid campaigns on digital platforms like search engines and social media. 2
In short, performance marketing allows marketers to understand the results of their digital campaign through quantitative analysis.
How might marketers measure performance? Return on investment (ROI) and data analytics are tools marketers use to determine the performance of a paid digital campaign. A marketer can learn whether their campaign had the necessary ROI by setting key performance indicators (KPIs). 3 Analyzing KPIs helps marketers interpret data, measure results, and ultimately improve their strategies. For example, a marketer can estimate lifetime value, a representation of a customer’s total value to a company based on metrics like their current purchasing habits amplified over their entire relationship. 4 KPIs like lifetime value provide a measurable value for marketers to analyze; these quantifiable metrics are “tangibly linked to revenue rather than a somewhat intangible promise of loyalty and satisfaction.” 5
“Understanding these numbers over time and being able to track them side by side is the only way to get a true understanding not only of what’s driving customer spend and loyalty but also what it’s delivering back to the business’s bottom line.” 6
This element of marketing is important for today’s marketers to utilize because of the far-reaching impacts of digital campaigns. Globally, digital advertising expenditures are expected to reach over $700 billion this year with search advertising making up the largest segment. 7 With these significant investments into digital advertising, marketers must be able to interpret the performance of their efforts, determine where their budget is best spent, and deliver results to company leaders.
Chief marketing officers and senior-level marketing executives are expected to recognize the value of digital marketing and be able to balance performance marketing with brand marketing. While performance marketing seeks to convert digital marketing efforts into results, brand marketing focuses on spreading awareness and managing perception. 8 Companies now are looking for senior marketers that have experience in both forms of marketing because each is essential to a successful marketing strategy. Without brand marketing strategies to manage consumer engagement, awareness, and differentiation, performance metrics are not as impactful. This is why firms are looking to hire senior marketing executives with experience in both. 9
Brand marketers might focus on audience engagement strategies while performance marketers evaluate advertising campaign execution.
In recent months there has also been a wave of advertising budget cuts stemming from economic uncertainty. It’s in these kinds of economic conditions that pressure increases to reduce marketing spending or prove the value of ad spending. “As the ad industry braces for whatever broader macroeconomic troubles come its way, its executives expect history to repeat itself: When the economy sputters, companies frequently reduce their ad and marketing budgets.” 10 Performance marketing allows marketers to defend their budgets by showing measurable results of digital campaigns and improves efficiency for determining where and how digital marketing spending is most effective.
In fact, CEO of the Association of National Advertisers, Bob Liodice, said brands will be most successful “when they can differentiate themselves and defend the productivity of their investments” despite economic conditions. 11 This perspective acknowledges the benefits of balancing performance marketing with brand marketing. Proving the value of marketing through performance analysis and brand management can help marketers defend their budgets in the face of spending cuts and determine the most cost-effective methods of digital marketing.
Questions marketing managers would consider:
- How can your marketing team benefit from using performance marketing?
- Digital marketing performance can be measured with KPIs. Which KPIs should you use to measure the success of your campaign?
- How might you use performance marketing and brand marketing strategies to defend marketing budgets from the pressure of spending cuts?
References
1 Shopify Staff. (6 April 2022). What is Performance Marketing? A Definition and Guide. Shopify. https://www.shopify.com/blog/performance-marketing
2 Shopify Staff. (6 April 2022). What is Performance Marketing? A Definition and Guide. Shopify. https://www.shopify.com/blog/performance-marketing
3 Kloot, Laura. (21 July 2022). How to Get Started with Performance Marketing. Outbrain. https://www.outbrain.com/blog/performance-marketing/
4 Kloot, Laura. (21 July 2022). How to Get Started with Performance Marketing. Outbrain. https://www.outbrain.com/blog/performance-marketing/
5 Qualtrics. (2023). What is customer lifetime value (CLV) and how to measure it? Qualtrics. https://www.qualtrics.com/experience-management/customer/customer-lifetime-value/
6 Qualtrics. (2023). What is customer lifetime value (CLV) and how to measure it? Qualtrics. https://www.qualtrics.com/experience-management/customer/customer-lifetime-value/
7 Statista Research Department. (20 January 2023). Digital advertising in the United States – statistics and facts. Statista. https://www.statista.com/study/12457/online-advertising-in-the-united-states-statista-dossier/
8 Coffee, Patrick. (17 January 2023). More Companies Are Hiring CMOs With Performance Marketing Backgrounds. The Wall Street Journal. https://www.wsj.com/articles/more-companies-are-hiring-cmos-with-performance-marketing-backgrounds-11673650584
9 Coffee, Patrick. (17 January 2023). More Companies Are Hiring CMOs With Performance Marketing Backgrounds. The Wall Street Journal. https://www.wsj.com/articles/more-companies-are-hiring-cmos-with-performance-marketing-backgrounds-11673650584
10 Graham, Megan. (28 October 2022). Marketers Brace to Defend Their Ad Budgets in an Unsteady Economy. The Wall Street Journal. https://www.wsj.com/articles/marketers-brace-to-defend-their-ad-budgets-in-an-unsteady-economy-11666987787?mod=article_inline
11 Graham, Megan. (28 October 2022). Marketers Brace to Defend Their Ad Budgets in an Unsteady Economy. The Wall Street Journal. https://www.wsj.com/articles/marketers-brace-to-defend-their-ad-budgets-in-an-unsteady-economy-11666987787?mod=article_inline
Marketing Management 