Performance marketing: pay-as-you-go audiences for your business

Performance marketing is a very appealing solution for businesses: you can attract visitors and clients for a "set" price. Set a price for each impression or visit so that a transaction costs you less than the profit you make and you have a winning formula.

Indeed, performance marketing can be an effective acquisition channel for small businesses and start-ups, to build-up an initial customer base and to complement more efficient but slow-burners channels such as SEO and Brand. 

There are a few catches though:

  • apart from the cost per acquisition channels, working out how many visits or impressions you need to obtain a transaction quickly requires statistical modelling

  • it is a competitive market where you need to have all the basics right in order not to lose money on your new customers

  • in some channels, such as Google Ads, the auction mechanism means that, in competitive markets, companies will often bid more than the margin they make on a transaction, hoping that the customer lifetime value will compensate for the loss in acquisition.

It is an excellent school of marketing where you need to carefully align all of the marketing "P"s, meaning your product, channel (place), audiences (people), pricing and promotion (message). It requires a prudent approach to budgeting spend until you have a clear understanding of the effective cost per acquisition.

Performance marketing is powered by mathematics and statistics. To be effective at scale, it requires automation and coding. Having both managed performance 8 figures marketing budgets and developed very effective processes and tools, I will help you turn performance marketing into a worthwhile growth opportunity.

Main performance marketing channels

Paid-search, Google Ads and Bing

Google Ads, also known as Adwords or PPC, is THE most popular channel for a large number of businesses. In 2019, Google Ads generated $135bn in revenue for Alphabet. 

 

Generally, Search (combining Organic Search or SEO and Paid Search) accounts for 50%-70% of the traffic to most business-to-customer websites. When we add the traffic going Directly to the websites, we cover a staggering 90% of all traffic. 

Google Ads is the main channel which enables you to communicate with customers looking for a product or service that you are selling, meaning that, if you are targeting the right terms, your ads will only be shown to 100% qualified prospects. In marketing terms, this is the channel with the highest intent 

Google also makes it deceivingly easy to create and invest in ads, provides a wealth of extremely relevant data to improve your performance, as well as means to improve your marketing and refine your target both in the terms you bid on and on the audiences.

These features have logically turned Google Ads into a very competitive channel, with a clever pricing mechanism: auctions. The price reflects as much the competitors are ready to pay for a click (hence the pay-per click model which is often associated to Google Ads).

 

The economic theory suggest that the bids will ultimately equal the profit that each competitor makes on a transaction, meaning that paid-search generally translates into a very high cost of sale. To make it work, your business needs to get a flawless execution in this channel, and actively manage its customers lifetime value.

 

Bing Ads follow a similar principle, however on a much smaller scale (Google has a market share close to 90%) and with less sophistication, making it a complementary rather than a priority channel.

Facebook Ads

Facebooks Ads, including Instagram, are the second biggest performance marketing. Facebook advertising revenue is growing fast with more than $60bn in revenue.

Contrary to Google, Facebook works by "pushing" content to audiences, which may or may not be interested by your products. Over time, Facebook has refined its segmenting capabilities much beyond socio-demographics attributes to provide very precise intent signals for your product.

Facebook allows you to bid either per impression (you pay every time an ad has been shown to a user) or per click.

 

For a start-up or a company creating a new market, for which the volume of search is low or non-existent, Facebook ads are a channel worth considering.

 

Although considered as more directed to audiences in their private lives, Facebook is frequently used to sell corporate products as well.

As for Google Ads, Facebook Ads provides both detailed information and parameters to fine tune the campaigns and select the best performing creatives.

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