How Performance Marketing Works [+6 Simple Steps]

Marketing Performance

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18 digital marketing metrics and KPIs you should know

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18 digital marketing metrics and KPIs you should know

In the digital world today, businesses are using new marketing strategies to connect with their audience and grow. Performance marketing has become a powerful method, alongside social media ads, affiliate marketing, and email marketing.

Meaning of Performance Marketing

In this article, you'll learn:

  • how performance marketing works;
  • how to craft an effective performance marketing strategy;
  • how to evaluate the success of your performance marketing strategy;
  • how to use performance marketing analytics.

Additionally, we'll take a look at other emerging trends that are shaping the future of digital marketing.

Meaning of Performance Marketing

Performance marketing is a dynamic blend of paid advertising and brand promotion. It involves affiliates, advertising publishers, and marketing agencies getting paid only when specific actions, like leads, sales, bookings, or downloads, are achieved.

Sellers feel more secure when they pay for real results because they know their target customers are already buying before they pay. And they also get free advertising and targeted clicks as a bonus.

Unlike traditional ad campaigns where success is uncertain, performance marketing ensures you get a guaranteed return on your investment. This approach is less risky, and you have better control over your ad spending. It's like paying for success.

How to Measure Performance Marketing

In performance marketing, the metric you choose determines when you get paid and how successful your campaign is. The more actions you generate, the better your results.

Let's say you are a tech influencer collaborating with a popular electronics retailer. You provide your followers with an exclusive 15% discount code to use on the retailer's website. Every time someone makes a purchase using your unique code, you receive a commission from the sale.

The success of your performance marketing campaign is determined by the number of sales made with your unique discount code. This helps calculate your earnings from the purchases your audience makes using that code.

When it comes to picking the right metric for your performance marketing campaign, you've got some options to consider:

metrics for your performance marketing campaign

Impressions and CPM

Useful for increasing brand exposure. Also known as cost per mille, you'll pay based on the number of impressions you receive from an ad shared by a partner or displayed elsewhere. CPM typically pays out for every 1,000 impressions.

Cost Per Click (CPC)

If your goal is to get more clicks to your page or offers, then CPC is your go-to. Your partners get paid each time they drive someone to click. It's important to use tracking URLs to distinguish regular traffic from the traffic they inspire.

Cost Per Leads (CPL)

Looking to capture potential customers? Pay for each new user's information, like when they fill out a form. This metric is excellent for gathering leads, and you can further nurture them to become loyal customers.

Cost Per Order (CPO)

If you aim to increase completed orders, focus on the CPO metric. This helps measure your campaign's success by counting customer orders. You can easily track your marketing effectiveness and pay your partners accordingly when their efforts lead to successful orders.

Cost Per Acquisition (CPA)

This metric is ideal for driving sales, and you'll measure your success based on the number of actual product purchases. Whenever your partners' efforts lead to a sale, you'll pay them, making it easy to trace back.

Customer Lifetime Value (LTV)

This metric is used to determine the long-term value of acquiring a customer. It is usually measured over a specific period, such as a year, and helps marketers understand the revenue a customer is likely to generate during their entire relationship with the business.

Steps to Create a Performance Marketing Strategy

Here are the basic steps to run successful performance marketing campaigns that deliver the best possible outcomes for your business.

Steps to Create a Performance Marketing Strategy

Set Your Goals

The very first step is to get the ball rolling and have a clear vision of what you want to achieve with your performance marketing campaign. Whether it's generating leads, increasing sales, or improving brand awareness, defining your goals sets the direction for your entire strategy.

Identify Your Target Audience

Once you have your goals in place, identify your target audience. Understand who your potential customers are, what they need, and what interests them. Research shows that businesses using customer personas have a 2-5 times higher return on investment. Tailoring your campaigns to address their specific pain points and desires can significantly boost your marketing success.

Choose Your Channels

Performance marketing offers a wide array of channels to reach your audience, including social media, search engines, email, and mobile apps. Select the channels that align best with your target audience and campaign objectives. Each channel has its strengths and weaknesses, so consider where your audience is most active and engaged.

Develop Your Campaign

Now that you know your goals, target audience, and chosen channels, it's time to craft your campaign. Create a well-rounded strategy that includes different tactics like targeted ads, email marketing, social media posts, and other relevant methods to reach your audience better.

Launch Your Campaign

Put your customized strategies into action on various platforms like social media, search engines, emails, and mobile apps.

Track Your Campaign

Keep a close watch on how your campaign performs right from the start. Use main metrics and analytics to see how your efforts are making a difference and if you're on track to reach your goals. If needed, be ready to make changes based on the valuable data you collect during this initial phase.

Optimize and Adjust

As you keep tabs on your campaign's progress, you might uncover areas that require improvement. This is where optimization comes into play. Make data-driven adjustments to improve your campaign's performance. Tweak your targeting, refine your messaging, or experiment with new tactics to maximize results.

Performance Marketing Analytics

Marketing analytics is a way for marketers to figure out what's effective and why. It involves collecting and analyzing data from marketing efforts to see how well they perform.

Why Do You Need Performance Marketing Analytics

By looking at data from different campaigns, like a new blog post or an email campaign, marketers can see how successful they were. This helps them decide if they should do the same thing again or if they need to make changes for better results.

So, what steps are necessary when it comes to performance marketing analytics?

Collect Advertising Cost Data

First, collect data on your spending for ads, promotions, and other marketing activities. This helps you see where your money goes and how well it works. Understanding the ROI of different marketing efforts helps you plan and adjust the budget, and prioritize strategies that get the best results.

Stream User Behavior Data

Now, let's see how people interact with your marketing. Keep an eye on how users behave on your website, mobile apps, and social media. Measure how many times they visit, how many clicks you get, and how much they like your content. This information gives you insights into what your audience loves and how you can connect with them even better.

Prepare (Transform) Data

After gathering data from various sources, it's time to clean it up and get it ready for analysis. Data preparation involves organizing and structuring the information so that it becomes easy to understand and work with.

Visualize Data

Now, it's time to turn the data into easy-to-understand pictures. You use colorful charts, graphs, and dashboards to present the information visually. These visualizations help you spot patterns and important points quickly. It's like turning complex data into a story that's easy to follow.

Make Data-Driven Decisions

Armed with numbers transformed into easy-to-understand charts and graphs, you can now make smart decisions for your marketing strategies. You look at how your past efforts performed, find areas where you can improve, and adjust your plans accordingly.

Why Performance Marketing Is Worth Your Investment

Why Performance Marketing Is Worth Your Investment

Performance marketing has many benefits that make it a smart choice for businesses. One of the biggest advantages is that you only pay for marketing when you see real results and successful transactions. This is great for small businesses just starting, as they can make money before spending on marketing.

Another benefit is that performance marketing is easy to track and measure. You can see exactly how well it's working, which helps you make informed decisions and improve your strategies.

Also, performance marketing is a win-win for both businesses and marketing companies. Marketers work hard to make their campaigns successful because they get paid based on results. This means you can expect your marketing partners to give their best efforts, leading to successful campaigns for both of you.

What Is the Evolving Landscape of Performance Marketing

The performance marketing landscape is always evolving, with new technologies and strategies on the horizon. Here are some exciting trends that will shape its future:

AI and ML

Artificial intelligence and machine learning have changed performance marketing, helping businesses analyze massive amounts of data and make smarter decisions. Thanks to AI-powered algorithms, campaigns can be optimized to reach the right people, personalized just for them. It's like having a marketing assistant that knows exactly what your customers want, leading to more sales and better profits.

Mass Personalization

Ever noticed how websites and emails seem to know exactly what you like? That's mass personalization at work. Customers these days expect a customized experience, and it's a big deal in performance marketing. By tailoring content and offers to each person's tastes and habits, businesses can create a stronger bond with customers. With data and smart targeting, marketers can deliver messages that hit the right spot across different platforms.

The Power of Video

Videos are like magnets, drawing in audiences and convincing them to take action. Whether it's an engaging product demo or a heartwarming story, videos have the power to entertain and make people click that "buy now" button. Videos offer a compelling way to tell stories and showcase products or services on social media, email campaigns, or websites.

Omni-Channel Marketing

Think about how you shop these days - online, on your phone, or even in a store. Brands aim to provide a seamless journey for customers across different platforms and devices. As people use different channels and devices, performance marketing will likely become more omni-channel. This means campaigns will use multiple media and touchpoints to reach customers.

To master omni-channel marketing, use OWOX BI and get comprehensive insights into customer journeys and behavior across multiple channels.

Optimize your omni-channel performance with OWOX analytics


Cross-Device Marketing

In today's world, people use smartphones, tablets, and computers for shopping. Cross-device marketing connects these devices to understand how customers shop. It gives a complete picture of customer behavior and their path to purchase.

For successful cross-device marketing, OWOX BI provides tools to track and analyze user profiles on different devices. This helps marketers create personalized experiences, increase customer loyalty, and boost conversions.

Discover user insights with OWOX BI cross-device tracking and analysis



Performance marketing is a powerful blend of paid advertising and brand promotion that ensures businesses pay only when specific actions, like leads or sales, are achieved. This win-win approach gives sellers confidence, knowing they pay for real results, and affiliates earn from targeted clicks and free advertising. With so many benefits and the integration of advanced technologies, businesses can stay ahead in the ever-changing marketing landscape and achieve remarkable results.


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  • What is performance-based marketing?

    Performance-based marketing is a digital strategy where advertisers pay for specific actions achieved, such as leads or sales, ensuring a guaranteed return on investment.
  • What are the benefits of performance-based marketing?

    The benefits of performance-based marketing include reduced risk, targeted advertising, better control over spending, and motivated partners working towards successful campaigns.
  • Is performance marketing the same as affiliate marketing?

    Performance marketing and affiliate marketing are closely related but not the same. While both involve paying for specific actions, performance marketing encompasses a broader range of paid advertising and brand promotion strategies. Affiliate marketing is a part of performance marketing, where affiliates promote products or services and earn commissions based on successful referrals.

icon Get in-depth insights

18 digital marketing metrics and KPIs you should know

icon Get in-depth insights

18 digital marketing metrics and KPIs you should know