• by Chris Johnson , February 26, 2013

“How?” and “why?” are the common questions raised when discussing the potential of performance-based marketing as part of any ecommerce ecosystem across the globe. Relevancy is often unacknowledged, and the channel’s incremental sales potential is often misunderstood.

With that in mind, let’s get straight to the point of the industry that encompasses search, affiliate, social, mobile, e-mail, display and lead generation.

In the U.S., the true value of performance marketing has been somewhat hidden as relevant revenue figures by key stakeholders are often undisclosed. Fortunately, we can look to a recent market study conducted in the U.K. to gain insight into the potential value of performance marketing in the U.S.

 The IAB recently commissioned an industry study with PwC which generated an “under-represented” market figure for performance marketing in the United Kingdom. A figure of $14 billion was released by PwC as the sales revenue from performance marketing activity in the U.K. That figure covers 100 million transactions, 7% to 9% of digital marketing spend, and 0.6% of total U.K. GDP.

The above numbers have helped cement performance marketing as a viable channel in the ecommerce ecosystem, but the real figure that I’d like to focus on is the expenditure by retailers, standing at $1.24 billion, which generated an average ROI of 11:1 for retailers engaging with performance marketing activities.

11:1. Do I need to say much more?

As a relatively new market and one that has evolved considerably over the past 12 years, performance marketing is now in a position to offer retailers additional value from incremental sales and an enhanced sales arm. Take a quick scan of some of the top performance-marketing networks, and you’ll see Macy’s, Saks Fifth Avenue, Walmart, AT&T, Home Depot and Starbucks all generating revenue through the channel.

Publishers are an enhanced ‘sales arm’ for their business. Generally speaking, unless a sale or lead are made, the publisher is not paid. By promoting retailers on a performance-based model, provides a level of enhanced brand advocacy. It’s in the interest of your “sales arm” to promote offers and brand messages in the right way, in order to encourage the customer to continue their journey through to the retailer’s site and to make a purchase.

Wouldn’t you have gotten those sales anyway? There are some great white papers on the subject, one of which can be read here.

Overall, key publishers and affiliates in the performance marketing industry are becoming well known online brands in their own right. They have an increasing social fan base, e-mail list, mobile offering. Most importantly, they are often the first point of call for consumers who have been prompted to become savvier, deal-focused and increasingly selective during this fragile economic time.

To meet the needs of today’s agile consumers, who are shopping cross-device, in-store and online, marketing has had to innovate in order to service this  new customer journey. This air of smarter marketing has been so far successful; new technologies are being utilized across the board to meet demands. In performance marketing, this is no different. There’s a desire to engage savvier consumers along the purchase funnel. Plus, innovation in call-tracking solutions, mobile commerce, retargeting and remarketing, which allows brands to reach more consumers at extended stages of the customer journey than ever before.

If you’re not yet a part of this fascinating sector, I’d urge you to engage with the leading edge of performance marketing. You’ll be surprised with the additional revenue the channel will add to your bottom line.  The model speaks for itself: pay-on-performance.