• by Cory Treffiletti , Featured Contributor, November 3, 2010

Many people ask what performance marketing is -- but I think it's clear that ALL marketing is performance marketing. 

Let's look at it from a slightly different perspective.  What is "under-performance marketing"?  That would be the science of spending money to talk to the wrong consumers, with utter disregard for the ROI of your spend.  Sounds like a very small fraction of the marketplace to me.  At best I can think of one, maybe two brands in the history of marketing that fall under this definition (and, yes -- you know who you are).

Maybe in the age of "Mad Men" and the three-martini lunch there were marketers that didn't diligently review the performance of their efforts, but in today's economy all marketers are focused on performance. 

The concept of "performance marketing" is often applied to the world of direct response, but it's very clear that whether your response is direct or indirect, you value the metrics along the way that measure the responsiveness of your efforts.

The metrics are what drive the majority of the confusion.   The way I see it, there are three categories of metrics that marketers use to evaluate their performance. The first are direct metrics, which include click-through, registration, and conversion. The next are the indirect measures, which include an overlap for conversion (as it pertains to extended session vs. same session conversion), as well as buy rate and penetration.  Buy rate and penetration are typically referred to as CPG metrics, but they apply to almost any good that is purchased by a consumer.  On a broad scale, buy rate refers to the instances of purchase vs. exposure to a product, and penetration refers to the percentage of households that own your products. 

The third tier are the "brand" metrics, which can include awareness, favorability, consideration and intent.  These are famously associated with brand marketing, but marketers measuring results attempt to generate correlations between awareness and buy rate, consideration and buy rate and intent and buy rate.  If you can create a positive correlation between any of these metrics, and then apply that knowledge to your first tier of metrics, then you can create a formula for media mix modeling and predicting success.

That last sentence is what gets people in the world of performance marketing the most excited. It's also what tends to frighten your traditional "brand" marketers the most.  It's the grey area between the art and science of marketing becoming un-greyed.  When you can create a formula that is based on enough data, and you can semi-accurately predict the ROI for your ad spend and marketing efforts, then the guesswork is taken out of the equation.  The formula may not take into account the art of creativity, but it can provide a basis for comparison.  A truly effective piece of creative can blow your results out of the water, and a truly poor piece of creative can end a campaign before it even begins.

More and more marketers are getting involved in data analysis, coming to terms with the scientific component of the business. This means more and more marketers are acting like performance marketers. 

So I ask the question again: What exactly is performance marketing?  And I amend the question to ask if you're a performance marketer.