How Performance Marketing Works [+ 6 Tools You Can Use]

Many companies have employee referral programs.

The concept is simple: if you refer someone to be hired, you will receive a reward (usually a cash bonus). It’s a win-win situation – HR receives qualified candidates while employees feel motivated to support the search process.

The caveat that we often see is that the reward is null and void if the employee leaves the company within a certain window. Why pay a commission when the company doesn’t see any return on its investment? This is the same principle as in performance marketing.

Let’s examine how performance marketing works, what the benefits are, and what tools you can use to translate it into your strategy.

What is performance marketing?

Performance marketing is a commission-based tactic where advertisers don’t pay until a user has met a conversion goal. This can be anything from making a purchase to filling out a form on a landing page.

With a traditional approach to advertising campaigns, there is no guarantee that your investment will be profitable. Once your ad starts, all you can do is monitor performance and make adjustments.

The better and faster you can identify areas for improvement, the better your chances of maximizing the return on your advertising spend (ROAS). But even seasoned media buyers can run unsuccessful campaigns if there is a misalignment between the campaign and the target audience.

Performance marketing puts power back in the hands of advertisers. Since you don’t pay until your goals are met, you accomplish three things:

  • Your campaign is less risky
  • There is a guaranteed return on investment (ROI)
  • You have better control over your ad spend

Is Affiliate Marketing the Same as Performance Marketing?

Short answer: yes and no.

Think of affiliate marketing as a subset of performance marketing. The terms are often used synonymously. However, performance marketing has grown to include more than just affiliates over the years.

It also includes campaigns that use pay-per-click (PPC) models, e.g. B. the paid search.

This is how performance marketing works

There are three main actors required to implement a performance marketing strategy:

  • A publisher or a partner
  • A conversion goal
  • A commission rate

As an advertiser, you are looking for a partner who can be an influencer or publisher.

You then need to outline your conversion goals. For example, let’s say your marketing goal for the quarter is to get 10,000 leads. You can instruct your partner to direct traffic to your landing page. Only when a user has filled out the form does he receive a commission.

Your next question might be, “How do advertisers know which users are from which partner?” Advertisers usually give each partner a specific link or code to keep track of who is responsible for that conversion goal.

For example, if I were an influencer working with Brandon Blackwood, I would share a 10% discount code “MARTINA10” with my followers that I can use at checkout when purchasing an item from the brand. Every time someone used my code to purchase, I received a percentage of the sale.

Today, performance marketing is most popular with influencers as studies show that consumers trust influencers more than brands.

Before influencers, there were online publishers, and they’re still big players in performance marketing. If you search for “Top Performance Marketing Tools” on Google and land on a list, chances are one of those tools is an affiliate link.

How can you know for sure? Well, the Federal Trade Commission (FTC) is now requiring affiliate partners to disclose their partnerships to consumers. On Instagram you can see the “Paid Partnership” tag as follows:

Performance marketing example on Instagram

Affiliate details are displayed on websites and YouTube video descriptions as follows:Example of Affiliate Disclosure on YouTube

How to Create a Performance Marketing Strategy

1. Define your goals.

In any digital marketing campaign, setting your goals is key.

What do you want to achieve? This could be general brand awareness, sales for your new line of products, more leads, or something else.

Let’s go back to the world where I’m an influencer. Let’s say Brandon Blackwood just released a new product. Your marketing goal is to raise awareness of the new product and drive traffic to the product page to generate sales. In this case, their key metrics would be website clicks and unique sales.

Once you’ve defined your goals, you can develop your ad strategy and determine which metrics to track.

2. Identify your partner.

Now that you know what you want to achieve, it is time to look at online publishers and social media influencers whose target audience is the same as your own.

Identifying the right partner requires extensive research, but is arguably the most important step.

Imagine you’re working with a partner whose audience isn’t interested in your brand or product. Although they can interact at some level, they are unlikely to convert.

And while you might not lose money by taking a certain action, it would be a waste of your time and resources.

After you’ve determined who you want to work with, reach out to them to see if they’re interested in partnering. In this step of the process, you will discuss your marketing goals, target audiences, and commission rates. While some brands have standard tariffs, others can bargain.

3. Generate and assign IDs.

You have consolidated your partnerships. Now is the time to prepare your links and codes to be shared with your partners.

The only way to correctly assign an action to a specific partner is to assign a user-defined ID, code or UTM parameter.

It is important to note that you may have to do this manually first, but you will likely have to rely on a program to automate this process as your business scales.

High performance marketing software

There are two main types of performance marketing software: those that focus on connecting advertisers with affiliate partners or publishers, and those that monitor performance. Let’s go over some top tools in each category.

Tools for performance marketing partnerships

1. PartnerStack

If you’re a SaaS company looking to develop a robust affiliate program, consider PartnerStack.

Partnerstack Performance Marketing Tool

Listed in G2’s Top 50 Products for Sales in 2021, the platform helps brands recruit, integrate and manage partners.

The main features of PartnerStack include custom forms and email flows to:

  • Facilitate onboarding.
  • Establish reward structures that are tailored to each partner.
  • Develop an automated payment process.

The company offers custom pricing based on the needs and requirements of each business.

2. Become a partner

Would you like a simple and easy-to-use dashboard to manage your partners? Take a look at Partnerize.

Partner for performance marketing tool

The dashboard gives you general data that you can use to quickly gather information and make decisions. In addition, Partnerize adapts its functions to the industry, thus ensuring that every brand has what it needs for the success of its performance marketing campaigns.

Contact Partnerize for pricing information.

3. Tapjoy

TapJoy is designed for brands targeting mobile app users.

TapJoy Performance Marketing Tool

The software acts as an intermediary between advertisers and leading mobile game publishers. Brands can pursue key conversion goals like completing videos and in-app purchases, and only pay money for the actions that achieve their goals.

To learn more about TapJoy’s pricing structure, you need to contact the company.

Performance Marketing Tracking Tools

1. LeadDyno

One of the biggest problems when working with affiliates is creating and keeping track of links and codes for each partner. This is where LeadDyno comes in.

LeadDyno Performance Marketing Tool

LeadDyno gives brands the tools they need to grow a successful affiliate program. The outstanding features include:

  • Automated links and codes for each partner
  • Option to upload social media-enabled content for partners to share
  • A customizable partner portal

Pricing starts at $ 49 per month and goes up to $ 79 per month for access to unlimited partners, extensive customer support options, and more. LeadDyno also offers custom pricing for businesses with over 7,500 unique monthly website visitors.

2. AnyTrack.io

Attribution reporting is easier with AnyTrack. You can consolidate data from multiple sources (such as Google Analytics and Facebook Pixel) on one platform. From there, you can determine which strategies are working and which ones need adjusting.

AnyTrack Performance Marketing Tool

You can use AnyTrack for free. Premium versions of the software are available and cost between $ 50 / month and $ 300 / month.

3. Effects

The impact tool optimizes the partnership process from the first contact to the payment.

Impact Performance Marketing Tool

Anyone from ambassadors to sponsors can be added to a brand’s “Partnership Cloud”, with features tailored for each type of partner.

Beyond the cloud, Impact’s main functions include:

  • Partner search and discovery
  • Discovery of a fraud
  • Optimization of partner management

Contact Impact to learn more about pricing.

Top performance marketing industries

Are you wondering in which industries performance marketing is most commonly used? According to a 2018 study by the Performance Marketing Association, retail advertisers spent the most on performance marketing, accounting for 50% of total spending. The financial sector followed with 35%, followed by a sharp decline in the travel industry with 7% spending.

In terms of turnover, retail was the sector with the highest turnover with 73%, followed by travel with 14%. Industries like automotive, healthcare and telecommunications accounted for just 1% of total performance marketing revenue in 2018.

Despite the high spending and highest sales rates, retail didn’t deliver the best ROAS. According to the report, the travel industry offered the best returns with an 18: 1 ratio, followed by entertainment with a 15: 1 ratio.

Any industry can thrive with performance marketing. It’s about working with the right partners and building a solid program to help you achieve your marketing goals.

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