Performance-based marketing — the solution marketers have sought since the profession began
More than a century ago retail magnate John Wannamaker reputedly conceded that half of his ad spend went straight down the drain. He just didn’t know which half, he added.
That observation has stuck with marketers — and CEOs — ever since. In the generations following Wannamaker’s day, marketing return on investment (MROI) has continued to be an elusive thing to quantify — and a source of chagrin for marketing professionals who’ve had to argue without hard data to back up their claims about marketing performance.
They couldn’t tell the client, with any certainty, which half of the campaign was working.
Thankfully, smart marketers no longer have that problem thanks to the internet, the ascendancy of performance-based marketing concepts, and the sophisticated tech tools that can quantify precisely how online marketing performs.
Performance-based marketing pricing models such as CPM, CPC, CPL, CPA, and PPC effectively tie online marketing performance directly to results, taking much of the guesswork out of an ad buy. That development was transformative in itself, but now cutting-edge technology has made it even more actionable by rendering marketing performance visually and in real time.
Performance-based marketing ties marketing expense to specific outcomes
With the advent of the multi-faceted, organized dashboard that provides aggregated statistics, data analysis and visualization, marketers only pay for measurable results, typically achieved through one or some combination of the most popular marketing approaches.
CPM (Cost-per-thousand), or CPI (Cost-per-impression) was the earliest such pricing model in the internet age, essentially mimicking traditional print circulation-based pricing models. Like print ads, however, the number of eyeballs reached doesn’t predict the number of sales — or clicks. With CPM/CPI advertising, the value of the audience determines the value of the ad.
While modern metrics can assign a reliable value to CPM ads, the desire to attach an ad buy to an action — and ultimately to the bottom line — led to a still-evolving array of marketing performance-based models. CPC (Cost-per-click) or PPC (Pay-per-click) has the advantage of requiring an action — a click — before any cost accrues, but it still stops short of tying the ad directly to revenue.
CPL (Cost-per-lead) campaigns have the advantage of generating — and only paying for — qualified leads, tying them closely to the traditional sales cycle and providing a straight line to valuable data that can be tracked from acquisition through sales using software. CPA (Cost-per-action) advertising goes a step further, only paying for an ad when a customer makes a specific action, often a credit card purchase.
While such performance marketing models in effect grew up on the internet, concepts and techniques continue to evolve as marketers adapt them to newer technologies, and extend them to the full battery of devices now available.
It’s the marketing performance metrics that tell the whole story
Each of these models can be effectively deployed as a component of a successful performance-based marketing campaign. But, as with any marketing initiative, they achieve their greatest impact when they are linked strategically to one another and the overall campaign — and then continually monitored, assessed and adjusted in order to maximize performance.
By their very nature, marketing campaigns are laser-focused to achieve the goals of the advertiser, but they also offer a win-win for publishers, affiliates, and marketers themselves, by clarifying the value and impact of the campaign. When, for example, a click equals a sale and a dashboard then opens up the big picture as well, there’s no need to wonder anymore — as John Wannamaker did — which half of the ad budget is working.
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