Newsletter

Growth in a Downturn

For nearly a decade now, I have seen countless companies engage in online marketing. And from that experience, I'm convinced that waiting for the larger economic picture to improve is not going to make the path ahead any easier.

Launching targeted and cost-effective campaigns could mean the difference between success and failure during the downturn. If you can grow, even in these times, you will emerge on the other side of the economic crisis ahead of the competition. And to achieve this growth now, more than ever, many marketers are turning to a model called performance marketing.

Payment for Results
Performance marketing is the fastest growing segment of Internet marketing. The term refers to advertising options in which marketers pay their agency for the results that are delivered and not for a budget that is being spent. Simply, agencies that offer performance marketing only get paid when they produce results. According to the Interactive Advertising Bureau, performance marketing is now more desirable ever.

It is a beneficial model for online marketers, whether you are promoting your product or service through email marketing, search engine marketing, display advertising, social networks, mobile or affiliate networks. In this model, agencies drive traffic to their clients' sites, help them convert the traffic into qualified leads or actual transactions and are paid only for the results, which can include qualified leads, referrals or sales.

Performance marketing can be an extremely powerful and influential tool when it is strategically designed for your business. Many companies favor performance marketing because they do not incur a marketing expense unless results are achieved. In most cases, when it relates to an e-commerce website, performance marketing is a form of advertising that is cash-flow positive.

A Different Model
This pay-per-action model is distinct from traditional advertising approaches in that consumers must make a purchase or create a lead rather than just view a page or click for the advertiser to spend.

Unlike traditional advertising where companies pay on an impression (CPM) or click (pay-per-click) basis, performance-marketing agencies are only paid for leads generated and transactions completed. In the traditional scenario, the advertiser must pay in advance for the creative work and media buys regardless of the ROI of the campaign.

In the new model, the burden is on the agency to create a performing ad campaign that converts into good leads or customers if the agency wants to receive payments from its client. The agency will invest its own resources into the campaign, thereby taking a great portion of the advertising risk on behalf of its clients. In contrast with traditional advertising pricing models, the advertiser pays the agency only after having collected the revenues from its customers' purchase orders and not before.

Performance marketing should not to be confused with pay per click (or PPC), the paid search pricing model in which the advertiser pays when an Internet user clicks on its ad and visits its site. The media buying cost of performance marketing is risk-free to an advertiser. In a paid search campaign the advertiser takes the risk of the conversion rate between a click, a visit and an actual lead or sale.

High Quality Traffic
Because performance marketers are only paid for completed transactions, these agencies focus on driving high quality traffic through strategically designed campaigns that fit your target audience. Quality is guaranteed by construction of the model. Traffic is driven from many sources including search engine optimization, paid search, social networks, email marketing, and the ever-evolving variety of online channels.

Meet Online Objectives
The lead generation activities or transaction objectives you select should be consistent with your company's strategic goals. If the primary objective for instance is to drive consumers to trial a product, then the activities could focus on the incentive that you will offer to your consumers. An important step in choosing the activities is to first make sure they can be tracked accurately.
Once you have identified all the activities you want to track, determine the value of each lead or sale. For example if your product or service retails for an average order value (AOV) of $100, you may want to assign a value of $40 to $50 per order. Cost per lead or cost per order will depend on your strategic objectives. If your company is trying to aggressively gain market share, you may want to assign greater value to each transaction than if the product is more mature and your company is trying to improve its profit margins.

Partner Wisely
Choosing a knowledgeable and nimble performance-marketing agency is vital. This agency will be your partner, supporting your business objectives and growth. An experienced agency will create effective advertising campaigns and promotions to convert the maximum number of new leads or customers, ensuring your success during tough times. Your performance marketing agency should be considered a long-term partner.

If you can delegate enough of your online campaigns to your performance marketing agency, which acts like an extension of your own online marketing department, this will free up some precious time for you to come up with the right product offers that your online consumers are looking for. Crafting attractive product offers in your competitive environment is one of the most important factors of success in online marketing and will be the topic of a future issue of this newsletter.

• Click here to subscribe to the newsletter
  
  
• Click here to learn more about LSF Interactive’s performance marketing services