What Is Performance-Based Digital Marketing?

What does performance-based digital marketing mean?

When your organization uses an agency or professional services firm to manage its marketing, you may base your payment on a number of factors. Maybe it works well for you to pay annually or per campaign. In performance-based digital marketing, you base your payment specifically on the results of your campaigns. When your professional services agency meets specific metrics or goals, they receive their payment. In this way, your business pays for results, not for the effort that goes into a campaign. 

The metrics that must be met for performance-based digital marketing can vary, and all depend on your business and what you want to achieve. You may aim to reach a certain number of clicks on a post or gather a certain number of leads from an email. You and your professional services provider will settle on these numbers before beginning your campaign.

What are the benefits of performance-based digital marketing?

There are a number of benefits to performance-based digital marketing. These can include:

• Increased transparency: With performance-based models, you, as a client, can be as direct and clear as possible about the results you want. Conversely, this model doesn’t leave room for your professional services to be vague about their results. Everyone is clear about what needs to be done.
• Lower risk: The level of risk for the client in performance-based models is very low. What you pay solely depends on the results, and you can save money when things need to be tweaked.
• Measurable: All the data you need about how your campaign is performing is readily available in this model. You can consistently optimize your strategy to get the results you want, and it’s easy and quick to do so.

What are the challenges of performance-based digital marketing?

Like any marketing strategy, performance-based digital marketing does hold its challenges. These can include:

• Risk of fraud: If your professional services provider does not achieve the results you need ethically, it is possible for them to use fraudulent methods to gain success. These can include using bots, ad stacking, or ‘stuffing.’
• Decreased focus on long-term goals: Because performance-based digital marketing often focuses on speedy results, it’s common for clients and their agencies to lose sight of the big picture. Remember that nurturing customer relationships is the key to long-term success. 
• Wasted resources: If your campaigns are focusing on the wrong kinds of metrics, it can be easy to mistake these results for success. Just because your campaign has gotten a lot of clicks, for example, doesn’t mean these are converting to customers. Make sure your efforts are streaming into your big-picture goals.

Should you use performance-based digital marketing for your business?

It can be hard to know for sure if performance-based digital marketing is right for your business. Here are a few factors to consider — if you answer ‘yes’ to most of these questions, performance-based digital marketing is something you should consider.

• Can your business afford it?
• Does your business already have a good digital presence?
• Do you need quick results?
• Is your team familiar with the metrics and technical ideas involved?