Performance based advertising is the opposite of what is known as brand awareness. Brand awareness has the goal of an ad being seen by as many people, or as many relevant people as possible. Performance based advertising has the goal of having an action completed by the one who sees the ad. While brand awareness campaigns bill according to some viewable metric, performance-based advertising bills on the agreed upon action.
Origins of this practice can be seen in the direct response campaigns used with mass mailings that have the recipient use a coupon or perform another action based on what was sent. With the advent of the internet, the types of desired actions have grown considerably.
Types of Performance Based Pricing Models
In online marketing, the different forms of performance-based advertising are related to the different pricing models used. While the acronym CPA (Cost-per-Action) is used to describe a payment model based on the determined action, there are also more specific models (and acronyms).
CPL (Cost-per-Lead) is where a brand will pay a marketing company a specified amount per interested prospect or lead that is submitted. Usually this occurs when a prospect fills out a web form requesting information or a service. That contact data is considered the billable lead. This model is popular in financial services, education, and mortgage.
CTC (Click-to-Call) or Pay-per-Call is related to CPL except that instead of contact info being received, the brand receives an actual call from the prospect into their business or call center.
PPC (Pay-per-Click) is a model where payment is given for each click on an ad that results in traffic going to a brand’s site.
CPS (Cost-per-Sale), also known as Cost-per-Transaction, is where the desired action is a financial transaction from the customer. While this sounds great for a brand, it does present the most risk to a media company, which inhibits this model’s popularity. Also, certain services require more steps than an affiliate marketer can lead a prospect through (like discussing loan options with an underwriter). In those cases, a CPL model would be best so the brand can receive the lead, and then close the sale.
Benefits of Performance Based Advertising
As you might have already surmised, a benefit of performance-based advertising is that you will only pay for actions that matters most to your business.
Another benefit with performance marketing is that media companies who work in this space can only survive by thriving. If they have been around for any significant length of time, they have done so by delivering results that their clients have wanted.
This is not to say that all performance marketing agencies are equal, yet it should give you confidence that they are used to bringing results.
So how do decide which performance marketing company is best for you?
Certainly ask about their experience, not just with your industry but also with the technology they are using. Have they used click to call ads before? Do they understand the customer journey? How do they optimize the campaign as reporting data comes in?
Many times, it is an initial phone conversation that will give you an fairly good idea if a company is competent.