It’s been an interesting year for businesses, but one common thread is the increase in online activity. This makes it even more important for businesses to get things right here. One common thread is the concept of performance marketing and how it relates to the modern/digital marketing worlds. It’s easy to treat these as interchangeable, but performance, or pay, marketing, has a few other points to consider. Let’s take a closer look.
Do the work to understand your ROI
Performance marketing ultimately begins with customer acquisition. Many companies invest in this on some level but don’t do the full work to understand their return on investment. For example, a company may say that they are spending a given amount on paid media, and it looks like they are having people come to their website as a result. However, in order to really excel, you need to understand the cost per click to hit your desired benchmarks.
Surprisingly, most companies don’t fully track their return on investment with performance marketing. Things that every company should be able to reference quickly are:
- Do you understand your costs for marketing?
- Do you know the closing ratio of leads you get from this marketing?
- What is the margin on the products that you use?
Why is this so important? As a business owner, you have a ton of options to invest a dollar of capital. If your growth engine is your area of focus, this generally means marketing or sales. Another common question is whether working to improve your social advertising/search ranking qualifies as performance marketing. Social media can be extremely effective at retargeting. For example, if a customer sees a given item on Facebook, there’s a degree of intent that can be established for visitors to your site. This technically qualifies as performance marketing, even if it’s not a PPC ad, per se.
Prioritize your spend with your first most efficient dollar
Let’s wind things back a bit. When a company decides to invest in performance marketing, where should its first dollar go? How do they know that they will see a return on it? This largely is dependent on already having the numbers that they need. What are the KPIs they are going to use and the goals they want to reach? This will show whether or not your investment turns into impressions, which turns into sales. In some cases, though, creating that foundation may be a bit murky, like channel sales as a goal metric. Make sure you have an array of KPIs to help compensate.
If your first dollar is in paid search, don’t set it and forget it
Finally, there’s a common misconception a lot of companies have about paid media and search. Many assume that this is a pay to play auction marketplace, and they need to be number one. This fallacy leads to many companies paying a high amount to be number one for a keyword or category. However, what you need to realize is that you can be in that 2 or 3 slots and still increase your sales by a significant amount. However, entering a bidding war with your competition ultimately cuts into your profit margin. Be sure to keep the quality score in the back of your head when it comes to ranking. Companies can improve their search placement but understanding what Google specifically wants to do, giving the user the highest-quality content possible.
Performance marketing is ultimately an economic decision. You need to have a clear understanding of how much it costs you to execute different strategies, but also how much it can bring in to make sure you have the largest return on investment. Make sure that you follow the Mahdlo blog for more news and guidance on digital marketing and other business trends.