According to Wikipedia, performance advertising - also referred to as pay for performance advertising and marketing - is:
"a pricing model whereby a marketing agency will receive a bounty [financial reward] from an advertiser [i.e. business] for each new lead or new customer obtained for the advertiser through the agency's online marketing efforts. The agency creates advertising campaigns and promotions to convert the maximum number of new leads or customers and gets paid for its work only when a new lead or a new customer is passed on to the advertiser." [Wikipedia.org]
An advertiser is simply... "an individual, company or organisation that places an advertisement in order to attract customers and new business". [Business Directory]
In a performance advertising model the onus is on the marketing agency to build out a marketing and advertising campaign that actually generates quality leads and customers for the advertiser. The agency does not get paid unless leads and customers are generated for the advertiser.
In traditional advertising, like newspaper advertising, social media or even pay per click (PPC) advertising, the advertiser pays for the cost of advertising i.e. for the printed ad, for clicks, or just for setting up a social media campaign, irrespective of whether leads or new customers are generated.
In other words, with traditional advertising & marketing the financial risk is on the advertiser company because with this type of advertising it may or may not generate any leads or new customers from the advertising campaign.
In performance marketing the financial risk is with the marketing agency. Failure to generate new leads or customers, for example, for the client will result in not getting paid.
Video on Performance Advertising
The 4 Core Pricing Models of Performance Marketing
In online advertising there are 4 core pricing models for performance based advertising:
1. CPM which stands for cost per mille or per thousand. Advertisers are charged for advertising per 1000 views an ad gets irrespective of the number of clicks. For example, if you set up a Video Views ad with Facebook, the default charging option is CPM. For businesses that want to maximise brand exposure, this pricing model works well. The downside is, it is impossible to independently verify how many real views an ad gets.
2. CPC or cost per click favoured by ad platforms like Google, overcomes the issue of verification mentioned with CPM. This pricing model charges advertisers every time someone clicks their ad. This pricing model works well for businesses that need to maximise the amount of traffic they get to their website, landing page or special offer. The downside is that it can work out expensive if the campaign and or landing page is not set up correctly. It is also well known that people click on ads just for curiosity. And with competition for ad space growing every year, cost of CPC campaigns are constantly being pushed upwards.
3. CPL or cost per lead is a relatively new pricing strategy that more advertising agencies are beginning to offer to alleviate the challenges faced by many smaller businesses that either don't have the time or money resources to do their own marketing and advertising. In a cost per lead pricing model, advertisers only pay for actual leads. For example, an email lead, or a telephone lead. Clicks and impressions are irrelevant with this pricing model as a fixed price is agreed with the advertiser for each new lead secured.
4. CPA or cost per acquisition is also gaining in popularity. With this pricing model, an advertiser only pays for a specific result such as a purchase or credit card transaction. This pricing model works well for businesses that simply want more customers and not have to deal with the nuances of converting a prospect into a paying customer. A good solution for companies that need customers through the door as quickly as possible.
There are clear advantages to both CPL and CPA advertising pricing models as the objective shifts from one of paying for an action, such as a click or impression, to one of paying for a defined outcome, for example a phone lead or new customer. The key to running a successful CPL or CPA performance advertising campaign is to know the life time value (LTV) of one customer and use that as the benchmark in your campaigns so you can always remain in profit by turning off ads that are not performing.
A Performance Advertising Service In Collaboration With Visa, MasterCard & American Express
The Empyr Ad Network is a performance advertising platform set up in association with payment processors Visa, MasterCard and American Express. The advertising network is made up of over 1,500 high traffic, highly visible online publishers that combined gets exposure to over 100 million US consumers. The network is the first of its kind to provide local businesses the opportunity to promote their products and services alongside big brand websites and apps with no upfront advertising cost in contract to Google & Facebook advertising.
For businesses with limited advertising and marketing budgets that need to get a result on every advertising dollar spent, the no upfront and only pay for results advertising marks a major shift to the traditional advertising model.
To find out more on how to get your business advertised on high profile websites for free on highly trusted sites like Bank of America, Yelp, Microsoft Earn, LivingSocial’s, Coupon.com’s rewards program, Swagbucks, Wells Fargo and many others, reach out to us via our contact us form or call 1-770-749-7422 to speak with an adviser today.
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