What can performance marketing do and what does a typical campaign look like? The sector is growing rapidly. But the number of mistakes you can make if you’re not familiar with the subject matter is also high.
This article originally appeared in M&K Marketing & Kommunikation, the “most important publication of the marketing and communication industry” in Switzerland. Editor Gregor Waser talks to me about performance marketing.
Performance marketing is often mistakenly used to consider the billing model of a channel or campaign. However, the billing model does not play a role in this field.
Rather, performance marketing is defined by the measurability of the results with the aim of placing the results obtained in the best possible proportion to the advertising expenses.
M&K Magazine wanted to know more and had the growing model explained, highlighted and evaluated by experts.
Actions Must Be Measurable and Have a Direct Effect
Stefan Vetter, CEO of the agency Wortspiel, says about the characteristics of performance marketing: “In performance marketing, the activities have to be measurable and have a direct impact on the business profit. Either more orders or more leads should be generated. Direct revenue relevance is the big difference from branding. There the increase in turnover is more a side effect, primarily branding is about getting to know the brand”.
Matteo Schuerch, CEO of Converto, explains the sector as follows: “Performance marketing refers to the use of various marketing channels with the aim of achieving a measurable response from the user – for example a visit to a page or the purchase of a product. It is therefore a comprehensive approach in which different measures are used in interaction with each other.”
This Is What a Performance Campaign Looks Like
When asked about a typical performance marketing campaign, Stefan Vetter describes it as follows: “It is important to set a clearly defined corporate goal and determine the key points where measurements can be made. The most obvious measurement is in an online shop, where direct sales can be recorded on an advertised product.
With B2B companies, where services are concerned, this is not so easy, here the generation of leads is in the spotlight. This often happens by phone, which is more difficult to track. The number of people watching a video can also be measured. The point here is to formulate intermediate goals.”
Extensive and Comprehensive Campaigns
Matteo Schuerch, who also heads the Performance Marketing focus group at IAB Switzerland, explains how extensive and comprehensive performance campaigns can be: “Almost all marketing channels can be planned for a performance impact and can be provided with a performance target: display, search engine marketing, e-mail, social media, feed-based advertising, affiliate or retargeting”.
Performance marketing tries to lead the user during his customer journey towards a conversion: “You generate attention with a performance display, you reawaken the user’s interest when he searches for the product on Google and then win the customer back on your own site with retargeting if he hasn’t bought anything after visiting the website after all”.
All these measures would be used with the aim of accompanying the user on the way to conversion.
Above-Average Growth in the Segment
And how does Matteo Schuerch assess the growth of this segment? “The performance marketing sector has grown at an above-average rate in Switzerland in recent years and this sector is likely to be the winner in the growth race of the next few years.
Branding and performance are increasingly being used together and analyzed coherently. More and more advertising clients are combining their classic branding budgets with performance campaigns.”
Opportunities for Innovation and Start-Ups
As everywhere in the world, international giants such as Google with its diverse ecosystem with search, display or shopping, Facebook or Criteo Retargeting would benefit from this positive development in Switzerland as well. The performance marketing sector also leaves room for innovation for local and international start-ups who invent new models to run more efficient campaigns.
The market experts agree, says Schuerch: “In the performance sector, you need alternatives to the well-known international players in order to fulfill the actual market demand.
The Plateau Is Not yet Reached
Stefan Vetter also assumes that the plateau has not yet been reached: “Last year digital marketing grew by 10 percent, search engine marketing by 15 to 20 percent. The potential is likely to remain high.”
Vetter does not think that the sector would only be suitable for certain industries: “The approach is undoubtedly important for online shops. But I don’t know of any industry for which performance marketing has no relevance. Generally speaking, search engine marketing is driven by performance. Growth here remains high.”
After all, last year digital marketing overtook TV in media spending. “Performance campaigns affect all sectors, including food. I’m thinking of Amazon Fresh. Amazon is putting established players such as Coop@home under pressure in this sector”.
Don’t Lose the Sense of Reality with Expensive Products
As usual in a still young sector, where a lot is tried out and experimented, many mistakes are still made in performance marketing.
A frequent mistake is that the goals are set too high, says Stefan Vetter: “Particularly when it comes to expensive products, advertisers should remain realistic. In the case of higher-priced products, the first step is to build consumer confidence, for example with helpful content. Studies show that a customer journey requires seven to twelve touch points for expensive products.”
The first thing to do is to establish contact, then provide information, and possibly set up a personal conversation.
The attempt to generate sales directly with Google advertising for expensive products is a mistake . The focus must be on arousing interest.
Beware of Frequently Made Mistakes
Matteo Schuerch comments on frequent mistakes in performance marketing: “You often see that advertisers see individual channels as the only truth, the ‘Holy Grail’ of marketing.
The campaigns that work best are continued, while the others are completely deactivated. The campaigns are then analyzed in silos, which is very dangerous from a performance marketing point of view.
Performance marketing is a combination of different campaigns and tools, each of which takes the customer journey at a different time in order to best accompany the journey to conversion”.
If, for example, you were just retargeting – addressing customers who have already visited a page – you would reach fewer and fewer customers over time and the channel would gradually lose its performance, says Schuerch.
Retargeting only works really well if fresh traffic is supplied to it through other channels. Before starting a campaign, the advertiser has to set very concrete and realistic goals.
How Are the Results Measured?
Then the important question would be: “How do you measure and evaluate the results of the campaign? The answer to this question is one of the points on which many advertisers still have a hard time – on the one hand because the topic itself is very complex, on the other hand because the dynamics of performance marketing constantly present advertisers with new challenges,” says Schuerch.
Big Tech-Companies Rely on AI
However, the end of the flagpole does not yet seem to have been reached with performance marketing. When asked about future trends, Stefan Vetter says: “Automation will certainly change a lot in the future. All major tech companies such as Google, Facebook and Amazon rely on artificial intelligence and machine learning.
Advertising becomes easier, access to customers more direct. What agencies do today will become a bit superfluous in the future.”
For agencies, this means that they have to reinvent themselves and differentiate themselves with certain topics, ranging from marketing consulting and strategic consulting to focusing on the enhancement of value propositions.
“The customer journey is becoming more and more fragmented, there are more and more possibilities. The campfire situation that prevailed in front of TV no longer exists today, where companies were able to reach everyone with a perfect spot.
Today, it doesn’t have to be perfect anymore, it has to be tailored to the individual, because there are many channels, whether Snapchat, Facebook, Youtube or TV,” says Vetter.
The focus is on the channel-specific message. This also leads to a specialization of the agencies.
Bonus: Four Characteristics of Performance Marketing
Measurability: The reactions of the target group, such as a registration or a purchase, are clear, timely, fully observable and measurable.
Modularity: The campaign can be divided into many small budget modules that can be individually ordered and evaluated.
Optimizability: The efficiency of the campaign can be influenced and improved during runtime by adjusting various parameters such as ad texts, advertising design, placements or click bids.
Cross-linking: Performance marketing can be integrated into a classic campaign as an interaction element. There are strong correlations, for example between awareness and click rate.
Stefan Vetter is CEO and founder at Wortspiel. He created his first website in 1999 and has been active in digital marketing ever since. Stefan is also the founder at Friendly, a Swiss provider of privacy-friendly marketing software.
