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Our services - what is performance marketing?

What does baking powder have to do with a business area that can be found in almost every company today? Sounds like the beginning of a good joke, but we're talking about marketing. 

Baking powder and marketing can have almost no connection, you might think. But it can, because Dr. Oetker's baking powder also marks the birth of German marketing. In 1893, mass advertising for the first time offered customers a product that had not been needed before, but which made work easier. 
⁠Marketing has gone through several stages of development (not only in Germany) since Dr. Oetker's baking powder and has also grown in its form, possibilities and instruments due to the Internet. 

While in the 1950s the focus was clearly on the product, the orientation developed from sales (1960), via the market (1970) to a competitive orientation in the 1980s. In 1990, the environment orientation was added, and in 2000 a more interactive orientation was developed through the possibilities of the Internet and emails. Since about 2010, due to the new possibilities of social media, we now speak of a network orientation.

Not only has orientation changed over the years, but also new tools and strategies have emerged, expanding the possibilities for companies to promote and sell their products.
⁠One part of this is performance marketing, and what that is exactly, what it's all about, and what important metrics there are, we'll take a closer look in this article. 

What is Performance Marketing?

At its core, performance marketing is about achieving a measurable response from users or addressees of a campaign. Performance marketing is used both to acquire new customers and to retain existing ones. 
⁠Marketing activities are geared to the target group and key performance indicators (KPIs) - such as click numbers, conversion rates or impressions. 

The primary goal of performance marketing is to make marketing activities as efficient as possible. It has 2 essential characteristics: 

  1. Measurability: the defined KPIs must be quantitatively recordable so that the success of the campaign and the interactions of the users can subsequently be evaluated. 

  2. Modularity: By using different communication tools, which can all be evaluated independently, changes can also be made within an ongoing campaign. 

Probably the best known form of performance marketing is SEA, i.e. advertising within search engines such as Google. For this we have an article for you, which also explains which tools can be used here and what the difference is to SEO. 
⁠Paid advertising can also be placed via channels such as Instagram, Facebook and TikTok (paid social media marketing), and the conception and evaluation of these campaigns is also part of performance marketing. 

The most important KPIs

Performance marketing is all about measurement, and for that, of course, you need metrics and benchmarks to guide you. 

  • Impressions: Impressions indicate the total number of times a campaign has been played.

  • Reach: This measures the number of people reached by a campaign.

  • Conversions: This measures the number of times a specified goal was accomplished. Such goals can be purchase completions, newsletter signups, and more. 

  • Return on Ad Spend (ROAS): This is the profit that was generated by the campaign

  • Click-Through Rate (CTR): The higher the CTR, the more people in the target audience clicked on the campaign.

Besides these KPIs, there are others, but to understand how exactly performance marketing works, these are the basics. 

Pros and Cons

Performance marketing offers numerous opportunities and choosing to align marketing activities with data can improve return on investment. Return on investment (ROI) is a business metric that indicates the ratio of profit to cost. So what are the advantages and disadvantages of performance marketing? 

Advantages: 

  • Results become measurable and thus offer detailed conclusions. These results serve as a basis for further decisions.

  • Adjustments and optimizations can be made in a target-oriented manner 

  • Costs are only incurred if the ad is successful (if an ad is not clicked on, no costs are charged for the clicks)

  • Advertisements can be individually designed and can be varied 

Disadvantages: 

  • Professional analysis of the data is necessary and knowledge of how to classify the metrics is important. 

  • Regular analysis of the data is important and also means time-consuming. 

  • Campaigns need to be continuously worked on and improved. 

Performance marketing is a promising method to make one's own marketing activities visible and also to understand which campaigns reach which target group in which way. But the effort required should not be ignored either. 

Summary 

In marketing, as in so many areas of business, it's the mix that counts. The application and use of different instruments and methods of marketing are important to create the individual-perfect communication method for a company in order to achieve the desired company goals through marketing. 

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