Performance Marketing, as the name implies, is an online advertising model that is based entirely on performance — with the merchant paying for services rendered only after the desired action has taken place.
It’s completely changed how merchants are tackling the way they market and sell their products. But, more importantly, it’s allowed them to measure the success of their campaigns—from their acquisition rates to brand reach—down to a single advertisement.
Today, we’ll be diving deep into this subject along with Speqta’s (SPEQT) CEO, Fredrik Lindros. Who’s here to introduce us to their newly released and highly anticipated AI-powered Google Shopping optimization tool, Bidbrain™.
Please introduce yourself briefly to our readers! What led you to become the man that you are today?
Fredrik Lindros: Hello, my name is Fredrik Lindros. I studied finance and marketing at school, but I’ve always had a healthy interest in discovering new technology — which is what ultimately brought me to Speqta, where our mission has always been to enable those in the e-commerce space, whether they be retailers or agencies, to succeed in the modern online marketplace via innovation with the products that we develop (like Bidbrain™).
Now, for beginners who may have never heard the term ‘Performance Marketing’ before. Can you give us a brief overview of why it is important?
Fredrik Lindros: The old way of thinking about marketing is a capped dedicated budget — with the goal of driving business benefits such as sales and loyalty. But, with this model, the connection between the input and output has always been tough to prove. That is, until the rise of modern technology.
What that means is that, from this point on, we are entering into a digital age where data-driven marketing is the key to success. Where advertising is more transparent than ever, and marketers can now look beyond just building up their brand to decrease their cost per acquisition while steadily increasing their ROI. And it is performance marketing that has become the vessel to make it all possible.
How does performance marketing work?
Fredrik Lindros: The goal of performance marketing is to optimize your campaigns to bring in more conversions. That is why it is driven by lots and lots of testing, followed by a very in-depth analysis of the results of those tests to improve your chances of success. Just to give you something to compare it to: consider brand marketing, where the main goal is to build a strong bond between customer and brand.
Now, as for the actual practice of performance marketing. It extends into quite a few channels:
- Paid User Acquisition (Google Search & Shopping ads, Social Media ads, etc.)
- Search Engine Optimization (SEO)
- Affiliate Marketing
- App Store Optimization
And so on. Just remember that the key defining feature of performance marketing is that the ‘reward’ (or payment) for the service provider (i.e., Google) comes after the task has been completed (i.e., a click on a Google Shopping ad).
What are the benefits of performance marketing?
Fredrik Lindros: There are numerous benefits to be had by adding performance marketing into your processes. After all, not only are you tapping into the pre-established audience of your third-party partners, but the risk for you is lower as you will be able to maximize your current budget to lower your CPA (Cost Per Acquisition) while knowing that all of your efforts should produce measurable results of some kind (even if they don’t outright result in conversions.)
You can also stop making a marketing budget as a capped fixed spend. And transform it as a percentage of sales. That means that if marketing is driving x5 sales vs marketing spend it equals a 500% ROAS (Return on Ad Spend) or 20% CoS (Cost of Sales). The question to ask yourself here is: Why not set an unlimited roof for growth by not capping it a fixed spend amount and letting your budget be that %-figure as a percentage of the sales generated?
How can an e-retailer be able to make the most out of performance marketing?
Fredrik Lindros: Performance marketing runs entirely on data. As such, as an e-retailer looking to optimize your performance marketing efforts, you need to understand the importance of tests and analytics. It is through experimentation that you will be able to see what’s missing in your campaigns (and thus, see how you can improve them).
Of course, if you want to take the easy route, there are digital agencies out there that can get the job done for you. Just be aware that those marketing firms will use man power (in order to charge hours or spend retainer) instead of the latest tools and may not work in the most optimal way — having incentives to sell more hours instead of fully maximizing the effect. In other words, go into any partnership with a healthy level of wariness.
Do you have any further recommendations for those that are just starting out with performance marketing?
Fredrik Lindros: If you’re not getting the results that you want out of performance marketing, I urge you to open up your mind to trying something new. This may sound self-serving, but new technology like our AI-based tool Bidbrain™ is a good example of something that you might want to try.
After all, even though it is still relatively new, our Bidbrain program has already been able to pump out excellent results when it comes to optimizing Google Shopping campaigns (up to +20-50% increase in sales on average, to be exact), thanks to its highly intelligent algorithms capable of parsing through thousands of data in real-time.
It’s really just a matter of seeking these solutions out and accepting that trying something new isn’t as scary as you might think it is at first.