The concept and classification of Performance Marketing

Theory Andy 0℃

What is Performance Marketing?

Performance Marketing is a method of marketing in which the purchaser pays only when there are measurable results[1]. The measurable results refer to the completion of an order, a user registration and other advertising activities which can be measured. Performance marketing activities include four types of roles: merchant, network, publisher, and customer. The alliance is the hub of the industry chain and is responsible for upstream and downstream management. The core business is to manage and update offers and pay commissions. Performance marketing originated from Affiliate Marketing[2]. Affiliate Marketing is the most famous form of Performance Marketing.
The concept of Performance Marketing is relative to Brand Marketing. The essence of the brand marketing is “attraction”, that is, through the repeated advertising effect, it establishes the conditional reflection effect between the customer and the brand, and achieves the purpose of occupying the customer’s mind. In the era of the Internet, the advertising way of brand marketing has not changed. It still follows the positioning theory, occupying the mind of customers through continuous advertising effect. One of the difficulties of brand marketing is that it is difficult to monitor the effect of advertising input, and the effect of advertising investment is hard to assess. Advertisers don’t know which advertising costs have achieved results.
Performance marketing is an upgrade to brand marketing. Performance ads are measurement marketing campaigns. The measurement results are quantified. There are many types of result which including recording customer visit information (CPC), obtaining user leads or information (CPA/CPL), and completing a transaction (CPS). Through quantitative quantification and internet technology, the results of Performance Marketing can be easily verified, which makes advertising marketing from the traditional extensive type into the refined stage.

The Classification of Performance Marketing

The basic characteristic of Performance marketing is to pay for ads results. According to different payment methods, Performance Marketing can be divided into categories such as CPA, CPI, CPS.
The CPA (Cost Per Action) refers to paying according to the number of effective actions after the user guides arrival. The purpose is to obtain user information. Actions here can be registrations, interactions, downloads, orders, purchases, etc., which are agreed in advance by the advertising buyer and the seller. No matter how many times the advertisement is displayed or clicked, the advertiser pays only the agreed action, that is, the Performance.
CPS (Cost Per Sale) is based on the number of purchased purchases after the user guides arrival, the purpose of which is to obtain an order. For example, in an e-commerce order, the promoter can get a 5% commission for each transaction completed.
CPI (Cost Per Install) refers to payment per installation. For example, in mobile app promotion, advertisers pay 5 dollars for each installation.
Performance marketing usually settles afterward. Advertisers only pay for advertisements after the advertising campaign is over. Advertisers do not need to consider the risk of advertising. Performance Marketing is welcomed by advertisers.

The Essence of Performance Marketing is Revenue Sharing

The essence of Performance Marketing is Revenue Sharing. Let us first analyze the traditional industry, that is, offline Revenue Sharing practices.
We study computer trading market. There are multiple stores in the market, each selling different kinds of computer products. Shops make money from the difference between buying and selling. The faster the product turnover, the more money you make. The owner wants more customers to buy computers. It is a common practice to hire a Purchasing Guide. Purchasing guides usually have no wages or very low salaries. Every time a transaction is made, a commission is paid. This is the model of Revenue Sharing. Due to the identity of the Purchasing Guide, if the product is not well understood by him, customers often do not trust the Purchasing Guide and may even feel that they are being promoted.
Another way is acquaintance recommendation. If the customer recommends that the acquaintance generate a repurchase, then the merchant will usually reward both sides separately after the new transaction. This is another model of Revenue Sharing. Due to the lack of information system support, there are many difficulties in transaction confirmation and commission payment. This kind of Revenue Sharing model has not been widely used.
Then we will analyze the Revenue Sharing practices of the online market again. Amazon’s online book recommendation system is the earliest model of Revenue sharing in the world. Users usually share their reading experience and book links after purchasing a book on Amazon. His friends purchase books through his share link. Then the sharer will get a certain percentage of the book price. Because of the buyer’s recommendation, a strong sense of trust, and a complete set of sharing and commission settlement system support, Amazon’s model has achieved great success and this has created the emerging of Affiliate Network Marketing.


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