Performance Marketing (With Payment Methods and Channels)

By Indeed Editorial Team

Published 9 November 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Digital marketing allows businesses to engage customers worldwide and across multiple segments. Results drive performance-based marketing strategies, so a business can attract consumers while receiving confirmation on the effectiveness of its content. If your work involves marketing or if a career in this field interests you, learning more about this strategy can help you boost a company's sales and raise its brand awareness. In this article, we define performance marketing, discuss the payment methods and optimal channels for this marketing strategy and describe its key benefits.

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What is performance marketing?

Performance marketing is a digital marketing strategy where the purchaser of advertising services only pays when certain results occur. This differs from traditional marketing approaches, which typically require businesses to pay upfront to advertise products or services. Additionally, traditional approaches typically use a predetermined and non-negotiable fee. There are several pricing models available for performance-based marketing strategies. The purchaser may select one based on the specific type of action they want a consumer to take.

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5 payment methods for performance marketing

To help you understand how this strategy works, the following lists the advertising models that businesses can adopt when using performance-based marketing:

1. Cost per click (CPC)

This advertising model, also known as pay-per-click, charges the purchaser each time a consumer clicks on an ad. It's an organic and effective way of attracting customers since many instances of this strategy appear on popular search engines. The fees for using CPC can range from several cents to hundreds of dollars, depending on the niche market, keyword relevance and target area.

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2. Cost per impression (CPI)

This model bases payment on the amount of exposure that an ad receives. When an ad appears on a search result page or another website, it counts as a single impression. So, if one person views the ad five times or five different people view the same ad one time, it counts as a total of five impressions. Companies that use CPI typically pay for every thousand impressions.

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3. Cost per sale (CPS)

CPS, or pay-per-sale, is an online advertising model where the purchaser of advertising only makes a payment to the publisher when the ad generates a sale. This pricing model is prominent in affiliate marketing. For example, the affiliate may promote a product they enjoyed using. For each sale the product merchant makes, the affiliate receives a commission from the profits.

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4. Cost per lead (CPL)

For this pricing model, a business pays when it receives a sign-up from an interested consumer. Common applications for this strategy include getting sign-ups from consumers for newsletters and webinars. To confirm their interest in these offerings, consumers typically complete a registration form requiring personal information, such as their full name, email address and phone number. This is beneficial for companies, as they can use these details to contact and engage them further, which may lead to more sales.

5. Cost per acquisition (CPA)

This model is optimal for a business with several intended goals for its advertisements. You can think of CPA, or cost per action, as a composite of the CPS and CPL models. These two models require specific results, namely sales and leads, but CPA is a more general model whereby a purchaser makes payment when a consumer completes one or more of the following actions:

  • providing their contact information

  • purchasing a product

  • downloading an e-book

  • visiting a company's blog

  • subscribing to a newsletter

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Optimal channels for performance marketing

Marketing channels are an important means of raising consumers' awareness of products. The following lists the most suitable channels for performance-based marketing strategies:

Display advertising

This type of advertising entices consumers using various graphics, such as videos, pictures and text. Banner ads are a prominent example, appearing on many social media platforms and websites. Display advertising tends to work best when it uses interactive content and attractive designs, which increase the likelihood of a potential customer clicking on the ad.

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Native advertising

Native advertising, also known as sponsored advertising, matches the form and function of the platform the ad appears on. For example, a scientific magazine's website may feature an ad that aligns with its vision and aesthetic. One benefit of having advertisements that match the content and look of the publisher's website is that they don't disrupt the user's experience. The advertisements usually blend in well with the website's layout so that the user is likely to click on them as they scroll to the bottom of the page.

Content marketing

Content marketing focuses on publishing material that informs a target audience about a company's products and services. For example, a gym may create a blog post to educate readers about the benefits of group training classes, with a link to one of its available programmes. Other types of content marketing materials include case studies, e-books and white papers.

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Social media marketing

Businesses can advertise on social media platforms for different objectives, such as generating leads and sales or increasing engagement and website traffic. This method is also highly trackable, making it easy to determine a marketing campaign's effectiveness. Social media also provides access to a large number of consumers, making this a great option for companies that want to expand their customer base.

Partnership marketing

Partnership marketing is when two companies collaborate to achieve their business goals together. For example, a magazine publication could sponsor a cafe with a bookcase full of its latest and most popular issues. By announcing this collaboration, both businesses can increase their brand awareness and reputation. Additionally, each may attract new customers from the other business, diversifying the customer segments of both companies.

A variation of this approach is affiliate marketing, where an affiliate receives a commission for promoting a product. Influencers, bloggers, podcasters and product review sites are some common examples of affiliates that businesses can partner with to increase their sales and engagement.

Search engine marketing (SEM)

SEM involves promoting a company's website by placing it at prominent locations on search engine results pages. If an individual uses a search engine to find a particular luxury bag, they may see an ad for the brand's website at the top of the results page. Selecting relevant keywords that consumers are likely to use is an important factor for businesses that want to employ this type of marketing.

Benefits of performance marketing

The following are the main benefits of performance-based marketing:

  • Enables audience-specific approaches: This type of marketing enables businesses to customise their content and approach for their various customer segments. For example, a bookshop could use social media to engage young consumers while targeting its older audience with native advertising on various news websites.

  • Facilitates flexibility: With so many payment models and channels, businesses can find the exact combination that suits their needs and budget. The flexibility that performance-based marketing offers also means businesses can adjust their approach post-campaign when they review the results.

  • Creates mutually beneficial outcomes: Successful performance-based marketing strategies can benefit both the company and the advertiser or affiliate. For example, creative content that engages an audience can improve a publisher's website and elevate brand awareness, while affiliates promoting a product may also gain new followers.

  • Minimises risk: Compared to traditional methods requiring upfront payment, the low risk of performance-based marketing makes it an appealing option for businesses. This enables them to allocate the money saved to other areas.

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