What is performance marketing?

The definition of Performance Marketing is quite hard to pin down, and usually varies depending on who you ask. For many, it is the absolute tip of the marketing funnel, where leads convert into sales through channels like affiliates and retargeting. For others it is a catch-all for all digital channels, and all digital channels are thought of in this light as being last click revenue drivers. 

The Performance Marketing Association defines it as “a comprehensive term that refers to online marketing and advertising programs in which advertisers (a.k.a., “retailers” or “merchants”)  pay marketing companies (a.k.a, “affiliates” or “publishers”) when  a specific action is completed; such as a sale, lead or click.” 

While this is a solid definition, it is not always accurate. What, in this definition, would display prospecting, or video pre-roll be? Not performance in this sense, but probably also not quite brand marketing in the sense that a creative director might talk about it.

In fact, this distinction between “brand” and “performance” marketing is, in the first place, a completely false one. No individual channel is innately only suited to driving direct response or long-term brand perception, as the two are inextricably linked. When it comes to specific marketing channels, they can all do both tasks in different ways and to different extents. “Performance marketing” as such needs to develop from being a very narrow view of direct response tactics and channels, into a broader set of approaches and methodologies.

Developing a performance approach 

This is, of course, easier said than done. The first, most critical, step however is to broaden the way we look at marketing by considering all channels as part of a complex mix, and consider the phases consumers pass through in any purchase decision journey. Broadly, and extremely simplistically, consumers are either passively or actively thinking about products and services. 

When they are thinking passively, they may not be “in market” to purchase, but they are consuming content and being exposed to messaging that will influence their decisions further down the line. This might be how we most conventionally think about “brand” advertising such as TV or print ads, but it is not exclusively the case, especially considering prospecting-style activity on social on display. Moreover, performance tactics can trigger a change of mind state, from passive to active. For example, a TV ad that includes the call to action of “Sale this weekend only” could prompt a consumer to start actively considering the product, which would be a performance approach applied to a brand channel, communicating with a consumer that is not conventionally in-market.

When consumers are thinking actively, they are in the process of exploring their options and evaluating the best choices. Exploration is an additive process of adding additional brands and products into their comparison set, while evaluation is the narrowing down of that set to their preferred final option. The role of any marketing is to shorten this process down as much as possible, up to the point where the consumer simply repeatedly buys from their preferred brand without considering alternatives. This is a highly complex mixture of branding and performance tactics that drive either brand/product consideration or taking action and purchasing. This final act of purchase is historically where “performance” marketing sat in the journey, but this final trigger could be prompted by any touchpoint or combination of touchpoints.

Applying a performance approach

Now that we have developed a more holistic view of how marketing (and performance marketing specifically) interacts with a consumers decision making process, we come to how we apply this in a practical sense. The simplest way to layer this thinking into your planning is to consider the two basic states of thinking: passive and active, and the two sub states within active thinking: evaluating and exploring, as moments that can be influenced. 

Then, the task of marketers is to map the various spectrum of channels, tactics and activations they can use to the various moments of influence in a way that maximises their impact. For example, while retargeting can have a role in all stages, it is perhaps best deployed on those in an evaluative mindset to trigger the change towards purchase. 

Lastly, we need to consider that the correct answer in this view of marketing may not always be, or even include our “performance” channels and tactics. And that is part and parcel of having a more sophisticated approach to performance marketing: knowing when it is not the best answer.