What is performance marketing and what are its key components?
Performance marketing is a term that refers to online marketing and advertising programs in which advertisers (or “retailers” or “merchants”) and marketing companies (or “affiliates” or “publishers”) are paid when a specific action is completed. Examples in this regard include online sales, leads or clicks.
Performance-based advertising is a form of advertising in which the purchaser only pays when there are measurable results. There are various pricing models used for performance advertising, and the most common ones are:
- CPM – Cost per mile/thousand impressions. Via this model the advertiser only pays for the amount of times the advertisement is being showed (impressions). To be more secure about the quality and the viewability of the advertisement, a quite new price model has been introduced in the landscape of performance marketing. This is the vCPM price model, in which the advertiser only pays for the impressions that are viewable. In this regard, viewability means that the consumer has actively seen the banner on his screen.
- CPC – Cost per click. This means that the advertiser only needs to pay for the amount of clicks on an advertisement. This is mainly used with search advertisement, but can also be used in manual deals.
- CPL – Cost per lead. This means that the advertiser only pays for the leads that the advertisements generate. A lead could be a subscriber to a newsletter or someone who leaves his contact details to participate in a contest.
- CPA – Cost per Acquisition, also know as CPS (cost per sale). Via this model the advertiser only pays for the generated acquisitions, such as a transaction. Please note that CPA is not the same as CPL, because CPL is mainly about submitting basis contact details while a CPA is for example about buying a product for which the consumer needs to handover his bank account number.
In general, performance-based advertising is about ensuring transparency, visibility regarding inside traffic, conversion and commissions.