Before the Internet, advertisers used traditional media – television, print, radio, etc. – to help engage their target audience. Results were hard to measure and marketing budgets were the economic touchstone. With the advent of the Internet, marketers have gotten better, and faster, at measuring their results. But in 2011 and beyond, simply measuring results is not enough. Today’s best online marketers are performance marketers. They are not just measuring results, but actively improving them.
What if marketers could accurately predict the return on their marketing investment before running a campaign? What if they could pay media outlets only when the target consumer took a desired action like requesting more information on their product? And what if while the campaign was running, the marketer could change campaign elements – the mix and price for the media, the creative used, the sales process – to optimize sales related to the advertising program? If marketers could do all this, they would be running a true performance marketing campaign. More importantly, they would be generating revenue increases that would essentially make budgets obsolete. This is the essence of online performance marketing. Organizations that want to supercharge their customer acquisition strategies, while building profits, will increasingly turn to performance marketing to power their growth.
Nearly 20 years since the Internet began, a whole new world of advertising has opened up. The ability to actively manage the “new media” and drive more profitable sales from marketing has caused a surge in the advertising dollars being spent online. Good online advertisers know how far their dollars are going to go and how much they can expect in profits. They take advantage of the near real-time flexibility of the Internet to actively manage campaign elements and improve marketing to sales conversions. They adjust to incorporate performance-based media like paid search, online exchanges, and affiliate marketing. They tweak media pricing to improve marketing economics, and where possible, advertisers only pay for a consumer action that indicates an interest in their product or service.
The ability to improve results during a live campaign makes online performance marketing a game changer. Performance marketing enables companies to grow revenues more rapidly, confident that their marketing is increasing profits. Those of us in the industry understand how powerful performance marketing can be; how it can maximize sales and profits simultaneously. In layman’s terms, online performance marketing lets advertisers pay solely for improved economic performance. Why then is online performance marketing still underutilized? Why aren’t more marketers, advertisers, and companies taking advantage of these tools? For those on the fence, it may be a case of misperception dictating reality, or simply a lack of execution experience.
Online performance marketers create product-specific strategies utilizing one or more of six major channels: affiliate marketing, data acquisition, display advertising, e-mail marketing, search marketing, and social media marketing. Each channel has a unique set of best practices including compliance methodologies, targeting and tracking tools, and key performance indicators. The skills required to optimize each channel while concurrently optimizing the creative and consumer experience, as well as stitching together the right tools to make the ongoing optimization possible, take time and experience to perfect. Unfortunately, the relative newness of the industry has not provided sufficient time for most marketing organizations to develop the expertise or technology to manage a true performance marketing campaign.
Also slowing the adoption of performance marketing is its reliance on “long tail” media. Performance marketers typically share risk with their media partners by only paying when the target consumer performs a desired action. Until recently, the largest online media outlets have been unwilling to share this economic risk, forcing performance advertisers to partner with less-well-established media outlets. Some advertisers have been fearful that by using relatively new, contemporary media, their brands will be at risk. Ironically, the continuous improvement model of online performance marketing should have the direct opposite effect. The pay-for-improved-performance approach and its reliance on tracking, reporting, and optimization should assure advertisers that their marketing will reach the right audience, one that responds to the brand.
The Internet has forced greater accountability in the advertising world. But setting a campaign and then measuring the results after the fact won’t win you market share. In 2011, the best online marketers will acquire the skills and tools needed to improve the economics of their campaigns on an ongoing basis. They will understand that reaching the right audience on Facebook is just as valuable as reaching them on The New York Times. And they will forsake the budget and spend as much on marketing as they can until the profitability of the next campaign starts to decline. The online marketing winners will deploy true performance marketing campaigns that will create dramatic growth and profits.