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What the Hell is Performance Marketing?

What the Hell is Performance Marketing?

We talk frequently about happenings in the performance space - sifting through the daily stream of digital marketing news, pondering repercussions for brands and marketers that take a ‘performance-based’ approach with their promotional activity. 

In recent years, looking into debates from a ‘performance’ perspective may have caused the assessor to ride on a slightly different train of thought to the one present today. The consensus is that performance was borne out of smart marketing; the ‘pay on results‘ model that made small fortunes for affiliate publishers in the 2000s, thrusting metrics such as cost per sale and cost per click into the advertiser and agency spectrum.

A greater need for return and measurability from media buyers has caused the idea of paying on performance to branch out of its early beginnings in affiliate and into the marketing mainstream. 

Nowadays it’s common for a brand’s ‘head of performance’ to have a task list that encompasses so much more than keeping an eye on publisher activity. 

The role entails management of paid media on social networks. Traces of performance ‘trading’ can be found in retargeting, on display, while the pay-per-click ad services from search giants such as Google and Bing cover the fundamentals of what, for many, performance marketing is all about. 

We all have our own opinions of which channels and techniques should be worthy of a mention in an article pondering the definition of performance marketing. 

Seeing the need to investigate further, and in the lead up to a Performance Marketing Insights session on the same matter, we asked our industry experts to dissect the obvious: why are we here; which areas do we focus on; what the hell is performance marketing?

From the base

Keeping the digital marketing industry afloat with their ever-rising spend (valued at $137.53 billion globally by eMarketer last year) are the all-important holders of the purse strings: the advertisers.

For James Maley, senior international marketing manager at Hilton Hotels, affiliate is performance in “its purest, more simplistic form”, but does not define what it is. 

“Performance marketers measure spend vs return; they quantify how successful activity is against objectives originally set.

“Commonly this is revenue vs cost metric, however depending on activity it can be a range of goals, such cost per sign up, cost per lead, cost per acquisition, cost per engagement, cost per view. This measurement is present across channels; as long as there is a measurable ROI being produced.”

Also speaking from the advertiser side, Riman Verma, digital marketing manager at First Utility, believes that some of the metrics cited by Maley have a hand in shaping what performance is.

“Performance marketing is driving performance and rewarding on completed consumer action versus a pre-determined KPI set, including, but not limited to, pay-for-performance business models. Performance marketing must ensure that campaigns are clearly measurable, can be optimised in real time and payment made based on defined consumer action.”

Both examples highlight what so many advertisers like about performance - or the common perception of what it means. Clear goals for activity are aligned and, while there are techniques which only require payment on these being met, the idea is that a line between success and failure is pretty clear.

Outsourcing performance

Another media buyer in the space, agencies also have dedicated performance managers for overseeing campaigns that are metric-driven. Standing as the performance account director at UK media agency Maxus, Nick Cristal says performance marketing ensures accountable results and transparent ROI for clients, who - if recent studies are anything to go by - are increasingly demanding a return on their spend. 

However, the techniques and channels have changed radically since performance was first introduced to marketers, as Cristal highlights.    

“Traditionally this has involved focusing on end-of-the-funnel, bought media on a CPA. But as technology and supplier propositions have evolved, so has our ability to expand what performance marketing encompasses,” he comments.

“We [Maxus] feel it’s imperative to plan and buy performance media from a holistic perspective; encompassing affiliates, lead generation, paid search, paid social and beyond into one single integrated approach.  

“This approach ultimately derives from consumer behaviour where successful performance marketing depends on the ability to reach the right audiences, at the right time with the right message, which in turn delivers the desired actions for our clients.”

It’s worth noting that, from the expert’s view, modern-day performance marketing means tracking results and pitting something against an objective. Whether or not the whole picture can be summarised is a different matter.

“In the past, defining performance marketing was much simpler. Its objective was to drive a specific action, like a sale, and advertisers only paid when this was achieved,” says Jon Myers, VP and MD for EMEA at Marin Software.

“Even now, often when people think of performance marketing, they imagine an affiliate marketing model, but it’s becoming increasingly complicated.”

Interestingly, Myers, whose software group helps advertisers run and measure activity across social, display and search, believes that part of performance is simply being able to enhance marketing and prove that an impact was made. 
 
“Now, performance marketing encapsulates any marketing strategy which improves performance of your brand,” he opines. “This includes search advertising, pay per acquisition, email marketing and more.”

Not only this, Myers - a moderator on the ‘What the Hell is Performance Marketing?’ PMI session - believes that new opportunities like programmatic will create an ecosystem where “all” digital marketing will be considered performance. Essentially, this would blend the foundations of performance - in digital marketing technology - with brand and agency desires to see exactly where their money is going and, more importantly, what it does.

A more measurable, accountable and trackable environment wouldn’t be the worst idea.  

Building up 

Some of the most intriguing points surrounding the definition of performance marketing come from its evolution in recent years. Many of the experts that spoke to PerformanceIN cited a grounding in affiliate marketing, where it’s gone on to inspire a new and highly popular marketing logic, in which ROI and measurability are paramount. 

But according to Nigel Gilbert, VP of strategic development for EMEA at ad tech group AppNexus, the catalyst in performance’s growth was found away from the affiliate space. 

"The advent of real-time bidding, which has historically been a performance-driven medium, revolutionised the performance marketing discipline and commoditised the traditional proposition of the performance network. 

“The evolution of programmatic technology has widely enabled unprecedented scale and intelligence to iteratively reach the right audience. In this evolving world of advertising trading desks, flexible bidding technology is the foundation, while applied data science is the differentiator.”

Reverting back to Myers’ thoughts that performance - or marketing you can measure - will continue its evolution and path of growth to eventually engulf the entire digital landscape, others believe that performance is unique, and should be all about paying on results. 

“Performance marketing describes any marketing activity where spend is only invested as a result of a specific measurable action taken by a customer, in response to marketing collateral,” says Carla Arrindell, UK managing director at dedicated performance agency Online Media Group

“This makes it distinct from almost every other form of marketing, and also makes the channels that sit within performance marketing broad - encompassing everything from affiliate marketing and lead generation, to the more recent inclusions of programmatic display and native content.”

But regardless of the channels involved, the growing ways to invest and everything that has happened since the rise and rise of affiliate publishers, Arrindell and many others are adamant that performance can be boiled down to a process; money for actions delivered.  

“Online performance marketing (OPM) brings together activities across a range of digital channels, from mobile to social to SEO, with one thing in common – payment is required only when a particular action is delivered. Hence the performance element – a brand only invests marketing spend to the extent that the campaign measurably performs.”

If anything, leaving ‘payment on action’ as a layman’s terms definition may help performance separate itself from some of the other practices as digital marketing as a whole becomes increasingly measurable. Should this be the case, the concept may not have departed as far from affiliate as some might think.

Across the land

Adding to the debate are the varying definitions of performance around the world. Our investigations confirmed that performance marketing was indeed ‘a thing’ away from Europe, but that certain nuances tweaked the definition from country to country. 

Jessica Joines, CMO at Rakuten Marketing - home of a dedicated affiliate network and marketing attribution toolset - believes performance is recognised globally as a base for low-funnel activity, conducted close to the final purchase. However, in the US, innovations in technology are teaching advertisers about its use beyond this stage of the journey.

“As a result, the definition of what performance marketing means in the US has broadened beyond the global norm.

“As marketers examine the whole view of what happens from discovery to conversion, they’re no longer tied to thinking about brand performance with the ambiguity of impressions, or excluding retargeting success to short-sighted last-click wins. They can measure the impact of the entire marketing mix on converting consumer journeys, and how each touchpoint moves consumers down the marketing funnel.”

According to Joines, performance marketing in the US now means evaluating all activities in terms of what they can deliver, and using this data to better optimise consumer experience as well as general marketing performance.

She argues that other markets should move towards this approach. Nations such as Australia, perhaps; one of the areas of operation for voucher site Flipit, where country manager Ashley Howe has crystal-clear oversight of how performance is defined and perceived.  

“We are trying to change the way advertisers look at performance-based marketing in Australia so that it has a positive image that appeals to high-quality advertisers who are in it for the long haul. 

“For Flipit Australia, performance-based advertising should be about quality, long-term relationships, which gives good results for both the publisher and the advertiser.”

In theory, performance marketing in Australia is defined as ‘payment on action’, but Howe says an unwanted tagline sits above its banner.  

“It is not about get-rich-quick schemes which have plagued the affiliate marketing sphere for too long - this isn't just true in Australia, but it seems that other countries have been able to shake off the negative attitude towards affiliate marketing more quickly.”

Looking ahead

What is clear, though, is that given recent investment in the space, and the calibre of investors involved, performance marketing is a much bigger proposition and consideration than the one that stood ten, or even five years ago. 

If there are lessons to be had from events such as Rakuten Inc’s $425 million purchase of LinkShare (now Rakuten Affiliate Network), and prevalence of the word ‘performance’ as a prefix to describing an ad-tech offering, it’s that performance marketing arguably deserves the reputation as being something hard to pin down, given its stature and breadth of connections.

Pondering as much begs an important question: where will the next five years take us? 

We’ve seen some of the biggest brands looking to put a data and analytics slant on their marketing strategy. In a survey from Deloitte and ExactTarget Marketing Cloud, from salesforce.com, 53% of chief marketing officers said their team’s responsibilities would include a greater focus on driving revenue in the coming years.

Signs of this were evident in the same percentage - just over the majority barrier - citing ROI as their most important metric to measure success.

With this in mind, affiliate networks, publishers and marketers stand to benefit hugely from a swathe of CMOs looking for ROI at every opportunity, while performance marketing as a whole invites more results-driven channels and techniques into the mix. 
 
"Looking to the future, the definition of performance marketing is likely to evolve. The development of more sophisticated technology, which will increasingly blur the lines between traditional brand building and performance, will allow advertisers to measure the effects of audience engagement with the brand all in one place,” predicts Gilbert, who will have a prime view of the situation via his position at real-time ad facilitator AppNexus

“The result will be a greater understanding of how people use different channels like mobile, video and social and how these interact with one another. Ultimately we will reach a point where everything is measured, and tracked, giving advertisers in-depth insights into the drivers of each consumer’s action at any touchpoint.”

If that judgement is to be trusted, perhaps the future will be dictated by the same roadmap which has led to performance marketing’s position in June, 2015.   

What was a revolutionary way of thinking is now the norm; why wouldn’t a marketer want to assess their performance and track return on spend? But if one thing’s for sure, the situation is about to get a whole lot more complicated. 

How would you define performance marketing? Is it simply paying for results, or something else? Have your say below.

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Got a question or comment – tweet Richard @RichToweyPI or comment on Twitter, Facebook or LinkedIN.

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Richard Towey

Richard Towey

Richard serves as head of content at PerformanceIN. After many years spent covering developments from the automotive, sports, travel and finance sectors, he eventually turned his full attention to reporting on stories from the fast-evolving world of digital marketing. Richard now heads up the editorial team at PerformanceIN: the performance marketing industry's leading publication.  

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