Performance marketing is a paradigm shift, especially for agencies. In this model the agency gets paid only when certain targets are reached by the advertiser. The most aggressive agencies peg their compensation around net earnings for their client. The more modest performance marketing programs are based on compensation around sales or leads. All in all, the thrust of performance marketing is accountability, which in turn stands on three pillars.
1. Performance metrics
Typical advertiser-agency relationships converge on the performance criterion to be optimized. Typical examples include any/all of the following.
- Website Traffic
- Call center calls
- Lead Generation
The measures can further be refined around the shopping funnel and measures at different stages of the funnel.
- First-time purchasers
- Repeat purchasers
2. Shopper journey mapping
The key to performance marketing is clarity and completeness of the shopper journey. The more data you can capture on the shopper, whether he/she purchases or not, across shopping devices, shopping channels, marketing vehicles – the better the decisions for performance marketing. The screen grab below captures the path to purchase of a shopper across paid search, programmatic display ads to a purchase through the call center.
3. Performance attribution
As advertising gets more and more complex it is no longer enough to assign credit for the purchase to the last click prior to the purchase. As programmatic advertising, TV broadcast media and traditional lower funnel marketing like paid search and affiliates interact, it becomes critical to pick the best attribution model to guide marketing spending. Indeed it is not enough to answer what channel drove the sale. The key to performance marketing is to understand what channels work best at specific stages of the shopping journey – say acquisition, engagement, purchase or post-purchase engagement. The screengrab below shows the performance of Google ads over two different windows.
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