Performance marketing – what it is and how it works for e-commerce
If you do not want half of the money you invest in advertising to be wasted, performance marketing is an excellent choice for you.
In other types of marketing strategies, money is often squandered, while here the focus is entirely different. After measuring results, there is a reorganization and a concentration on successful outcomes for the client.
Literally translated, this is marketing that focuses on real and measurable results.
And why would performance marketing not be the choice of everyone engaged in marketing today? Technology and possibilities are there to help you optimize your company’s return on investment for pay-per-click advertising or paid social media campaigns, so you invest in what actually delivers results.
Performance marketing is a type of digital marketing campaign in which budget spending and decision-making are based exclusively on measurable results from the campaign itself.
In practice, it would look like this:
Launch a campaign, see what works, stop the ineffective parts, move the budget to the parts that perform, and keep going!
Performance marketing almost entirely refers to paid campaigns, because the results of SEO and organic social media reach are slow to measure.
With paid ads, you will quickly learn what works, making it easy to redirect your budget toward it!
Measuring results in performance marketing
The essence of performance marketing comes down to measuring results, so now is the right time to look at the main metrics in more detail:
Cost per thousand impressions (CPM) – the cost to reach the first 1,000 people who saw the ad. This metric is an excellent indicator for understanding how expensive it is to reach a certain audience on a particular platform;
Cost per click (CPC) – the cost of bringing visitors to your website through an ad. This metric is valuable for seeing which campaigns get a good reaction and clicks from the audience;
Cost per conversion – often called Cost per sale in e-commerce businesses. If you focus on individual sales, including returning customers, the cost per sale should be lower than the average gross margin from that individual sale;
Cost per lead – the cost of attracting potential customers who have interacted with the advertiser in some way in the past (example – newsletter sign-ups);
Cost per acquisition – the cost the advertiser bears for a completed consumer action (example – a customer arriving through an ad and leaving contact details).
Website redesign and setting clear goals
For a successful e-commerce business and the application of performance marketing, it is assumed that the online store website will be:
easy to navigate;
well-structured;
fast-loading;
featuring a prominent purchase button;
designed with consistent colors and style;
responsive for mobile viewing, among other things.
If the website does not meet these standards, purchases will be more difficult, and the number of visitors will not matter.
Once the site is optimized, it is important to set goals and create a plan using the SMART method, which is based on specificity, measurability, realism, and time-bound evaluation.
Define your audience, provide solutions to their problems, and analyze different platforms
Start by defining the target audience you believe could be your customers. Analyze data on your past customers and conduct new research.
After a thorough analysis, it will be much easier to present future and existing customers with the solutions your product offers them.
Now it’s time to choose and create an ad that is appealing, clear, and offers value. Stay active and test your ad on several different platforms. Sometimes consumers will respond better on Facebook, other times on Google…
Optimizing and improving campaigns with dynamic remarketing
The campaign is launched, and now performance marketing truly begins.
This is the moment to apply the metrics we described above. No matter how well you’ve executed the advertising, there is a good chance that not every segment of the campaign will work perfectly.
Pay attention to which platforms generate a good reaction to your ad, the times when consumers are most active relative to the campaign, and other signals.
One of the most effective tactics for boosting sales is dynamic remarketing.
Here are some examples of how it works.
A visitor to an e-commerce website has placed a product in their cart but has not completed the purchase. As the advertiser, it’s your job to target that potential customer with ads for the same or similar product – giving them another chance to buy.
On the other hand, this approach can help you save money by avoiding focus on consumers who clearly have no interest in the product.
If you have already achieved some progress in the campaign and noticed a positive consumer reaction, offer an additional reason or benefit to encourage the purchase during retargeting. For example, you could offer a discount for online purchases.
The role of Google Analytics 4 in performance marketing
The new Google Analytics 4 is a true innovation in the marketing world and completely changes how campaigns are created. With this upgraded tool, you will be able to track user behavior and potential customers more effectively.
This enhanced platform will maximize opportunities for advertising and retargeting users, thereby increasing overall campaign effectiveness.
From 2023 onward, Google Analytics 4 will be fully implemented, and all data analysis will be viewed through it. We recommend that you adapt your business in time and start acquiring the necessary knowledge.
We hope this article has been useful and interesting, and that you now understand the basics of performance marketing and its principles. Our team offers a wide range of digital services, so we invite you to join us in exploring the digital world!
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