What Are Performance Marketing and Why Its Important For Affiliates?

Performance marketing metrics refer to any measurable aspect of online marketing that drives sales and results in more profit for the company. Performance marketing is a way of measuring and tracking the actual performance of your online advertising efforts. Performance marketing works around measurable marketing objectives, whether AdWords, search engine optimization and other various digital media marketing strategies are about increasing awareness and convert customers to paying clients. What is important is that there is measurable performance, which can be determined through a number of methods.

Measurement refers to how the marketing activities are performing relative to the objectives of the company. The measurement of performance is made through metrics, which are objective, timely and reliable ways of measuring performance. Many Internet marketers are driven by affiliate revenue, which means that their success largely relies on affiliate sales. Affiliate marketing is based around commission revenue, but there are other ways of measuring performance that include click-throughs and bounce rates.

Marketing with advertising channels is one way to measure performance in marketing. This is also referred to as pay per click, cost per mile, or cost per thousand impressions. Advertisers measure the effectiveness of these channels by measuring the time a visitor clicks on the advertisement, usually by clicking on a link within the ad. These advertising channels are used to sell products and services. Pay per click and cost per mile are common forms of performance marketing that include Google AdWords and Yahoo! Search Marketing.

A related channel to affiliate marketing is the pay per sale, or PPS. The purpose of this type of marketing is to reward affiliates for sales that exceed a set amount. This amount is generally a percentage of the total cost of a product or service. Advertisers use this form of measurement because it’s quick and easy. Typically, merchants only pay for affiliates who meet a certain threshold.

The last-click attribution is another form of performance marketing. It requires an advertiser to not only pay for a customer who clicks through from the site, but also for each hit that comes from a Search Engine result page (SERP). Google and Yahoo! employ a unique system called the last-click attribute value, or LCT, which uses customer journey data from the customer’s past search patterns to assign a cost to the advertisers for each click on the advertiser’s website.

An alternative form of affiliate marketing is called a funnel. In a funnel, advertisers have predetermined parameters to determine which advertisements to send to customers based on their past search patterns. For example, if an advertiser sends traffic to a landing page when a customer searches for a certain keyword, the ad may be split between ads that bring traffic directly to the product or service and ads that send customers to other links on the web based on other search terms. This form of measurement differs from the LCT measurement method because it focuses on the actual conversion (or sale) rate, rather than simply the number of times an ad appears.

Price Based Pricing Models: There are two different pricing models that merchants can choose from when it comes to affiliate marketing. These models are cost per click (CPC), cost per action (CPA) or a combination of both. Cost per click pricing models provide advertisers with a flat rate per click while cost per action pricing models calculate a commission based on a set amount, usually per sale, from each click through. A combination of both provides advertisers with a hybrid solution that offers the benefits of both models.

Digital Marketing Channels: There are a number of digital marketing channels that an advertiser can choose to advertise through. The most popular channel chosen by most advertisers is display advertising. Display advertising is used on a website or in electronic magazines and it usually requires no upfront cost for the publisher. The advertiser only pays for results, which come from purchases generated by visitors that click on the advertisement. This is the model most closely resembles cost per action pricing and it’s a great way to calculate the effectiveness of digital channels.