Per­for­mance marketing: measuring ad­ver­tis­ing success

Whether an ad­ver­tis­ing spot, a billboard, a newspaper ad­ver­tise­ment, or an online banner, anyone who places an ad­ver­tise­ment wants to know how it’s received by potential customers. In online ad­ver­tis­ing, which includes, amongst others, social media ad­ver­tis­ing, your own website, or e-mail and affiliate marketing, this desire is met with a special strategy: per­for­mance marketing. In this dis­ci­pline of online marketing, the marketing measures applied lead to clearly mea­sur­able reactions of the ad­ver­tis­ing re­cip­i­ents, which in turn allows ad­ver­tis­ing success to be measured. How exactly does this work, and what other ad­van­tages does per­for­mance marketing offer companies and the self-employed?

Per­for­mance marketing, also known as per­for­mance ad­ver­tis­ing, is a subfield, or a strategy of online marketing, in which com­mu­ni­ca­tion measures are intended to trigger mea­sur­able reactions or trans­ac­tions. As the name suggests, this is a strongly per­for­mance-oriented approach that is char­ac­ter­ized by its high mea­sur­a­bil­i­ty and con­trol­la­bil­i­ty. To put it simply: per­for­mance marketing is about measuring the impact of online ad­ver­tis­ing, adapting it as needed, and making it more effective. For this purpose, per­for­mance marketing uses various in­stru­ments such as SEO, affiliate marketing, or display ad­ver­tis­ing. Billing is also based on per­for­mance, using standard billing models:

Pay per sale (PPS): The ad­ver­tis­er only pays if they can suc­cess­ful­ly sell a product through the cor­re­spond­ing ad­ver­tis­ing measures.

Pay per lead (PPL): The ad­ver­tis­er pays as soon as a potential customer contacts them – e.g. the user signs up to a newslet­ter.

Pay per click (PPC): The ad­ver­tis­er pays a pre­de­ter­mined amount for every click on the online ad­ver­tise­ment – e.g. ad­ver­tis­ing banner or text ad.

Per­for­mance marketing can be clas­si­fied as direct marketing and belongs to the below-the-line com­mu­ni­ca­tion (“non-classical” com­mu­ni­ca­tion and ad­ver­tis­ing measures).

For companies and self-employed people, per­for­mance ad­ver­tis­ing is a cost-efficient way to optimize marketing efforts and budgets through­out the campaign period. Large companies such as eBay and Amazon have long relied on per­for­mance ad­ver­tis­ing to com­ple­ment the classic, brand-building ad­ver­tis­ing.

• Mea­sur­a­bil­i­ty
• Op­ti­miza­tion
• Mod­u­lar­i­ty
• Net­work­ing

The mea­sur­a­bil­i­ty plays an extremely important role in per­for­mance marketing. While success in classical marketing is often difficult to measure, in per­for­mance marketing you can record all reactions and trans­ac­tions of the target group clearly and promptly – the range of cor­re­spond­ing tools and ad­di­tion­al programs is now very broad. For example, a newly reg­is­tered user, the purchase of a product, a newslet­ter reg­is­tra­tion, or clicks on an ad­ver­tis­ing banner can be monitored, measured, and analyzed ac­cu­rate­ly. However, per­for­mance marketing can only work if the behavior of the site visitor is observed through­out their entire stay.

Whether ad­ver­tis­ing design, ad text, en­vi­ron­ments, or click offers, it’s possible to adjust various pa­ra­me­ters at any time with online per­for­mance ad­ver­tis­ing. Through constant ad­just­ment and op­ti­miza­tion, the ef­fi­cien­cy of the re­spec­tive marketing campaign can be in­flu­enced and improved through­out its entire duration.

In order to adapt the campaign at any time, a per­for­mance marketing strategy must consist of numerous small budget modules. The big advantage of this is that each of these budget modules can be analyzed and evaluated in­de­pen­dent­ly of the others. This allows you to ef­fort­less­ly determine which module is par­tic­u­lar­ly worth investing in. If you compare the in­di­vid­ual modules directly with each other, you will also quickly see which of them have a low ef­fi­cien­cy and need to be adapted ac­cord­ing­ly.

Together you are stronger and can achieve more – per­for­mance marketing cannot be imagined without this guiding principle. It’s linked with other marketing elements in a variety of ways. For example, a strong in­ter­ac­tion can be observed between the awareness of the ad­ver­tis­ing platform and the re­spec­tive click rate. Online per­for­mance marketing is partly dependent on other important in­ter­ac­tion elements, but can also be easily integrated into any classic campaign as an element itself.

As with all marketing dis­ci­plines, setting concrete goals plays an enor­mous­ly important role in per­for­mance ad­ver­tis­ing.

• What exactly do I want to achieve?
• When do I want to achieve this or in what time period?
• What budget can I set aside for this?

The basis should primarily be higher-level marketing and corporate ob­jec­tives (e.g. con­ver­sion targets or “sales increase by x percent over the previous year”). These ob­jec­tives partly com­ple­ment each other, but also compete with one another. Many per­for­mance marketing campaigns are very strongly focused on sales and dis­tri­b­u­tion, which un­jus­ti­fi­ably narrows the view of the different areas of ap­pli­ca­tion within this online marketing principle. Per­for­mance marketing can also be an effective in­stru­ment in the context of pre-sales, when contact with a customer has only just been es­tab­lished, or also during the after-sales period (sales follow-up marketing).

Which goals can be set during a per­for­mance marketing strategy?

Source: (trans­lat­ed from German) Thomas Eisinger, Lars Rabe, Wolfgang Thomas (Hrsg.), “Per­for­mance Marketing – Er­fol­gs­basiertes Online-Marketing. Mehr Umsatz im Internet mit Such­maschi­nen, Bannern, E-Mails & Co.”. 3., über­ar­beit­ete und er­weit­erte Auflage, Göttingen: Busi­nessVil­lage, 2009.

Depending on the chosen marketing channels (see below) for your campaign, you can derive in­di­vid­ual target KPIs (key per­for­mance in­di­ca­tors). Using these, you can then check to what extent a target has already been achieved. The following simple examples il­lus­trate how different per­for­mance marketing ob­jec­tives can be for­mu­lat­ed:

Search engine ad­ver­tis­ing (SEA): Search engine ad­ver­tis­ing, includes paid ads that primarily appear on the results pages of Google or other search engines. The website operators buy them­selves a better ranking: their website is played out by the search engine (marked as an ad­ver­tise­ment) above, beside or below the organic search results for certain keywords.

Search machine op­ti­miza­tion (SEO): Search engine op­ti­miza­tion combines all measures that lead to a website being displayed as high as possible in the organic search results of a search engine (es­pe­cial­ly Google). For example, the website is struc­tured in such a way that search engines can read and analyze it better. If this is the case, the site usually gets a better ranking and is found faster by users and visited more fre­quent­ly.

Affiliate marketing: Affiliate marketing is when website owners place third-party links on their website. The website owner (also known as the publisher or the affiliate) provides the ad­ver­tis­er (or the merchant) with ad­ver­tis­ing space, and therefore the reach of their website, for a fee. The ad­ver­tis­er only has to pay if the link placed is suc­cess­ful, i.e. if the link is clicked on or has led to the es­tab­lish­ment of contact or the sale of the offered product.

Newslet­ter and e-mail marketing: These two online marketing channels are very useful tools for in­creas­ing a website’s traffic and strength­en­ing a company’s customer loyalty. With e-mail marketing, you can address either a single person (one-to-one com­mu­ni­ca­tion) or a number of people si­mul­ta­ne­ous­ly (one-to-many com­mu­ni­ca­tion). A newslet­ter, on the other hand, is usually aimed at a large number of in­ter­est­ed parties who have signed up to it.

Social media marketing: This form of online marketing has grown in im­por­tance in the last few years. In the meantime, ad­ver­tis­ing on social networks like Facebook, XING, Twitter, Pinterest, or Instagram has become an integral part of the marketing concept for many companies. According to a recent SCORE in­fo­graph­ic, 77% of small busi­ness­es in the US use social media for marketing purposes.

Couponing: Whether it’s washing detergent, chocolate, hand soap, or pasta, those who present savings coupons at the checkout when shopping get a discount. For companies, they are a reliable marketing tool. With coupon websites such as Groupon and coupons.com, couponing in the US has become very popular in recent years.

Guerrilla marketing: Guerrilla marketing is always used when an ad­ver­tis­er wants to increase the vis­i­bil­i­ty or awareness of their brand without being too intrusive. As a rule, this is achieved through ad­ver­tis­ing campaigns that attract a great deal of attention.

Per­for­mance marketing makes the impact of ad­ver­tis­ing mea­sur­able, but how exactly is it measured? First of all, it is important that you monitor the ob­jec­tives not only after the campaign has been completed, but also during it. There are various analysis tools that can be used for this such as Google Analytics, GoAccess, Google Ads, or similar. For example, you can determine how many internet users have seen an ad­ver­tise­ment, how many have clicked on it, and how many have actually placed an order. After a detailed eval­u­a­tion of this data, it becomes clear whether and to what extent the budget used led to an increase in turnover – in simple terms: how suc­cess­ful the re­spec­tive ad­ver­tise­ment was.

The decisive ad­van­tages of a well thought out per­for­mance ad­ver­tis­ing strategy are:

• The billing is based on per­for­mance – as an ad­ver­tis­er, you know exactly what you get for your money.
• Success can be measured precisely – not just after the campaign has ended, but through­out the entire duration of the campaign. In this way, the ad­ver­tis­ing media used can be adapted in good time and the campaign as a whole can be optimized.
• Per­for­mance marketing can easily be in­te­grat­ed into a classic marketing campaign.

In theory, per­for­mance ad­ver­tis­ing is easy to define, but what is the best way to implement it in practice? Let’s take a look at the following per­for­mance marketing example:

Suppose you run an online vintage store and want to use per­for­mance marketing to increase awareness, traffic, and ul­ti­mate­ly, revenue.

Your per­for­mance marketing strategy should begin by taking a critical look at your online store. All content should remain up to date: this not only includes product de­scrip­tions, prices, pro­mo­tions, etc., but also in­for­ma­tion about the company or changes to the payment or shipping in­for­ma­tion. Fur­ther­more, you should check whether you can further improve the design and func­tion­al­i­ty of your site – re­spon­sive­ness, clarity, and mon­i­tora­bil­i­ty are pre­req­ui­sites for a suc­cess­ful per­for­mance marketing campaign.

During op­ti­miza­tion, you should also check out other important areas such as product and price and adjust them as required. Can you keep up with your biggest com­peti­tors in terms of price? Do your products offer a unique selling point (a USP)? Do you dif­fer­en­ti­ate yourself enough from your com­peti­tors?

Clar­i­fy­ing such questions is crucial for the success of your online shop. After this is complete, you can look towards the op­ti­miza­tion of your online store’s user interface. In order for visitors to feel com­fort­able browsing your online store and stay there longer, the site must be intuitive to use, load quickly, and contain a good search function – further user interface tips can be found in our Digital Guide. These factors have a big influence on the con­ver­sion of new visitors to customers. Usability and con­ver­sion op­ti­miza­tion play a big role in the success of any online marketing campaign.

If you did not take search engine op­ti­miza­tion (SEO) into con­sid­er­a­tion when setting up your store, you should def­i­nite­ly do so as part of your per­for­mance marketing campaign. Ap­pro­pri­ate measures (on-page and off-page op­ti­miza­tion) help your store achieve a better ranking, which makes it easier for new visitors and potential customers to find you on search engines such as Google. In addition, you can have an ad on Google (SEA measures) or an ad­ver­tis­ing banner (display ad­ver­tis­ing) speak for your online store and so increase the awareness of your shop – in e-commerce the com­pe­ti­tion is par­tic­u­lar­ly high.

However, before you use these measures as part of a per­for­mance marketing campaign, you should do some important prepara­to­ry work and in­ter­nal­ize the following points for effective per­for­mance mea­sure­ment:

By defining your goals as precisely as possible, you will be able to see the important subgoals for your marketing campaign. For example, if your goal is to “increase sales,” the subgoal would be “increase con­ver­sion rate,” “sell more products,” or “sell products with a larger profit margin.”

Indexes and KPIs are no less important to a suc­cess­ful per­for­mance marketing campaign, as they help you measure the degree to which your goals are met. The term “KPI” and “indexes” are often used in­ter­change­ably, but they have very different meanings. An index is a mea­sur­able value, such as the number of page views or the number of website visitors.

A KPI, on the other hand, is not directly mea­sur­able, but shows the extent to which certain goals have already been achieved – which is why an exact target is so important. For example, if the target is to gain an average of 100 new customers per day via channel XY in two months, the KPI shows the deviation from the target value. If, for example, the value after one month is only one third, you know that there is still room for im­prove­ment in this area.

With an online per­for­mance marketing campaign, you have the great advantage that you can divide your budget into in­di­vid­ual modules and can keep a much closer eye on costs. To make the campaign a success, you should control costs through­out the entire campaign and make changes to the catalog of measures if necessary.

Not only the costs, but also the set targets and cor­re­spond­ing KPIs should be closely monitored through­out the entire campaign. To get a good overview, you can use Google Analytics, for example, which displays and analyzes your data in a clear dashboard.

The decision for or against certain marketing channels largely depends on your goals. If you want to increase the awareness of your brand, nowadays it’s difficult to avoid the Google Display Network (GDN) – a cost-effective addition to the classic AdWords ad in Google search.

The GDN is a network con­sist­ing of several million websites that have free ad­ver­tis­ing space available and would like to rent it out. Similar to the auction with Google Search Network, the ad­ver­tis­ing space is auctioned off via the ads platform. Instead of using exactly defined keywords. The GDN works mostly with the­mat­i­cal­ly defined ads. Ad­di­tion­al­ly you can display classic text ads in the display network, as well as video, image, and rich media ads.

While in­flu­encer marketing has clear benefits such as building customer loyalty, improving brand awareness, and driving pur­chas­ing decisions, there are also things to be cautious of. According to an article written on the In­flu­encer Marketing Hub, choosing the wrong in­flu­encer or brand am­bas­sador can have a negative effect on publicity. The classic mistake is col­lab­o­rat­ing with an in­flu­encer that does not suit the brand image or when in­con­sis­ten­cies arise. It is therefore important to remember that, just as your product must match your social in­flu­encer, so too must the selected in­flu­encer match your product.

We have in­tro­duced only a few measures that you can use as part of your per­for­mance marketing campaign. It is important that the selected channels always cor­re­spond to your goals, your budget, and last but not least, your target group. At the end of each campaign, a com­pre­hen­sive analysis and eval­u­a­tion should be carried out to assess the marketing channels used and the results of the campaign itself. This way, you will gain valuable knowledge for your future campaigns and have an even better idea about the budget with which positive results can be achieved.