Performance Marketing for Small Businesses

‘I will buy you that Ipad if you score a full 100 in your Maths exam this year!’

EVEN BETTER

‘For every 1 mark you score in your maths test, you get extra 10 minutes of TV time in the summer vacations!’

As parents, we’ve been forever striking such deals with our children ……and you thought you needed training in PERFORMANCE MARKETING!

The examples above might not exactly be ‘Marketing’, however, this happens to be the central principle behind performance marketing. When you play a game of rewards with your children to ensure that they get the best results, i.e. good marks, good behaviour etc., you are parenting; applying similar strategies to marketing platform is ‘performance marketing’.

You pay for the advertising effort as per the advertisement’s performance! In other words, you pay X amount to achieve Y result!

Is Performance Marketing same as Digital Marketing?

What are the elements of Performance Marketing?

How can I practice performance marketing on different digital platforms (Facebook, Instagram, Google etc.)?

Is Performance Marketing Expensive?

What is Customer Acquisition Cost?

Is Performance marketing good for small businesses?

Is Performance Marketing same as Digital Marketing?

Performance marketing has been practiced since the pre-digital era. Remember the pamphlets that came in your newspapers every morning! The newspaper vendor was paid as per the number of newspapers he could add pamphlets in the busy early mornings. However, the crude form of performance marketing practiced in the pre-digital era got way more efficient with digital marketing.

How? Let’s say these pamphlets were about a new tuition centre opening in the neighbourhood, which meant the target group of this business could only be families with children of a certain age group. However, the newspaper vendor would insert the advert randomly in the agreed number of newspapers. So, if you paid for inserting 1000 pamphlets on a particular day, you ensured that you reached out to 1000 families (payment as per performance), however, you still have no clue if these 1000 families were your potential customers, i.e., many of these would not even have children of the particular age-group! So, although the reach of the advert could be measured, the performance was not optimized.

Performance marketing sharpened itself in the digital era by offering SMART solutions.

SMART objectives in advertising

Read further to understand this in detail.

What are the elements of Performance Marketing?

The Power of Data & Targeting:

Marketing platforms like social media and search engines have extensive demographic and psychographic data about their users. Think of performance marketing as your personal business assistant who collects valuable information about your customers' preferences, buying habits, and interests.

If we continue with the previous example, a digital marketing platform knows fairly accurately the specific households in a particular postcode that might be looking for extra coaching for their children. So, if you want your advert to be exposed to 1000 people again, you can make sure it is specifically those 1000 people that might be your potential customer.

Do you see lesser inserts in your newspaper these days? Now you know why!

Taking a step forward, it can help businesses create super-targeted ads that reach the right people at the right time. For example, I can run an advertisement about a restaurant to a specific target group of customers between 5-6pm in the evening, i.e., when they are most likely to make a table booking.

Paying for Results:

Now the most interesting bit…. in the world of performance marketing, businesses only pay for the ads that actually work, i.e., based on performance. It's like having a special agreement with a magical genie who says, "You only have to pay me when someone is actually impressed by your offer!" This way, companies can be sure they're getting their money's worth and use their budget wisely. As a microbusiness entrepreneur, you understand the importance of budgeting wisely. With performance marketing, you only pay for the results you achieve. It's like having a special agreement ensuring your hard-earned money is spent on ads that generate sales or engagement or at lest reach the right people. This way, you can have peace of mind knowing that your marketing budget is being put to good use and delivering tangible returns.

And what are the parameters of this performance measurement? Please read Is Your Digital Promotion Activity Producing Desired Results to understand this in detail.

Testing and Tweaking:

Performance marketing is like having a laboratory where you can experiment with different ads and see what works best. It's like having a crystal ball that reveals their desires, allowing you to tailor your products or services accordingly. You can try out various approaches, measure the results, and make data-driven decisions. It's a journey of continuous improvement and growth.

How? After every performance marketing campaign, I can gauge my advertisement response data to collect information about the gender, age group, education level, location, and interest segments of people who paid attention to my advertisement. In my next advertisement campaign, I can adjust the tone, messaging, punchline, offer, aesthetics, and much more to appeal to this specific group of people.

Alternatively, I can also run A/B testing on these platforms. Here I can launch the same advertisement in two forms, for ex., In A I can talk about the outstanding performance of my previous students and & in B, I can emphasize the innovative teaching methods in my institute. In A/B testing the platform would run both these advertisements to similar profiles and demographics for a few days. At the end of the experiment, the data generated will help me understand if people in a particular demography are more ‘result-oriented’ or ‘process oriented’. This can help me tweak my future advertisement design and win more customers.

How can I practice performance marketing on different digital platforms (Facebook, Instagram, Google etc.)?

While the concept of performance measurement and performance-linked payments remains the common factor on all marketing platforms; there are some basic differences in the way performance is measured and monetised.

Social media platforms like Facebook, Instagram, Twitter etc. charge a marketing fee for exposing your advert to a select target group. This target group could be manually fed by you or can be lifted by these platforms from your web properties ( your brand’s social media page, website etc.). So, once the target group has been identified, the platform might charge X amount for exposing the advert to Y number of people.

Do you often see a BOOST POST blue button on your facebook brand page posts? Click and explore this button. This is your window to the world of Performance Marketing on Facebook!

Example: Pay X AchieveY results on Facebook Marketing

Another form of performance marketing on social media is influencer marketing. Here you might not be paying the platform, but paying an influencer for promoting your product or service on their account. The cost of this indirect advertisement is often decided by the number of followers the influencer has (so the number of followers your indirect advertisement will reach). Sometimes, some influencers also promise a certain number of followers added to your account as a measure of performance and payment.

On the other hand, search engines like Google practice PPC (Pay Per Click can be explored at ads.google.com). You are still suggesting a specific target group to the platform, however, you will be charged only when someone clicks on your advertisement. So, you are looking at a higher level of genuine interest and engagement. Needless to say, setting adverts on these platforms is more expensive than social media advertising… and rightly so.

Is Performance Marketing Expensive?

What is Customer Acquisition Cost?

Yes and No! Performance marketing is inexpensive in the sense that you can start with very small amounts. Your budget for advertising on Facebook could be as low as Rs.100/- a day (less than a cup of coffee at your favorite café), where depending on other parameters you could reach out to 100-500 people. However, the efficiency of small-budget marketing is generally low.

The real parameters that need to be measured are the CAC (Customer Acquisition Cost) & Conversion cost.

Marketing Conversion Funnel

In simple terms, how much did you need to spend on digital advertising to actually get a customer to make their first purchase from you OR make a shift down the funnel, say from 'Consideration' to 'Purchase'? This would be the cumulative cost of repeated marketing exposures on one or more platforms (it is uncommon to get a customer on the basis of single advert exposure).

Good targeting can reduce this cost to minimal levels, making the whole performance marketing process very reasonable. However, investing in performance marketing without a well-laid strategy and without constant monitoring can make the process very expensive for you!

Is Performance marketing good for small businesses?

Performance Marketing levels the playing field and gives you the opportunity to compete with larger businesses, all from the comfort of your own home. It empowers you to connect with the right customers, maximize your resources, and drive the success of your small business. You could be advertising in any part of the world, at any time of the day with full control over your advertisement circulation, i.e., you can pause, delete or alter the advertisement even in the middle of the campaign if something doesn’t seem right.

Performance marketing, if played right can be a game-changer for your small business. Just remember the cycle:

1. Advertise,

2. Analyse data,

3. Tweak the advert and target group on the basis of this data,

4. Advertise again!

Performance marketing is a must for small businesses as all other traditional marketing options are essentially big-budget. Performance marketing is the only advertising option that provides you the liberty of starting small-budget advertising, if you are still not sure……remember cheaper than a cup of coffee @ ……….!