What Is Performance Marketing And How Can It Help You?
Forget impressions reach & engagement, let’s talk sales.
Performance marketing is a comprehensive term that refers to the amalgamation of steps with the end goal of boosting sales. An agency is only charged on the basis of achieving a specific and measurable outcome. Different brands have different problems and thus require different solutions. A performance marketing team must employ a specific data driven and result oriented approach with the aim to build, manage and optimize campaigns specifically for your goal.
Sales begin with the consumer and not the producer. Understanding your specific target audience is the first step towards running a successful digital campaign. To understand the customer journey we put each step of their journey into what we call the AIDA model. The AIDA model drives customers from one funnel into another till a conversion or sale occurs.
To clearly understand how the AIDA model works we’ll take one of DigiMazes very own clients, Urban Tribe as an example.
The process of online sales start at the first step; awareness. The point of awareness is just to put your product out there and leave an impression on your audience. This lets them know that your brand/product exists.
Once your audience is aware of your presence, it’s time to create interest for your product. The ad copy below is a carousel ad which portrays the features of the bag. This in turn generates interest for the product.
Once the customer has been driven out from the interest funnel, they’re led right into the funnel of desire. This ad copy has the tag “Best seller of the year” which makes it seem more desirable to a customer who was already interested in the product.
The final funnel is the action funnel. It’s after the customer has been driven into this funnel that a sale or conversion actually occurs. This ad copy is targeted at customers who have visited Urban Tribes website, added a Havana bag to their cart but not purchased it. It’s the final push they need to finally convert the lead into a sale.
How does it work?
While not only limited to these, the main platforms performance marketing teams use to advertise are Facebook Ads, Google Ads and Amazon Marketing Services. Using these powerhouse platforms in conjunction can allow you to reap the benefits all three platforms offer.
It’s a digital advertising platform that runs advertisements on one of it’s 3 ways of communication:
- Search Results
- Websites that are Google’s search partners
- Display Network
Search results are the core of Google Ads since they allow advertisers to show their advertisements to users who make a search. The search network allows you to target your audience by the use of ‘keywords’. When a user makes a search related to your keyword it will trigger an ad to pop up.
Each time a user clicks on the advertisement, the advertiser pays Google an X amount of money. This is why Google Ads can be put into the category of PPC (Pay Per Click) advertisements. The X amount of money is determined by bidding on keywords that you choose. The highest bidder gets the ad space for that keyword.
Just like Google Ads, Facebook Ads are a paid way of advertising your business on Facebook. Facebook ads can show up on multiple places within Facebooks website as well as on Instagram. Just like the search network makes up the biggest chunk of Google Ads business, Ads run on Facebooks Newsfeed make up the biggest percentage.
The main feature which attracts advertisers to Facebook is its in depth ability to create custom audiences. Facebook has a proprietary algorithm that allows you to create ‘lookalike audiences’. Lookalike audiences are made by uploading existing customer bases to Facebook which in turn creates a custom audience similar in every way to your customer base.
The screenshot above is a Facebook Ads campaign we at DigiMaze ran for a client. While the average ROAS on a campaign is 3 or 4 the ROAS achieved here is 101. Numbers speak for themselves and you can find out more about this here.
Amazon Marketing Services
Amazon Marketing Services (AMS) in theory is very similar to Google Ads. It’s a service offered by Amazon for vendors to promote their products to potential customers through targeted ads. The business model of AMS is similar to Google Ads in the sense that it too operates on a PPC basis.
Search keywords, related products and shopper interests are of use to target customers. This in turn boosts demand for those particular products. The best part is that because AMS is PPC based, you can register on it for free and only pay for each customer that clicks on your ad.
The screenshot above once again shows a live campaign DigiMaze is running for a client. The thing to pay attention to there is the ACoS (Advertising Cost of Sales). ACoS is a metric used exclusively by Amazon to calculate the performance of an AMS campaign. The ACoS of a campaign is calculated by the following formula
ACoS = (Ad Spend ÷ Ad Revenue) * 100
An ACoS of 20 or lower is ideally the sweet spot, but if a product is new to the market even 30 or 40 is acceptable for the first few weeks. Amazon Marketing needs dedicated focus and it is best run by experts only. There are these ‘dedicated agencies’ who would boast of 100+ brands that they are doing this for. What most brands forget is that this is not a ‘one-size-fits-all’ rule. Every brand is different, its category and competition is different and how customers search in that category is different.
Real performance on Amazon occurs when a brand is able to run a campaign, manage it, get sales and still be able to spend the most optimized amount to get the sales.
How can Performance Marketing help your business grow?
The benefits achieved by adding Performance Marketing into your marketing mix are seemingly limitless. Apart from just the obvious benefits Performance Marketing carries such as sales, it can also:
- Increase your market share
- Divert traffic to your desired page
- Engage your audience through SMM
- Rank your desired page higher on Google
- Decrease budgets
Furthermore one of the key elements of performance marketing is that it is entirely traceable, measurable and transparent. Both the agency and the client should have 100% access to all data to understand which channels produce the best results. After a desired action takes place, the performance marketing team receives payment. Such a business model reduces risks and CPA while boosting your ROI. This allows you to allocate budgets to other parts of your marketing mix.
ROI and ROAS
ROI (return on investment) measures the profit or loss created by an investment based on how much money has been invested and is usually expressed as a percentage and used to compare an organisations profitability or efficiency.
ROAS (return on ad spend) measures the profitability of a digital ad campaign. In nature performance marketing is ROAS driven. Performance marketing successfully allows for real-time measurement of ROAS and it’s measurable and trackable down to a click. Online ads require constant testing and analyzing, so that adjustments can be made when required.
If as a client you feel like your agency is not being transparent with you, you can read about common scams to understand which agencies might execute on uninformed clients.