Performance Pressure! Why performance marketing is advertisers’ favourite new toy

From the recession in Europe, to the Ukraine-Russia’s battle, the ongoing economic and socio-political forces continue to have an impact on costs across industries throughout the globe. And hence, it but obvious that advertisers too have become cautious in spending or whatever amount they are spending on marketing is being done with an aim to drive conversions or sales, directly or indirectly.  Perhaps this is the reason why performance marketing has picked up more than ever, this year and continous to grow.  

“Performance Marketing takes a business view of marketing. It is where we basically look at what is the immediate Return-on-Investment (RoI)  and cost of customer acquisition (CAC). Largely the focus of this channel is to expose the right information about the brand and its relevant products at the right time to already interested customers,” Arif Ehsan, AVP – head of Digital Marketing and Loyalty, Jubilant FoodWorks, told BrandWagon Online

In the world of performance 

According to GroupM’ latest report on the advertising expenditure forecast for 2023, ‘This Year Next Year India is in the the eighth position globally interms of ad spend. The Indian advertising expenditure will reach Rs 20,000 crores of incremental ad spend in 2023 compared to 2022. The report also highlights a 15.5% increase in ad spend in India, reaching Rs 1,46,450 crore in 2023. 

(Source: Statista)

While Google and Meta continue to grab a large part of the performace marketing pie, as these platforms together account for about 70-80% of digital ad-spends, smaller players too have joined the game. Not to mention Google also runs a performace marketing product called Performace Max, with an underlay of artificial intelligence. 

Typically a performance marketing campaign is defined by the end goal which could be either clicks, lead generation or conversion. If we all remember it correctly, In 2018, food delivery app Swiggy released its campaign Match Day Mania during the Indian Premier League (IPL). Executed by InMobi’s Glance, as fours and sixers rained in on the field, Swiggy multiplied the buzz. The campaign, which is now one of the finest examples of performance marketing, was released on linear TV channels Star Sports and Hotstar. The platform witnessed a spike in its orders and app installs. The ‘one-click install’ (OCI) feature allowed people to download the app in a single click without needing to unlock the phone or visit the play store. The campaign’s popularity resulted in 12.25 million impressions recorded among 4.65 million people. The CTR stayed at 1.39%, and 6,194 orders poured in. What’s more, the OCI feature saw app installs shoot through the roof, registering over 3,000 downloads. “To make a campaign work marketers have to keep repeating and optimising the process through various marketing channels. Part of this includes employing various digital channels like pay-per-click (PPC) advertising, affiliate marketing, and search engine optimisation (SEO) to target specific segments of the audience, track their actions, and optimise campaigns for maximum efficiency,” Sidharth Pisharoti, CRO, CleverTap, said.

From 2018 to now, performance marketing has only evolved as marketers and agencies are more than willing to experiment. Several combination and permentiation are being tried. For instance, a layer of performance marketing is being added on display ads across websites, in addition to it it being layered on programmatic campaigns. It is believed to be more relevant because the landscape of business ecosystem has changed., “There are a lot more new D2C, startups which need to acquire users efficiently and scale their business. Publishers too have become bigger and better now to deliver ads efficiently now to users with Instagram Reels scaling and the advertising works expanding beyond Google. Overall with this shift in users to digital as the platform of media consumption, this was bound to be. Advertising dollars are moving swiftly from just television to the digital ecosystem and with performance marketing delivering highest efficiency, it’s but natural for advertisers to focus their interests here,” Ehsan explained. 

How does it work? 

Usually an advertiser in this case a brand partners with a publisher or an affiliate in conjunction with an affiliate tracking network  – a third-party system where advertisers and publishers connect and can track performance and receive payments. There are many ways to measure performance. One such way is Cost Per Acquisition (CPA)/Pay Per Sale – in this case, if a brand’s goal is to drive sales, one then measures the success of a campaign by the number of sales and pays partners every time someone buys a product that is directly traceable to them. Similarly, in case of another model called Cost Per Click (CPC)/Pay Per Click, if the goal is to drive clicks to a page or offers, an advertiser pays each time a partner drives someone to click (which is why tracking URLs are crucial in distinguishing regular traffic from partner-inspired traffic).The cost of running a performance marketing campaign varies depending on factors such as the platform being used, industry, target audience, campaign objectives, geographic scope, and the competitiveness of the market.  “An effective marketing strategy relies on brand marketing to establish a recognisable and trustworthy brand-persona, which then facilitates performance marketing by providing a receptive and familiar audience to engage with. A well-crafted marketing strategy leverages both aspects to foster brand growth, customer loyalty, and business success,” Pisharoti stated.

It is here to stay!

This year the digital ad-spend is expected to be in the range of Rs 5,94,00 crore. Of this it is believed that marketers have spent a substantial amount during this year’s IPL, and remaining halves will be split between ICC Cricket World Cup and festive season. In a year when ad-budget is limited industry experts believe that when the right ad appears before a user at the right time the probability of conversion is higher. “In the realm of advertising strategy, IPL and festive seasons tend to play a crucial role in the allocation of resources. While the distribution of funds might fluctuate based on the target audience and product category, this year presents a unique narrative. The upcoming festive season is poised to claim a larger share of ad spending for two compelling reasons: firstly, there are a multitude of brands advertising during this period; secondly, this festive season is accompanied by both Asia Cup and World Cup, inevitably calling for greater ad spends during this period,” Shayakh Mirza , vice president, digital planning,PHD Media India, explained.

While traditional medium such as TV still accounts for a large chunk of the ad-spends  the allocation of budgets towards overall media activities and performance marketing is subject to the prominence of the brand in question. Brands with a strong e-commerce focus tend to channel approximately 55-60% of their media budget towards fueling immediate sales through performance-driven strategies, particularly during festive seasons. By contrast, relatively more traditional brands might dedicate a more modest 30-35% of their digital expenditure to performance marketing. “Performance marketing can help in reducing cost of customer acquisition (CAC) by capturing users’ intent very precisely and then targeting them via personalised ads while retention is very broad and depends on a variety of factors like product experience, customer support, quality of product and not just marketing,” Ashish Aggarwal, head – Growth and Product, Statiq, explained.

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