Marketing in an e-commerce business is draining, exhausting, and expensive. According to Statista, in 2021 U.S. companies spent $225.8 billion on digital marketing alone. Percentage-wise, advertising eats up a pretty noticeable chunk of business expenses. In 2023 marketing is going to comprise about 13.8% of U.S. companies' budgets, and over the next five years, that figure is expected to almost double. Marketing expenses are expected to make up one-fourth of the companies’ total spending.
With more and more players entering the digital world of e-commerce and the macroeconomic prognosis for the U.S. looking less than rosy, businesses need their marketing techniques to be as smart and lean as possible to stay afloat. That is precisely why most entrepreneurs nowadays swear by performance marketing for ecommerce.
What is performance marketing?
Performance marketing is any digital marketing in which you pay affiliates or advertising platforms depending on how well a particular campaign does. It’s precisely how online grocery shopping works — you pay for your cabbage after it’s been weighed to the penny.
Performance marketing for e-commerce is the only way to go because this form of advertising is more flexible and lean. With payment only based on performance, you watch your ads generate traffic in real time, which allows you to kill inefficient campaigns that bring you no customers before you've spent too much on them.
The performance marketing approach means paying as little as possible while squeezing the most value from the process. The value is sales, leads, loyal customers, and valuable insights on expanding your outreach and scaling your e-commerce business.
How is performance marketing different from digital e-commerce marketing?
The main thing that sets marketing for e-commerce businesses apart from other forms of advertising is that there’s no payment unless there's a result.
Consider those newspaper classifieds, for instance, charged by the line or word, regardless of how many people will notice your little ad and call. In the brave new digital world, the ads moved online, but nothing else changed: you still paid for webpage space regardless of the number of times your ad was shown to users. There was no incentive for the publishers to provide advertisers with any statistics on how effective the ads are because they'll pay anyhow. The advertisers, in turn, remained in the dark about how well their campaigns had performed, and their best solution was to bug the customers with the "How did you hear about us?" question in the checkout form.
On the other hand, receiving payment based on performance encourages publishers to bring their clients as many clicks, completed actions, or leads as possible because their revenue and reputation depend on it.
Why performance marketing is vital for your business
While digital performance marketing strategies evolve and require more inventiveness over time, the success of any enterprise still rests on whether or not you manage to grab the market’s attention. Making your future customers hear your brand's voice above the clamor is as hard as it gets since starting an e-commerce business is becoming increasingly cheap and easy. Consequently, young start-ups are stuffed in the same room with kings of the world, waving banners and yelling “look at me” at the top of their lungs. And here we come to the first reason e-commerce performance marketing is a good idea if you’re in the middle of scaling an e-com.
Increasing competition
As more and more businesses try to get to the top of search result pages and social media feeds, ad prices are expected to grow to the point of being unbearable. This is why scale-ups are strongly advised to choose the pay-per-performance strategy over the older pay-per-ad approach. Performance marketing also lets you figure out where your audience is and what they're looking for earlier than your competitors.
Constant algorithm change
Ad publishers now and then introduce algorithm updates to provide users with more relevant and quality content — or so they claim at least. The effect of those updates is a well-known pain in the ass: at a certain point, previously profitable campaigns stop bringing in profit, and you don’t even know why.
If you're using non-measurable marketing techniques, readjusting your strategy to the new game rules takes time, and your brand becomes invisible to the users. In digital marketing performance, however, algorithm changes are noticeable at once, so there's a better chance you'll fix your marketing strategy for e-commerce in time.
An overabundance of ad channels
With the variety of advertising platforms on the market, one can lose their mind trying to figure out if one should go for Facebook Ads, Google Ads, Amazon Ads, Snapchat, TikTok, or... wait, did we mention Facebook?
While it’s always a good idea to try a new advertising channel or two, your marketing strategy decisions should be based on the publishers’ actual performance and not on how hip they currently are. The best marketing for e-commerce can help you navigate the maze of advertising channels.
What are the main types of performance marketing?
Okay, we’ve talked enough about the benefits of digital marketing for e-commerce. Let’s now talk about the main types of it, as performance marketing is an umbrella term for a whole set of marketing techniques.
Affiliate marketing
Affiliate marketing is when somebody else (an affiliate) markets your stuff for you in exchange for a teeny (and sometimes not so teeny) commission. Instagram influencers, bloggers, vloggers, coupon sites, and review platforms are all good examples of who or what your affiliate might be. The metrics are collected by placing unique links to your product on the affiliates' websites, accounts, or blogs.
Native advertising
This kind of performance marketing is often confused with social media marketing because both are about advertising your brand in the most inconspicuous way possible. The thing about a native ad, though, is that it is still an ad. What sets it apart from traditional banner advertising is that it is supposed to "blend in" to the publisher’s website to look consistent with the rest of the page. Marketers came up with the idea after noticing that people were so fed up with the number of annoying ads on specific websites that they began using ad blockers to avoid seeing all ads, relevant or irrelevant. To summarize, native advertising is marketing your brand without pissing the user off.
Content marketing (SMM)
Awareness spreads, and users look for fewer distractions and more meaningful content. They are also looking for brands and products that are more of a friend than just another shopping platform. We've returned to when people talked to the guy behind the counter and asked how his family was doing. This is precisely what SMM is about, except that the over-the-counter chit-chat now happens online.
Unlike native advertising, which is usually a one-time thing, content marketing is about building a long-term relationship with your customer. In terms of ROI, the results may take time to be visible. In the long run, however, there’s no better way to attract a hoard of devoted clients than SMM. Blog posts, workshops, checklists, brochures, infographics, memes, and videos are all good examples of content marketing, able to turn a casual visitor into a paying customer at any point.
Paid search
Paid search advertising is exactly what it sounds like. You pay search engines such as Google, Yahoo, or Bing to make your ads appear higher in relevant search results. Like any other performance marketing, you pay nothing unless your ad is clicked on.
Search engine optimization (SEO)
A less expensive way of moving your content up the search result page. To rank higher in Google, Bing, etc., content is seasoned with specific keywords that a particular search engine chooses to prioritize. Unlike paid search, SEO is seemingly free if we don’t consider the salary of the SEO specialist charged with the task.
How to build a performance marketing strategy
Even though there is no one-size-fits-all performance marketing strategy — you've seen the variety of available channels — there are specific steps that must be taken regardless of the type of performance marketing you choose.
1. Define your target audience
Your target audience is the people your product or services are aimed at. They are also the ones most likely to click on your ads. Try to define a target persona by analyzing your existing customers and the "ideal customer" you’d like to reach in the future. Be as specific as possible, and describe your personas’ demographics as thoroughly as possible. Age, ethnic background, education, income level, and so on are all crucial factors why a person might choose you over a competitor.
2. Make your landing pop
However much traffic your campaigns attract, if the users end up landing on a poorly designed website, there won't be any sales. Before sinking lots of bucks into online performance marketing, build a neat, stylish, and intuitive website.
- Make sure to focus on UX; ensure your UI is consistent with your brand's identity.
- E-commerce websites tend to have many photographs, so make sure yours are of high quality and the appropriate size. Blurred photos that can't be zoomed in are the death knell for an e-com's reputation.
- Your checkout flow has to be a breeze unless you don't want to be the champion of abandoned baskets.
3. Set clear goals and pick the right metrics
Of course, the first aim that comes to mind is sales, but over time, other metrics might turn out to be just as important. For example, when you use content marketing to attract a large number of leads expected to convert later in the future, it's the leads you should count, not sales. Depending on the strategy, your metrics can be email sign-ups, app downloads, clickthrough rate, conversion rate, etc.
While setting KPI, it’s best to revert to the SMART principle, making sure that your goals are Specific, Measurable, Assignable (you've specified the person in charge), Realistic, and Time-Related.
4. Test your campaigns
Perform A/B testing to test which campaigns are working and which aren't. Timely tests are crucial for a digital marketing plan to succeed because, as I stated earlier, there's no set rule for what will work for a specific business at a given period. Hence, it's best to learn from your own mistakes: to raise conversion rates, KPIs, and ROI, divide your audience into subgroups and compare how people are reacting to different tactics, strategies, and forms of ads.
5. Choose suitable sources of traffic and marketing channels
Remember your intended audience, and don't expect an Instagrammer to become an avid reader of your Facebook long reads. Simply put, target your audience where they already are. Using the personas you compiled in step one, you can recreate their user flow, which might give you valuable insights about their favorite platforms.
Similarly, it's wise to pick platforms explicitly tailored to the goods or services you offer. While Google, Facebook, and Instagram Ads are effective for any e-commerce business, Pinterest Ads, for instance, typically target women in their thirties, which makes it the best platform to showcase art materials and household supplies. Snapchat is the place to hunt down people under thirty. Bing targets the older crowd with above-average incomes, who are typically but not always women. If you’re selling physical products, consider Google Shopping Ads, and if your goods are more accessible to market through DIY workshops and tutorials, then, you guessed it, Youtube it is.
6. Track and monitor your results
Fresh-from-the-oven marketing campaigns seldom bring immediate results since algorithms and user behavior are subject to change. But no worries: as Peter Drucker once said, "What can be measured can be improved."
After measuring your results, tweak your strategy until you get the performance marketing recipe that produces the yummiest KPIs. Don’t kill yourself trying to conquer channels that are supposed to be the best. Instead, nurture the channels that have proven the best based on actual numbers and see if you can double their effectiveness by doubling your investment in them.
7. Respect the law
If you’re not compliant with American legislation, whether on purpose or out of ignorance, your marketing efforts can go down the drain. Make it a habit to study the rules and requirements published by the Federal Trade Commission (FTC), the GDPR (General Data Protection Law), and the CCPA (California Consumer Privacy Act). Keep your legal knowledge up to date, be compliant, and always make sure your campaigns are in line with the current regulations.
How to measure performance marketing results
ROI is a simple thing to calculate: the profit is divided by the cost of the investment. Figuring out how to increase your ROI by improving the correct KPIs is way trickier, so knowing your metrics is key. Here is a comprehensive list of the leading KPIs marketers base their strategies on.
ROAS (return on ad spend) is the money you make from your advertising campaigns. Unlike ROI, where revenue is divided by your overall investment, ROAS measures your income in proportion to the amount of money spent on advertising alone, ignoring the cost of goods and other expenses.
Cost Per Sale (CPS) is the amount you pay for each sale generated by the ad. I hate to state the obvious, but the lower the cost, the better.
Cost Per Acquisition (CPA) is the cost of getting a user to take a specific action that leads to a conversion; in other words, the cost of acquiring a new paying customer.
Cost Per Lead (CPL) is the amount of money it takes to bring in a potential customer who’s proven to be interested in your offer, for example, by completing a sign-up form.
Cost Per Click (CPC) is simply what you pay when a person clicks on your ad. This metric is mainly used in paid search marketing.
Cost Per X (CPX) is a custom KPI that your marketing team may find helpful to meet the specific needs of your business.
Lifetime Value (LTV) is the predicted revenue a customer will bring using your product or service.
How Karta can improve your marketing performance
With so many KPIs to keep in mind, having an expense-tracking tool is as handy as it gets. Here is how our solution can help make your performance marketing a success.
- Karta allows you to create many cards to assign a separate card to each medium, subscription service, media buyer, or employee. The metrics, in this case, are easier to measure because your marketing expenses are well-structured from the start.
- You can create digital spaces for specific teams or marketing campaigns with budgets. Monitor the teams' spending in real time, assign managers to monitor you and free up the time to focus on scaling.
- A single dashboard for all your marketing expenses means an opportunity to watch what’s being spent on marketing in real time. You can strategize on the go and plan your future performance marketing campaigns accordingly.
- You don't need to approve each purchase your media buyers make. Preset limits on each card mean more free time for you and less work for your financial department.
Get your marketing expenses in control
As consumer trends indicate a clear shift toward digitalization, performance marketing continues to be the most promising advertising, bringing e-commerce business owners more conversions at a lower cost. Overall, choosing performance marketing over overly expensive and unmeasurable advertising is a way to get a marketing automation e-commerce and a far better bang for your buck.
Get startedFAQ
What is e-commerce performance marketing?
Performance marketing describes digital advertising programs in which affiliates and publishers are only paid when a specific goal is achieved, such as a completed sale, booking, or download. It is currently considered the most efficient kind of digital marketing.
What is the goal of performance marketing?
Increasing user engagement, attracting leads, and converting visitors into paying customers at the lowest cost are some of the major objectives of performance marketing. Performance marketing costs are calculated proportionately to the results they bring.
What is the benefit of performance marketing?
Performance marketing has vast potential to help you scale your business and reach new customers at a relatively low cost. It can also make your brand more recognizable and give you helpful insights into how to make your campaigns more effective.
What are the best KPIs for e-commerce?
While it’s difficult to single out the KPIs that are ideal for focusing on any e-commerce business, conversion rate continues to be at the top of most marketing experts' lists, together with shopping cart abandonment rate, customer acquisition cost, and customer lifetime value.
How can I improve my e-commerce performance?
Providing excellent service to your target audience, developing brand recognition, and running creative marketing campaigns that are regularly improved based on collected metrics are the three most common tips for successfully scaling your e-commerce business.