You've created a brilliant digital marketing campaign strategy. You budget thousands of dollars to execute it and hope it will result in positive engagement and new prospects. However, when you track the campaign results, you realize it didn't achieve its goals. This adds your marketing spend to the marketing budgets lost on poor digital performance each year.
What if you could monitor and iterate as you execute marketing campaigns? What if you could see what leads to sales, conversions, and increased marketing ROI? This is where performance-based marketing comes in.
Performance marketing tracks essential elements of your digital marketing campaigns to ensure they work in alignment with your business goals. But what is performance marketing? In this article, we'll discuss the benefits and challenges of performance-based marketing. You’ll also learn whether it's right for your business and how to measure its success using Wrike.
What is performance-based marketing?
Performance-based marketing refers to digital marketing and advertising, where professional service providers are compensated when set metrics and business goals are met. In digital performance marketing, success is directly tied to performance, and you pay when a specific action is complete.
You pay for results, not effort. These results could be clicks, views, sales, installs, or leads. In performance marketing, all marketing activities are measured, and marketing managers make data-driven decisions based on campaign performance. You can see the real-time marketing impact on sales and other aspects of the business and optimize accordingly.
What are the benefits of performance marketing?
The benefits of performance marketing include:
- Performance-based marketing is transparent: The marketing managers (or business owners) are clear about the results they want. Advertisers (or agencies) must deliver on these goals or not get paid. Performance-based marketing leaves no room for ambiguous, upfront fees or unclear expectations. Both parties understand what each requires from the transaction and the conditions upon which payment would be made.
- Performance-based marketing is direct: Performance marketing lets you know exactly where your marketing budget goes and what it yields. Clicks, views, and total time spent on a page are easily measured. You can see who interacts with your campaign and uncover insights such as customer acquisition costs, costs per lead, and cost per sales. This information helps you decide where to focus marketing spend further down the line.
- Performance-based marketing is measurable: All the data you need is available on a dashboard. You can set campaign goals based on your business objectives and track their progress. For example, if your company relies on leads, you can track lead generation and discover what strategies account for the most successful and failed leads. This way, you optimize your marketing funnel to get the best results consistently.
- Performance-based marketing is low-risk: You can plan your budget down to a tee, schedule the best time to publish ads, view results in real-time, and tweak campaign elements to get the best results. Digital performance marketing puts you in the driver's seat, enabling you to make adjustments that ensure your campaign nets a positive marketing ROI.
- Performance-based marketing offers better insights: Performance marketing helps you learn more about your business, tactics, and customers. With data gleaned from your marketing performance management dashboard, you know which ads have the highest ROI, what your market engages with, where they drop off, and what parts of your funnel need more work. With these insights, you can make data-driven business decisions.
What are the challenges of performance-based marketing?
Performance marketing has its challenges. Execution can be complicated and may cross the lines of online advertising ethics. Choose your performance marketing agency carefully to get the results you need without getting involved in blackhat marketing techniques. Other challenges of performance marketing include:
1. Increased chances of fraud
On the surface, performance marketing seems like a smart choice since you only pay for what you get. However, payment on results may be costly if it incentivizes the wrong behavior. Digital performance marketing agencies may focus on driving quick results through unethical, fraudulent, or low-value methods. The main types of ad fraud in online advertising today are:
- Cookie stuffing: Leaving multiple cookies in users' browsers to claim inflated commission
- Domain spoofing: Faking a website name or email domain to deceive users
- Location fraud: Falsifying location data
- Pixel stuffing: Cramming an ad into a one-pixel space and charging for the full amount
- Malicious bots: Malicious bots click ads, impersonate humans, send spam emails, and carry out cyberattacks
- Ad stacking: Overlaying ads and charging for fraudulent impressions
2. Difficulty understanding the cross-device user journey
A user may find your product on an iPad, research and review it on their PC, and purchase it on their phone. This course across devices makes it challenging to accurately track customers' journeys, leading to last-click attribution and neglecting marketing interactions made before the customer gets to your sales page.
3. Underpriotization of long-term goals
Since it's focused on real-time results, performance marketing may cause you to forego longer-term goals and focus only on generating immediate ROI. Although performance marketing drives desired outcomes faster, you must keep sight of your larger marketing funnel to nurture and retain new and existing customers who find you through other means.
How do you measure success in performance-based marketing?
Measurable ROI is the highlight of performance marketing. You can track performance using marketing tools, but you should allow adequate time to gather data on each campaign before measuring its success. To measure success in performance marketing, you should:
- Set business goals: Your business goals are the foundation for your performance marketing. These goals determine the metrics that drive the campaign and whether it is successful.
- Set your keywords: When your goals are clear, you can target the most relevant keywords to attract the right prospects and increase your chances of success.
- Monitor campaign results: Once the campaign is in motion, you must monitor all your marketing activities to see what works best and what doesn't.
- Iterate and optimize successful tactics: Double down on the successful actions and analyze those that do not work. Test essential campaign elements and use the data to make your campaign more successful.
How do you know if performance-based marketing strategies are right for your business?
Almost every business can benefit from performance marketing, but it's not the right strategy for everyone. Your business is suitable for digital performance marketing if:
1. Your business has a digital presence
The goal of performance marketing is to drive customer action, not to spread brand awareness. This means you should already have a digital presence and assets that you want your market to patronize. Your performance marketing strategy will revolve around your website and online assets, so they must be well-optimized to drive desired results.
2. You need quick, direct marketing results
Focusing on immediate results rather than a big-picture view of your company's goals and growth may result in unsustainable (and unsavory) performance marketing results from blackhat methods. Before starting a campaign, it is important to align your performance marketing strategy with your short- and long-term business goals.
3. You have technical expertise
Performance-based marketing can be complicated. If you do not understand the methods or strategies used to get the results you need, you may incur technical debt or fall foul of blackhat methods. How much do you know about monitoring traffic data, affiliate programs, or online ads? To succeed in performance marketing, you must have marketing performance management skills to understand the technical aspects and leverage data insights.
How to plan your performance marketing campaign with Wrike
Wrike is a powerful solution for marketing teams looking to plan successful performance marketing campaigns. Wrike’s collaborative work management platform enables teams to streamline workflows, assign resources, and track data on ongoing campaigns.
With Wrike for Marketers Performance, you can leverage the full power of data to improve your marketing activities. Wrike helps marketing managers and professional service agencies optimize digital performance marketing by connecting effort with results. Use the Wrike marketing operations management template to get started.
How to track your performance marketing campaign with Wrike
Testing, tracking, and improving campaign performance results in real-time are crucial to performance marketing success. It helps to know the strengths and weaknesses of your performance marketing strategy.
Wrike's marketing project management software helps you gain visibility into ongoing marketing tasks and projects, communicate and collaborate with team members, and track results through real-time monitoring and visual reports. The marketing teams’ software delivers campaign performance insights right into your workspace.
Are you ready to set up a performance-based marketing campaign? Get started today with a two-week free Wrike trial and use the Wrike marketing campaign management template to track your progress throughout the campaign.