Understanding the performance marketing playing field

Understanding the performance marketing playing field

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Performance marketing is a relatively new term for something that has been with us for most of the Internet's existence. It is a way of describing marketing that is rewarded only based on results. It is direct marketing applied to the world of the Internet. It has many facets, but the core tenet is its reliance on tracking, data, analytics, and conversion optimization. After all, as a performance marketer, you only get paid every time you get a potential customer to take some action that a vendor has prescribed.

The easiest way to define performance marketing is to say that it is the act of paying for some action to be performed. It could be a sale, lead generated, or even a visit. Either way, you are paying for someone to do some prescribed action that you are then paid for. You do this successfully by having the acquisition cost be less than the value of the action you got that person to perform. This performance marketing strategy is called arbitrage.

Performance Marketing in 2022

The overall performance marketing landscape hasn't changed much since 2021, but there are still a few considerations you need to consider when planning your strategy for 2022. The biggest one is the typical Google shuffle that occurs once the algorithm has been changed. This shuffle will affect search engine optimization experts using this traffic source for their performance marketing efforts.

Understanding How It Works

As a performance marketer, there are two main ways to make it work. You can either be an affiliate or a product owner. The affiliate strategy is less costly to get started, and you don't have the advantage of being able to tweak the offer and have multiple backend products to improve your customer lifetime value. You also don't get the benefit of being able to fundamentally change aspects of your product to make it more appealing to potential customers. However, you can walk away and choose to promote another product relatively quickly when using this strategy. It means you are never tied down to any one product or vendor. You also don't need to spend time doing market research and creating a product from scratch for a market. This makes the affiliate strategy great for people who want quick earnings but don't want to invest in creating a full-time business.

The main benefit of going with the product owner strategy is that it allows complete control over your product and strategy. You can tweak the offer as much as you want, and you don't have to share in the profits with anyone. You can also create many backend products for up-selling to potential buyers. However, the major downside is you get all the responsibilities that come with running a full-time business. The main one will be handling customer complaints and handing out refunds. If your product is more complicated, you might also be tasked with providing detailed support to people. That might cause you to outsource certain responsibilities to third parties, but that strategy eats into your profit margin in the same way that being an affiliate marketer would.

Regardless of the strategy, the primary way to do performance marketing is to find a traffic source and redirect those people to an offer that eventually leads to conversion. The main considerations here are the cost of the traffic and your conversion rate. The task of a performance marketer is to maximise the math involved to ensure that you are always making a profit. You can also do long-term strategies like building an email list to sell more products in the future.

Recent Trends and Challenges

There are many legal concerns with the various political, medical, informational sensitivity rules coming into play. For example, certain traffic sources are not allowing some ads to be put on their platform. You also have new rules because of the recent privacy laws and sanctions enacted by the European Union. GDPR is a set of new rules surrounding general data protection regulation for countries in the European Union. If you allow people from any of these countries to visit your website, you need to be compliant with these rules. It can be quite difficult because these rules are specifically about privacy and data retention for advertising purposes. It makes your job much more difficult. It also makes accessing clean data for advertising purposes even harder than before.

Design and Psychology

Modern performance marketing started when people like Claude Hopkins created the first sales letters and started a direct marketing revolution. Since then, the emphasis has been on effective design and psychological principles. There are certain people dedicated to studying the emotional buttons to push to sell certain products. As a performance marketer, it is critical to understand design principles to maximise your conversions. It is also vital to understand what psychological buttons to press to ensure that you are being as persuasive as possible with your words and images. No matter how good your offer is, you will not build a profitable enterprise without a good understanding of these principles. In fact, understanding these principles can even help an unethical performance marketer sell harmful products to people.

From Affiliate Marketing to Performance Marketing

Affiliate marketing used to be the predominant term used to describe what performance marketing is. However, as affiliate marketers matured, they realised that they weren't considered to be serious businesses by other people around them. Performance marketing is a way for them to legitimise what is going on. However, performance marketing emphasises building long-term systems that can sustain a business. It isn't just the same model utilised by affiliate marketers to push digital products under a new brand.

How Affiliate Marketers Can Benefit

Traditional affiliate marketing can be a hit or miss because there is typically no long-term strategy. You research a product and then look for traffic sources to promote it. However, after that product stops selling, your campaign is over, and you have to start all over again. This cycle is a major problem if you are trying to build a sustainable business. On top of that, you also don't have systems in place to make outsourcing easier. That ensures you will do all the work yourself, and you can never scale to a level where it doesn't depend on you. Many affiliate marketers have transitioned to performance marketing because it works more like a business. These performance marketers can build teams that are responsible for each piece of the campaign. They also build email lists and other customer retention schemes to ensure that they can always market to them later. On top of that, they build custom relationships with vendors that ensure they get preferable commissions and incentives. The major difference between affiliate marketing and performance marketing is in the mindset. Once you change your mindset, you can start building a more sustainable long-term business using these methods.

For Your Marketing Agency

Many marketing agencies still have a Madison Avenue view of the world. They focus on building campaigns to promote products instead of getting sales. Direct Marketing can work even better if you apply Madison Avenue principles. Marketing agencies can combine the two to deliver more value to their customers. It means more sales for customers, which will help attract new ones. You can also use the principles of performance marketing to improve your traditional marketing campaigns. For example, data and tracking are two important components in performance marketing. Almost everything is tracked and traced during a performance marketing campaign. You can bring that level of sophistication to your traditional marketing campaign, and it will make you more effective.

How It Benefits Ecommerce Companies

Almost anyone can start an ecommerce company today without much effort. There are many full-service shipping services, and you even have services for building and hosting an Internet store. All of these resources mean the ecommerce marketplace has gotten a lot more competitive. The one place that makes the difference is in marketing. The best ecommerce services are the ones that can drive traffic to their offers on a mass scale. By utilizing performance marketing, you can drive traffic from various sources to ensure that your business can be viable and sustainable. If you do it well, you won't be dependent on marketplaces like eBay or Amazon. It makes it possible to scale by getting traffic from all over the Internet. It also means you can build a sustainable business without many other components that would traditionally be involved.

Performance Marketing in Dropshipping

Performance marketing makes it easy to create a sustainable dropshipping business. One of the only things to worry about in dropshipping is getting traffic. However, if you can create sustainable campaigns, you can build a good business out of dropshipping. You could potentially even turn your dropshipping business into being a full retail outlet, collecting all the profits for yourself. Performance marketing also makes it easier for you to scale out by attracting other performance marketers to help you grow your business. In this way, you only have benefits when using these methods.

Performance Marketing Methods

What are some of the performance marketing methods you need to know?

SEO

The overwhelming majority of performance marketers avoid SEO in favor of faster methods. However, if you are just starting and don't have a lot of initial capital, SEO is a great way to build a profitable enterprise without putting in a lot of money. That being said, the main downside is that it is quite slow, and it is a lot more competitive than it used to be. Still, if you are willing to create insightful content that engages people, you have a chance of building a successful SEO-based performance marketing business.

Media Buying

Media buying is the most extensive way of building a performance marketing business. However, media buying is typically the final frontier that experienced marketers go to. It is not friendly to beginners, and it can be difficult to understand the various traffic sources and methods used. Media buying means purchasing advertising space on a website. There are millions of websites, and you have unlimited options, making media buying one of the most complicated fields in performance marketing.

PPC Marketing

PPC marketing is easier than media buying, but it is a lot more expensive. That is because it is where beginners flock when just starting. Google also has complete control, meaning you don't have the creative freedom you usually would. Google can also ban you in a second, destroying your business quite easily. It is one of the many reasons why performance marketers opt to avoid PPC marketing in favor of other media buying ventures. However, if you stay within the ever-changing boundaries of Google's TOS, you can make a lot of profit as a performance marketer with search engine traffic.

Content Marketing

Content marketing is another area where performance marketers typically try to get into. As the name says, it means creating content that will attract many readers and social media shares. The key here is to use that content to drive visitors back to your landing page. The main issue is that not every piece of content will go viral, and it can get expensive to create all the content needed to build a sustainable business. However, it is an effective way of starting on a budget if you are willing to research and write the content by yourself.

Social Media Marketing

Social media has become a crucial component in how we live our lives and express ourselves. Performance marketing on social media is tricky, but it is similar to content marketing. The main way to drive traffic is to be outrageous, bombastic, and controversial. Clickbait has become common in this arena, and it is a very successful strategy to employ. On some social media networks, you also have access to a treasure trove of personal information, making it possible to target on a level you never thought possible before.

Native Ads

As Internet users changed their browsing patterns, advertisers saw that banner ads weren't being clicked on anymore. This has led to them doing many things to embed those advertisements into the content. Native ads are a way of embedding advertisements into your content, and it seamlessly blends together. This makes it possible to camouflage your content and ads, meaning a much higher clickthrough rate for everyone. It is also an effective strategy for modern marketers who want to gain access to some of the biggest publishers on the Internet. This is quickly becoming one of the best performance marketing strategies for 2022.

Email Marketing

The majority of serious performance marketers maintain an email list of potential buyers. They do a lot of promotions to ensure that this email list is always up-to-date and useful. It is one of the best ways of securing your business future, as it is one of the few Internet assets that you can own yourself. In most other performance marketing channels, you can get banned in an instant. With an email list, you always have people to market to.

Ad Serving

An ad server is a crucial component in the performance marketing world. That is especially true if you are doing media buying. It allows you to keep 100% of the data from your media buying and advertising efforts. You can do basic analytical manipulation to get more insightful information from this data as well.

Click Tracking

The most important piece of the puzzle for performance marketing is click tracking. In performance marketing, data collection is everything. It is why GDPR is such a major stumbling block in the industry. However, click tracking is crucial because it gives you precise control over what you can optimise. It gives you the knowledge needed to know when a campaign will fail or not. It can even give you detailed insights into what words need to be changed in your marketing copy. All aspects of your marketing can be improved with the right information. Click tracking gives you the ability to understand demographics and much more when running a campaign. It is usually one of the most important pieces of the puzzle, and it is why software programs that do this function are so expensive.

Analytics

The final piece of the puzzle is your analytics system. It goes hand-in-hand with click tracking. It allows you to get a detailed and comprehensive understanding of your campaign. You can use that information to optimise for location, sex, age, and many more demographic factors. You can also use it to figure out the most compelling images and words. However, this method is becoming much more difficult with the phasing out of third-party cookies and other legal mechanisms being implemented to protect privacy. It is one of the many considerations you need to have going forward in this field.

One of the biggest problems with running a performance marketing business is getting your finances in order. Having a clear oversight and understanding of where your money is and how it flows can give your business a strategic advantage when running and scaling your performance marketing campaigns. That is one of the reasons we started Juni - the financial companion for ecommerce entrepreneurs and digital marketers. We build tailor-made financial management solutions which are designed to make your life easier, optimise your performance marketing efforts, and provide resources to help you scale your business. 

Start your journey with Juni today and take your marketing game to the next level.

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Understanding the performance marketing playing field
Juni
Financial Companion

Juni is the financial companion that provides ecommerce entrepreneurs with an all-in-one financial platform to make better decisions, scale up, and unlock the full potential of ecommerce. You already track ROAS. Juni tracks your entire business.

Download our free whitepaper and gain important ecommerce and marketing insights, directly from Juni.

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