Performance marketing insights, discussions and expertise

What is Performance Marketing?

By on September 12, 2012

b2b_3When I first started here at Impact Radius, I heard the term “performance marketing” thrown around a lot. My initial thought was, “Shouldn’t all marketing be performance?” While there are a lot of definitions and a lot of common themes out there, I’ve been trying to determine exactly what is performance marketing.

To The Industry
To figure out what performance marketing means to the world of marketing, I scoured industry blogs, professional association websites, Wikipedia… All the sources I pulled from seem to agree on one thing: performance marketing is a form of advertising in which advertisers pay on a performance basis. That makes sense.

In an article on Performance Marketing Insider, Pace Lattin noted, “Most people think of Performance Marketing as being affiliate marketing, but affiliate marketing is just a subset, although large part of, the Performance Marketing community.” The line between performance marketing and affiliate marketing is blurred – for some, they are the same thing while for, others there is a notable difference. Affiliate marketing, however, is a version of performance marketing in which advertisers reward affiliates for specific consumer activities that result from the affiliate’s own marketing efforts.

To Impact Radius
I also asked a number of people in our office for their definitions of performance marketing. It’s not surprising that the answer provided to me by Per Petterson summarized the views of everyone here fairly well.

Per defined performance marketing to me as “all marketing strategies where the brand pays for a tangible outcome instead of potential results – including any commercial arrangement where one company compensates another for generating results.”

He went on to clarify that performance marketing and performance advertising should not be confused – the scope of performance marketing goes much further and includes non-advertising based arrangements such as referral marketing and strategic partnerships. Expanding performance marketing beyond just advertising differentiates this definition from the majority of definitions I encountered in my research.

On that Note…
Going back to industry views, Geno Prussakov wrote an article for Visibility on the universality of affiliate marketing. While the primary focus of this article is affiliate marketing (which we have previously noted is a subset of performance marketing), his key points can be applied to performance marketing as a whole as well.

Geno explains the function of the  “performance-based renumerating model” in marketing. Within the performance-based model, advertisers pay after a defined action has been completed or achieved, such as sales or lead generation. In other models, advertisers prepay for an action of the publisher’s choosing (such as ad placement). This difference is what separates the performance model from any other marketing model.

Also, it’s important to note the use of the word “model” here as it highlights an important distinction: this style of marketing is not itself a channel but rather is a model that can be applied across channels.

To The Newbie
Performance marketing, from everything I’ve gathered, is essentially a marketing model in which a brand post-pays a publisher or media partner for an action as determined by the brand – be it click-through, percent of sales, or any other desirable action.

That being said, shouldn’t all marketing be performance? Per’s basic definition, “all marketing strategies where the brand pays for a tangible outcome,” gets to the heart of my question. In what cases are marketers not looking for a tangible outcome?

Sure, there are some marketing strategies, such as exhibiting at an event or tv advertising, where brands prepay or the measurability of success is calculated using more conceptual metrics. But at the end of the day, you’re looking for your channels to perform, to yield results. There are methods for measuring the success of any campaign and, if a campaign isn’t successful, you’re not going to invest in it again. Isn’t that performance marketing?

This leaves me to conclude that all marketing can be performance marketing: you will pay for, invest in, and reinvest in marketing strategies that yield results. If this is true, then it is essential that you are able to monitor and measure the success of every campaign you undertake.

How would you define performance marketing? Are all of your marketing efforts performance focused? Leave us a comment below.

Want to learn more? Check out these helpful resources:
http://performancemarketingassociation.com/
http://performinsider.com/2011/09/what-is-performance-marketing/
http://www.visibilitymagazine.com/am-navigator/geno-prussakov/universal-affiliate-marketing#
http://en.wikipedia.org/wiki/Affiliate_marketing

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