Performance marketing works when advertisers connect with either agencies or publishers to design and place advertisements for their company on any number of performance marketing channels — social media, search engines, videos, embedded web content, and more. Performance marketing is a comprehensive term that refers to online marketing and advertising programs in which retailers and service companies pay a commission to publishers (also known as affiliates) when a specific action is completed, such as a sale. With traditional display advertising, advertising fees are paid up front and do not depend on a specific transaction taking place. With performance marketing, since advertising fees are only paid upon completion of a sale or lead, it is the most measurable way to tie marketing program costs directly to results.
In performance marketing, advertisers and marketers only pay for successful transactions. Each transaction is based on a consumer taking a defined action, such as making a purchase from the advertiser or signing up for a subscription. Instead of spending money to advertise your product via traditional media and not knowing if those ads generate sales, you will be able to track every click. Department store magnet John Wanamaker once said, “Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” That is not the case with performance marketing. The trackability of performance marketing isn’t based on estimates. It’s based on actual results — meaning that a marketing program’s effectiveness is accurately determined, down to the mouse click.