What Is The Difference Between Digital Marketing And Performance Marketing?
JTN Article
Every business owner wants their marketing campaigns to perform well. So that would make performance marketing the obvious approach to take, right? The answer isn't as straightforward as you think.
This data-driven strategy is often pursued for its name without consideration of the broader discipline of digital marketing. The two are different, and it can quite literally pay to understand their unique purposes as well as when to use one over the other.
In this article, we explain everything you need to know about performance marketing and its parent digital marketing, comparing both strategies to help you determine which one is best for your business.
Digital marketing is a broad term that encompasses the variety of activities a company may engage in to promote themselves online. A modern take on traditional marketing - which often makes use of printed ads, physical product displays, and real-world experiences - this discipline reaches audiences through digital channels. The options available to marketers have expanded significantly with technology's evolution and increasing adoption within twenty-first society. Now, it's almost nonsensical go anywhere else but online to reach consumers, who are spending more time on their devices and screens than ever before.
Digital marketing comprises a combination of strategies that revolve around creating and distributing content online. This media can take various forms, such as written articles and blogs, videos on social media, and static image banner advertisements on websites.
Like with offline marketing, every asset used in digital marketing has a business purpose or goal. The following are a few examples of what a business might hope to achieve with a given campaign.
Brand Awareness: Brand awareness is an intangible but critical element of business success. It refers to the extent to which a brand is recognized by consumers and associated with its products or services.
Lead Generation: Lead generation is the process of identifying and attracting potential customers for a business' products or services.
Sales Conversion: Leads are made profitable when they're converted into sales. Financial transactions mark the end of a sales funnel and thus represent a critical goal for most businesses.
Engagement: Engagement refers to how actively involved or interested consumers are in a brand's content or message. It can include metrics such as likes, comments, shares, and click-through rates.
Customer Retention: Customer retention is the ability of a business to retain its existing customers over time. It is an important goal for businesses as it can lead to repeat sales, positive word-of-mouth marketing, and overall brand loyalty.
Performance marketing can be best described as a subset of digital marketing. Like the larger discipline, it happens online. The key differentiator is that the goals of performance marketing campaigns are always measurable in transactional value. What do we mean by that? Where digital marketing involves promotional activities for everything from brand awareness to sales and loyalty, this specific echelon focuses exclusively on the exchange of dollars for results against KPIs.
Performance-based campaigns are easiest to administer using online networks like Google Ads and Meta Ads. Each platform has its own unique offering of ad types and campaign settings to work with.
Google Ads, for instance, currently gives marketers the option of In-App, Display, Local, Performance Max, Search, Smart, Shopping, and Video placements. Campaigns can be created to track conversions, clicks, impressions, or views depending on the desired outcome.
Meta Ads offers in-feed placements through the social media platforms Facebook, Instagram, and Messenger. Ads can be created for each platform to optimize actions such as conversions, clicks, or app installs. Meta's Audience Network follows a system similar to Google's display network, allowing brands to promote themselves across a greater range of websites and apps.
These ads are performance-based because they're both measured and served on a transactional basis - usually Pay-Per-Click (PPC), Cost-Per-Thousand (CPM), or Cost-Per-Action (CPA).
Performance marketing solutions aren’t limited to Google and Meta. LinkedIn, Snapchat, AdRoll, Bing, and a plethora of other platforms also offer PPC, CPM, and CPA placement opportunities across mobile and desktop devices.
Pay-Per-Click (PPC) is an online advertising model where advertisers pay a fee each time their ad is clicked. It is essentially a way of buying visits to your website, rather than attempting to earn those visits organically.
In PPC, advertisers bid on specific keywords or phrases that are relevant to their target audience. When a user searches for those keywords on a search engine, the ad will appear at the top of the search results page. The advertiser only pays when someone clicks on their ad, hence the name pay-per-click.
Cost-Per-Mille (CPM), more commonly referred to as Cost-Per-Thousand, is a pricing model where an advertiser pays for every thousand times their placement is shown to an audience. The "mille" in CPM refers to the Latin word for thousand.
Similarly to PPC, CPM ad campaigns can be set up in consideration of keywords and target audiences. The biggest difference between the two is that CPM campaigns charge based on impressions (the number of times an ad is displayed), rather than clicks. The advertiser will still be charged even if the ad is not clicked on. This system is especially common for display ads, which are often intended to boost brand awareness rather than drive immediate sales.
As its name suggests, the Cost-Per-Action (CPA) billing model charges advertisers based on the number of times a specific action is taken by a user. This can include anything from signing up for a newsletter to making a purchase.
CPA is often used in affiliate marketing, where advertisers partner with publishers or affiliates who promote their products or services. However, it can also be used for other types of online advertising, such as display ads or social media ads.
Digital marketing vs. performance marketing isn't an apples-to-apples comparison. As we explained in the previous section, the latter term is a subset of the former. Launching a performance marketing campaign means launching a digital marketing campaign, but launching a digital marketing campaign doesn't necessarily mean launching a performance marketing campaign.
Make sense? Here’s another way of putting it: performance marketing is defined by its structure. Advertising endeavors fall into the category when they’re arranged on the basis of performance.
Here's a more detailed breakdown of the core differences between digital marketing and performance marketing:
Digital marketing is a broad term that encompasses all online marketing efforts to promote a brand, product, or service. This includes activities like social media marketing, content creation, email campaigns, SEO, and more. Its main objective is to build brand awareness, increase website traffic, and generate leads.
Performance marketing is characteristically data-driven. It focuses solely on acquiring customers through specific actions or conversions like sales, downloads, or sign-ups.
Performance marketing costs are made in accordance with the quantity of results achieved - like total number of views, clicks, and sales. The exact amount spent isn’t known until after the campaign ends, but a budget cap can be set to keep spending within a specific range.
Non-performance digital marketing channels like TV and organic social media, on the other hand, typically include an upfront fee. This payment is required regardless of the number of views, clicks, or sales an ad receives.
With broader and sometimes less urgent goals, digital marketing campaign performance may be measured using a combination of metrics that don't necessarily translate to direct revenue or sales. These could include website visits, clicks, likes and shares on social media posts, or email opens.
In contrast, performance marketing relies heavily on measuring the success of specific actions that result in tangible conversions and revenue. Every campaign should end with hard numbers on sales, sign-ups, or whatever other desired goal was set at the beginning.
Performance marketing offers no shortage of potential advantages. These can benefit practically any business of any size, too. As we'll explain more later on, the value you get from this approach will be highly dependent on what your specific circumstances look like.
Here's a high-level overview of the benefits of performance marketing across the board:
Marketing is a game of intense planning and strategization. Teams spend weeks and sometimes even months laying out how they will launch a campaign, which channels they will utilize, and what kind of content they will create. All of this effort is put in with the hope that it will generate predictable results – increased brand awareness, more leads, and ultimately more sales.
Traditional marketing methods, while effective in their own right, often fall short when it comes to predictability. There's no guarantee that a TV commercial, billboard, or magazine ad will reach and resonate with your target audience. Similarly, success with digital content like blogs is only truly uncovered months after publication - to see if the article is ranking for desired keywords and driving organic traffic and leads.
Performance marketing is completely different in the sense that you pay based on the results you want to achieve. PPC platforms, for example, disclose exactly how much a lead or sale will cost before the campaign launch. There's no guessing or hoping for the best. The ad network has a contractual obligation to deliver results once the campaign is live.
To expand upon the topic of predictability, it's reasonable to say that every marketing team wants to know exactly how their campaigns are performing. Visibility isn't always clear in traditional marketing, and it can be difficult to attribute specific results and conversions to a single campaign or tactic.
By contrast, performance marketing is completely data-driven. Digital platforms like Google Ads and Facebook Ads record and report on every click, lead, and conversion. They can also glean insights into audience behavior, allowing for better targeting and optimization down the road.
Insight into what's performing well and why is great, but it's also useless if you don't have the option to make changes on the fly. That's a big downside to broader marketing methods, where you're locked into a long-term contract that locks you into pre-determined tactics for the foreseeable future.
Performance marketing is inherently flexible and scalable. Since campaigns are based on results, not set-in-stone contracts or timelines, advertisers have the ability to make changes as needed. If a certain tactic isn't delivering the desired results, it can be adjusted or replaced with a more effective one. This allows for continuous optimization and improvement, leading to better overall performance.
Performance marketing can also easily scale up or down depending on budget and desired reach. Advertisers have the flexibility to increase ad spending if a campaign is performing well and producing positive results, or decrease it if needed. Such adaptability is invaluable considering how rapidly trends and consumer behavior shift today.
Just like the ad creatives it promotes, every type of performance marketing has an ideal time and place. It's important to think carefully about when you use it in order to maximize results.
Here are some instances where performance marketing makes the most sense:
Performance marketing is often considered much more cost-effective compared to traditional forms of advertising. With pay-per-click or commission-based models, businesses only pay for the actual results they receive rather than paying for ad space upfront. This makes it a great option when working with a limited budget.
For example, a small start-up company may not have the funds for a large-scale advertising campaign. Instead, they could use performance marketing tactics such as pay-per-click (PPC) or affiliate marketing to generate leads in a controlled way, testing the waters and see what works best for their business before investing larger sums of money.
Performance marketing is similarly valuable in cases where you don't want to risk wasting money on empty services. Lots of people tout the potential of working with influencers, but their fees can be high and there's no guarantee of ROI. Arrangements structured on a performance basis, however, ensure that if influencers don't generate the desired results in terms of impressions or sales, you won't have to pay them for their services.
Performance marketing is measurable by definition. Unlike traditional forms of broadcasting a message like TV commercials or print ads, which don't offer many ways to measure reach or impact, digital KPI-based marketing is far more accurate and transparent. Tools exist to track metrics such as clicks, impressions, conversions, and more across the sales funnel.
With insight into the performance of each tier, it's easier to understand whether efforts are successful, which actions have the biggest impact, and what needs to be optimized for better results.
The measurability of performance marketing comes in handy when you need to produce tangible evidence of your marketing efforts to stakeholders. Some may be skeptical or even doubtful of the effectiveness of digital marketing, but with hard evidence in hand, you can confidently present the results and showcase how your strategies are driving conversions for your business.
Launching a new product or service is difficult in several respects, with one of the most daunting being ad planning. Oftentimes, you need to start from scratch with a clean slate, and there's no guarantee that the first strategies or channels you use will be effective. Performance-based marketing can't necessarily prevent you from making the wrong choice, but it can help mitigate the negative impacts of a failed campaign by limiting costs to what was actually delivered.
Comprehensive tracking and analytics can also provide guidance on which strategies generating the best returns for a specific audience or product. Because results are measurable, it's easy to cross-compare KPIs and determine which tactics are best suited for future campaigns. If you don't know where to start with marketing as a new business owner, a performance-based approach will give you a solid foundation to build from.
We're not going to blindly declare that performance marketing is the end-all, be-all solution for every business and industry. In fact, there are certain situations where it may not be as valuable or effective as other digital marketing strategies.
Here are a couple of examples:
Performance marketing is focused on driving immediate actions and conversions, such as making a purchase or filling out a lead form. Brand awareness, relationships with customers, and loyalty are unfortunately difficult to quantify in that sense. Businesses in pursuit of this goal usually employ more qualitative methods to connect with audiences, such as social media, content marketing, and influencer partnerships. It usually takes longer for the effects of these strategies to become evident in KPIs like ROI or cost-per-acquisition.
However, that's not to say that performance marketing doesn't have a role in building brand awareness. In fact, it can be used to complement other efforts by driving targeted traffic to content or social media pages and capturing leads for future nurturing.
In highly competitive markets, cost-per-clicks (CPCs) and cost-per-acquisitions (CPAs) can increase at the drop of a dime - or several dimes, for that matter. Bidding wars start between businesses that each want highly-coveted ad space in front of customers with the intent to purchase. It then becomes a numbers game, with businesses needing to keep their ad spend high in order to maintain visibility and outbid competitors. This can be especially challenging for smaller businesses or those with limited budgets.
In these situations, performance marketing may not work well as an exclusive strategy. Instead, businesses may need to consider a combination of performance marketing and traditional digital marketing efforts like PR, content marketing, and social media management.
You can benefit greatly by launching a performance marketing campaign, but you can also waste a lot of money by doing it the wrong way. In this section, we list seven things that every brand should know before implementing this strategy in their own digital marketing efforts.
One of the biggest misconceptions about performance marketing is that it guarantees high-quality leads. While it's true that performance marketing can bring in a high volume of leads, there's no guarantee those leads will be the right match for what your business offers. It's important to understand that the success of a performance marketing campaign relies heavily on the targeting and optimization efforts put into it. If you're not targeting the right audience or optimizing for desired actions, you may end up with a large quantity of low-quality leads.
Every business is unique, with its own goals, target audience, and offerings. This means that there isn't one set formula for success with performance marketing - or any other strategy, for that matter. What works for one business may not work for another because of a range of reasons, such as branding and messaging, local competition, and all of the ongoing campaign updates and adjustments you don't see behind the scenes. It's best to take a tailored approach to performance marketing that takes into account your specific business needs and goals. For example, if you're a B2C company with a strong social media presence, your performance marketing efforts may be focused on driving conversions through platforms like Facebook and Instagram. A business in the B2B space, on the other hand, may find more success with performance marketing on platforms like LinkedIn or through targeted email campaigns.
By now, it should be clear that performance marketing is all about data. You'll rely on it to not only ongoingly gauge campaign performance but also to make informed decisions about where to allocate your budget and what strategies are working best for your business.
Individual ad platforms, like Facebook and Google Ads, provide their own dashboards with data on impressions, clicks, conversions, and more. Having a centralized repository that can pull in information from all your campaigns across different platforms for a holistic view of performance is even better.
It's also a more practical setup for brands that engage in multichannel marketing. You'll be able to track customer journeys and touchpoints from various channels, gaining a deeper understanding of what leads to conversions and what doesn't.
If there's one thing that's consistent across all of digital advertising, it's that success is a product of experience. That's exactly what we offer at JTN Group. As a well-established London performance marketing agency, we've been around long enough to not only fully understand the difference between digital marketing and performance marketing, but also to know when and how to utilize each strategy for maximum results. Our team of experts has a deep understanding of the digital landscape and can help you create a customized plan that aligns with your business goals. Don't wait to achieve success - partner with JTN today.
Lucinda is a Marketing Manager at JTN Group in London where she leads the Paid Social team. Outside of her work Lucinda plays sports on three continents and coaches and participates in international debating competitions. Learn more about JTN Group here.
Contact
United States
4th Floor
667 Madison Avenue
New York, NY 10065
United States
+1 877 465 7740
cassie@jtn.group
United Kingdom
30th Floor
122 Leadenhall Street
London EC3V 4AB
United Kingdom
+44 20 7099 5535
jonathan@jtn.group
