Sales & Marketing Tech

Everything You Need to Know About Performance Marketing

Published by in Sales & Marketing Tech

This guide will answer all your questions about performance marketing, from what it is to how to implement it at your business.

performance marketing efforts that lead to growth

In an ever-changing digital world, marketing leaders are constantly looking for cost-effective ways to acquire and retain customers.

For many small and midsize businesses (SMBs), the most effective way to bolster a small marketing program is enlisting the help of an external marketing agency. Perhaps that’s why one of the hottest buzzwords in today’s digital marketing landscape is performance marketing.

In many ways, the popularization of performance marketing stems from advances in marketing software and digital technology. These tools help gather and analyze campaign performance data so marketers can more accurately assess their efforts, quickly identify what’s working, and optimize accordingly.

Let’s take a closer look at what performance marketing is, explore some of the most common performance marketing channels used by SMBs like yours, and then walk through an example of how to build a performance marketing campaign.

What is performance marketing?

Gartner defines performance marketing as a “cost-per-sale customer acquisition channel that digital marketing leaders leverage to drive sales through their digital commerce sites (full content available to Gartner clients).”

In layman’s terms, this means you only pay for the results, things like ad clicks, lead gen, and conversions.

Let’s look at it another way. In a traditional marketing model, you pay an ad agency or marketing company upfront for a strategy or campaign, hoping that their efforts result in leads or clicks (or whatever your goal was). An example would be paying for a radio ad with an estimated reach, and hoping it will drive customers to your website.

With a traditional marketing campaign, the results can be predicted, but not guaranteed. Performance-based marketing flips this model. With performance marketing, you’re only paying for successful results.

Performance marketing pricing models

Depending on the ad agency or marketing group you’re working with, your campaigns and pricing models will vary. That said, the two most common pricing models you’ll encounter as you establish your performance marketing strategy are pay-per-lead and pay-per-click.

  • Pay-per-lead (PPL): You pay a fixed price for every individual who becomes a lead by filling out a lead generation (lead gen) form or providing their contact information through an interaction with something like a gated asset.
  • Pay-per-click (PPC): You pay a fixed price for every individual who clicks on your advertisement. This is often the very first interaction leads have with your brand.

While a little less common, you may also see agreements for things like pay-per-sale, pay-per-installation, or even pay-per-video-view.

Performance marketing channels

As you begin to work with an external marketing agency to design your campaign, you’ll talk with their team about the different options for marketing channels to target. Here are a few of the most common channels used by small and midsize businesses:

Search engine marketing

Search engine marketing (SEM) is an umbrella term in the performance marketing industry. Any type of paid strategy for boosting your placement in search engine results falls under SEM. You’ve probably seen this when you enter a Google search term and see paid ads come up first on the results page.

The key here is that SEM covers paid strategies, while search engine optimization (SEO) uses organic strategies/keywords to try and rank higher in search results.

Check out our list of SEO software for both SEM and SEO tools.

Social media marketing

Paid social media marketing means your business pays for interactions like views or likes through ads on social media platforms such as Facebook, Instagram, Twitter, Youtube, and LinkedIn.

Social media ads are becoming a staple in marketing strategies across small and large businesses. In fact, HubSpot reports that social media advertising spend is expected to top $47.9 billion in 2021. That’s nearly 20% of the total expected advertising spend by all North American businesses this year.

While you can (and should) cultivate your business’s social media accounts without spending money on paid ads, the benefit of paid social media is speed and visibility. If you’re running a short campaign, paid social media can offer an extra boost at a speed that organic posts just can’t match.

Influencer marketing

Another way to leverage a performance marketing campaign on social media is through influencer marketing.

Influencer marketing is the process of partnering with influential people in your niche and having them promote your products and services. This form of marketing is one of the quickest and most powerful ways to get brand exposure in a short amount of time.

Influencer marketing is personal by nature; when influencers are valued by your target audience, those customers are more likely to take action to find out more or buy from your company. This type of paid marketing is best-suited for visual platforms such as Youtube and Instagram.

Affiliate marketing

Affiliate marketing relies on building partnerships with established and influential companies instead of influential people.

Affiliate marketing lets you promote your product or service on websites other than your own. When leads see your content on these sites, click on them, and buy something, the affiliate—the site your content appears on—receives a small percentage of the sale.

Create a performance marketing strategy:

Once you have a channel and a specific pricing model that works best for your goals, you’ll work with the marketing agency to set up a thoughtful, targeted performance marketing strategy.

The details of your marketing strategy will depend on your business, your budget, and your growth goals, but use these three steps as your foundation:

create a performance marketing strategy by choosing the right channels, producing engaging content, and making adjustments.

Let’s take a closer look at each of those steps.

  1. Choose the right channels for your audience. Understanding your goals and the behavior of your target audience will help you decide which marketing channel to tackle, and how. Ask your team at the marketing agency to identify the target audience for each available marketing channel so you can be sure you’re choosing the best fit for your customers.
  2. Produce engaging content. Depending on the type of performance marketing channel you choose, you’ll create different content to appeal to the viewing audience. Know your audience’s digital preference and behaviors and create content they will be likely to interact with. Work with the marketing agency to answer questions like “What common questions can we answer with this ad?
  3. Monitor, evaluate, and remain agile. Monitor your campaign’s performance by analyzing your data, tracking your best traffic and sales sources, and adjusting accordingly. At the end of the campaign, review how the performance compared to your goals and look for new ways to optimize future efforts.


Win with a performance marketing strategy

Performance marketing has flipped the script on how businesses advertise and sell their goods and services. It’s lower risk, results-oriented, and data-backed.

Of course, it’s not the only approach out there. Want to learn more about marketing strategies that could work for your business? Check out these articles:

Looking for Marketing Automation software? Check out Capterra's list of the best Marketing Automation software solutions.

About the Author

Samantha Bonanno

Samantha Bonanno

Senior Specialist Analyst @ Capterra, sharing insights about marketing technology and business trends. BA in English, SUNY Geneseo. Published in MarTech, Protocol, Marketing Profs. DC transplant, Upstate NY native. I love lively debates, strong coffee, and backpacking with my rescue dogs.


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