First Media presents a glossary of performance marketing terms to help you learn and hone your marketing vocabulary about this increasingly popular strategy.
As you learn more about marketing, you’ll likely come across the term performance marketing. This increasingly popular marketing strategy helps brands meet their business objectives using data-driven insights. With this emphasis on data, studying performance marketing requires knowing numerous terms about the strategy’s measurements, tactics, and objectives. So whether you’re learning the basics of performance marketing or want to hone your mastery of performance marketing vocab, here are the terms you need to know.
Performance Marketing
Definition: Performance marketing is a marketing strategy where brands pay advertising agencies, influencers, or other publishers only when a specific action occurs or a business objective is met.
Example: You create an ad for a publisher to post on their platform. Instead of paying a fee for them to publish the advertisement, you pay the publisher for the number of clicks the ad receives, the number of sales you get as a result of the campaign, or another cost metric. Some advertising agencies, like First Media, focus primarily on performance marketing solutions because of the benefit it gives to their partners. When partnering with agencies like First Media, instead of shelling out money for a campaign that may or may not impact your impressions, sales, etc., you only pay for the benefits you receive in clicks, conversions, or sales.
Affiliate Marketing
Definition: Brands pay affiliates to advertise a product or service for commission on each sale. Affiliates can be individuals (bloggers, influencers, current customers, or users) or companies.
Example: Your brand begins an affiliate marketing program with current users of your product or service. Each customer (affiliate) is given a unique URL to promote to their friends, family, or followers. When their peers click on the link and make a purchase, the affiliate gets a percentage of the profit made from the sale.
Metrics
Definition: In performance marketing, metrics are used to evaluate the success of a marketing campaign. Performance marketing metrics measure the actions or conversions made by users (clicks, click-throughs, impressions, click-throughs, conversions, abandoned carts). In addition, there are also cost metrics, like cost-per-click (CPC), cost-per-acquisition (CPA), cost-per-sales (CPS), and cost-per-mille (CPM), that help determine the overall value of a campaign. Assessing those metrics is essential in performance marketing because it gives you insight into your campaigns’ success and whether your advertising partners are meeting your objectives.
Example: During an ad campaign with a media publisher, you track metrics for cost and consumer actions, such as the cost–per–click of your ad, your add-to-cart rate, and how many sales you earn from the campaign, to quantify your return on investment. For example, First Media has a 21% lower bounce rate and a 104% better add-to-cart rate than industry standards. That means that partners of First Media notice those boosted rates as they track metrics, giving them greater insight into the benefits of campaigns.
SEO
Definition: Search Engine Optimization (SEO) is the process of improving search engine visibility, or “ranking,” by making content relevant to users’ search needs. SEO aims to gain more organic traffic, or unpaid traffic, to your site.
Example: To rank higher on Google, you concentrate on SEO practices like keyword research, high-quality content creation, and link building. For one informational blog on your website, you can move up in ranking after spending intentional time making sure the article has relevant, high-performing keywords, helpful hyperlinks, and strategic meta-information.
Target Audience
Definition: The target audience of a performance marketing campaign is the specific group of users you intend to reach in the campaign. Target audiences are users within your niche segmented by demographics like age, gender, location, occupation, and income level.
Example: You run a small exercise studio. After researching the demographics of users most interested in your service, you target an audience of 18-35-year-olds, 60% female and 40% male, living in your area. Your data might also include information about this target audience’s occupations, preferences in workout types, most frequented social media and more.
Cost-Per-Click
Definition: Cost-per-click is the price of a pay-per-click campaign, as you’ll read later. This metric can help you understand whether your campaign gives you a good return on investment (ROI). Cost-per-click is determined by dividing the total price of your campaign by the number of clicks you receive.
Example: Your campaign with a publisher earned you 85 clicks. If you paid $300 for that campaign, your cost-per-click is $3.53 ($300 ÷ 85 = $3.53).
Cost-Per-Action
Definition: Also known as cost-per-acquisition (CPA), cost-per-action is the total cost of a user taking a desired conversion, typically a sale or lead.
Example: Calculate your CPA by dividing the total cost of a campaign by the number of actions taken as a result of that campaign. Perhaps you paid $150 for a campaign and directly earned 50 sales. Your CPA is $3.00 ($150 ÷ 50).
Cost-Per-Mille
Definition: CPM (cost per mille), or cost-per-thousand, is the price your brand pays the publisher for 1,000 impressions or views of an ad.
Example: You pay First Media a set cost for every 1,000 views your ad gets on one of our publishing channels. Of note: ad spend, like CPM, varies depending on your chosen publisher. For example, First Media has a 35% lower CPM than the industry standard, meaning you can expect to pay less for those 1,000 ad views than you would with other partners.
KPIs
Definition: KPIs (key performance indicators) measure performance or progress toward a desired result over a period of time. KPIs differ based on the identified goals of a particular effort. Well-selected KPIs help teams assess whether their campaign is meeting its goals.
Example: There are dozens of KPIs used in performance marketing, including:
- Average time on page
- Click-through rate
- Conversions
- Cost-per-lead
- Email list growth
- Leads generated
- Retention rate
- Return on ad spend (ROAS)
- Revenue
If the goal of a campaign is to create a larger audience, the best KPIs might be increased conversions, email list growth, and a higher retention rate.
Conversion Rate
Definition: A conversion rate is the percentage of users who have “converted” or taken a specified action. The conversion rate for a campaign is calculated by dividing the number of conversions throughout the campaign’s lifecycle by the total number of ad interactions. Most marketers agree that a “good” conversion rate is anywhere between 2-5%. Conversions vary based on the specific campaign. For example, for some marketing campaigns, getting the audience to click through from a marketing email to a landing page on the company site might count as a conversion. For another campaign, a new purchase might be the metric counted as a conversion.
Example: Your goal is to grow your email list. You decide a new sign-up for your email list will count as a conversion. Your advertisement on First Media’s Instagram publishing channel gets 1,000 interactions and 50 conversions (email sign-ups). 50 ÷ 1,000 = 0.05, giving you a 5% conversion rate.
Pay-Per-Click
Definition: A frequently used performance marketing strategy, pay-per-click (PPC), refers to when a brand pays a publisher each time their ad is clicked.
Example: You partner with First Media to have advertisements for your brand published on our channels, paying a predetermined fee for every click your advertisement receives. The cost for that campaign can be calculated with your cost-per-click formula, as described above.
Click-Through Rates
Definition: When users click on an ad published on another app, platform, search engine, or site that sends them to your website, it’s called a click-through.
Example: The click-through rate is the number of clicks received divided by the number of times the ad is shown (also called impressions). Your ad has 200 impressions on Instagram, meaning it was seen 200 times by different users. Seven viewers clicked on the ad. The click-through rate for that ad is 3.5% (7 ÷ 200 = 3.5%).
Return on Investment
Definition: ROI is the profit you get from the money you invest. For performance marketing, your ROI is the profit you made from the campaign in sales compared to the money you put towards the campaign.
Example: As the result of a campaign, your sales grew by $2,000. The marketing campaign costs you $200. Therefore, you calculate your ROI as $1,800 ($2,000 – $200 = $1,800).
Partnering with Performance Marketing Experts
The niche terminology and abundance of metrics to calculate can make performance marketing seem inaccessible. But, with an understanding of the basics and the right marketing partner, performance marketing invites an opportunity for any brand.Explore our resources to learn more about marketing strategies and partner with First Media to get access to expertise that can give you the most benefits of this marketing strategy.
