Performance Based Marketing
by Ralph Hilsdon, Web-Clubs
Posted on 24th April 2017
I’ve read several articles recently on Performance Based Marketing, according to some writers, this is where more marketing pounds is heading! So, not wishing to be left behind, I’ve done my best to find out the basics and to present my findings concisely here. The simple definition is “Only Advertising that delivers a measurable result is chargeable!” This is the easy bit, it’s defining what is meant by the words Measurable and Result that is more tricky.
To expand on this, let’s look at in the context of common charging models;
CPM or Cost per Thousand
The simplest model, basically the number of views per advert. As a charge is made whether or not anything further happens, the only measure is volume, there is no measure of results.
PPC or CPC (Pay or Cost per Click)
Advertisers are charged when the advert is clicked on, this model is widely used for online search and display advertising and can apply to email marketing. Compared with CPM, there is more of an indication of interest but little more. It’s arguable if you can call this Performance based Marketing. As the cost of bidding for popular Keywords rises, paying for clicks without any guaranteed results is being questioned by more marketers.
CPL (Cost per Lead)
Now we’re getting closer. With this model, advertisers only pay when a campaign goal is achieved irrespective of the number of views or clicks. Typically, this, as the name suggests is a completed lead entry. Depending on the campaign, this can be a simple signing up for newsletters or a mailing list, or a more detailed even qualified lead.
CPA (Cost per Action)
Here the advertiser only pays for a specific action. This model is mostly associated with E-Commerce websites, where the “Action” that triggers payment is a completed and paid for order. This model is undoubtedly both measurable and results based.
Performance Based Marketing
With both CPL and CPA, it is the publisher of the advert rather than the advertiser that is taking the risk. If the advert fails to deliver they do not get paid. This gives them an incentive to make sure that the advertising is accurately targeted. These models are frequently used with Email and Affiliate Marketing tools.
The downside for the advertiser is that the publisher’s risk is reflected in the price. CPA and CPL costs are correspondingly higher than PPC and there are additional costs involved in setting up and managing suitable tracking.
Hybrid models are a midway option. A reduced CPM fee applies, guaranteeing the advertiser some income whilst a lower CPL or CPA fee, reduces the variable costs of the advertiser.
Is CPM and CPC/PPC dead or dying?
Experts seem to agree that there is a marked shift to payment on results, the trend though should not be overstated. CPM is a powerful tool for raising awareness of a business or new service. PPC and CPC are the sources of income for search and social media platforms so are an integral part of our online world so not easily displaced.
Without doubt the days of advertisers booking large campaigns in the hope of success are long gone. Whatever model is used, buyers for years have got more selective and demanding, the trend to Performance Based Marketing is part of this.