Over the last years, many companies claimed that Performance Marketing does not work for them. Why? They stopped their campaigns and somehow nothing changed with regards to revenue or at least profit.
It is quite clear, why they got to this conclusion.
But the same as blind trust in Performance Marketing has been wrong right from the beginning, it is wrong to conclude it is “not working” in general!
Those companies are most probably right about their observations.
Still, the problem is not the channel, but how we use it.
Spoiler Alert: Most companies are looking at Performance Marketing from the wrong angle or with very limited understanding.
This is only partly Google’s fault. Most times it is done that way, because of the huge “experts” market that feeds many extremely good sales people, but almost no holistic marketing experts.
Let’s digg into this!
A little disclaimer first:
- I managed many performance campaigns at around USD 50k ad spend per month over the last years. I have been there in the earlier days (around 2008), the pushy days (around 2014), and quite recently. Working with countless agencies and experts, as well as Google itself.
- I did my Masters focusing on consumer behavior research with regards to advertising effectiveness.
- I look at the religious believe in Performance Marketing extremely critical. Still, I see its benefits in specific cases.
- Bottom line: I would consider myself very experienced, but still unbiased.
Why Companies use Performance Marketing
Measurement and ROI.
The number one reason in every survey.
Let’s do some quick fact check.
Sure, you can somehow measure many parts of digital and therefore Performance Marketing measures. However, in the last years, due to ad and cookie blocking, this became more an approximation, than a 100% measurement.
And even if tracking would work 100%, none of the available and used numbers is a smart indicator for ROI.
In the end, a purchase decision is based on many parameters and in many cases, looking at your 1 million data points in Google Analytics is a no better ROI indicator than asking your actual customers why they bought (they are both not accurate).
Don’t get me wrong. You should measure and track as much as possible! Those are valuable information. But don’t get fooled on their absolute meaning. Marketing is way more than optimizing some digital KPI. Thinking about it too narrowly will break your complete sales funnel some day.
One out of many good reads here: https://www.linkedin.com/pulse/3-things-most-berlin-startups-dont-understand-growth-alexej-habinski/.
In the end, Performance Marketing is only 1 of many channels. You need to find out, how it fits into your marketing mix.
Do not compare its metrics against other channels, because you can’t. Sponsoring might be the reason, why your target audience searches for “this new insurance from the football game last night”. You cannot benchmark ROI of channels here, because user journeys happen on a multi-channel base.
Bottom line: Measurement is cool, but should never be the reason to choose Performance Marketing OVER some other channel (see the examples in the beginning).
Customer Touch Point.
Another reason would be to reach people, who, for example, search for a chair on Google or Bing (or Facebook).
This is a fair argument. If you are thinking about your customers’ journeys and one (potential) touch point can be served via Performance Marketing, awesome!
Performance Marketing usually does not involve huge upfront costs. You can start a search ad within minutes. You can also move budgets quite easily.
This is a huge difference to other channels, where you sometimes need to allocate budget half a year in advance.
This makes Performance Marketing stand out and a good start for startups. Still, it is a nice thing for management and controlling, but it has absolutely nothing to do with your customers and convincing them to buy.
When talking about effectiveness, this may only be a second row argument.
Let’s face it, many companies use Performance Marketing, just because it is “digital” and they do not want to loose ground.
Unfortunately, this is the most stupid and harmful thing you can do. You either have a clearly defined strategy or you don’t. Doing something, because it is “trendy to do”, simply costs you money and only if you are lucky (!) it maybe pays out partly.
I need to admit, that this can be a fair strategy in very new and unexplored fields (like currently eSports, for example), but not with Performance Marketing (Google Ads started 20 years ago!).
Advertising — the 3 big Games
After looking at the reasons to do Performance Marketing, let’s have a look at the major marketing game fields.
Retaining existing customers.
This is about making people stick to your brand. Making them buy again or keeping them engaged with an active subscription.
How this relates to Performance Marketing:
You could make use of remarketing measures to keep contact to those people. This is no bad idea, but be careful. Remarketing can be seen as “creepy”, if it feels to obtrusive. It can also feel “stupid” — imagine seeing an ad for a product, you have bought 5 minutes ago.
Maybe most important, Performance Marketing measures are not known to work well with brand building. They can, but it is usually way more expensive than other channels.
For retaining customers, remarketing can be interesting, but should only be part of the solution. You should also consider owned media, like newsletter marketing, communities, Social Media, or even corporate publishing. Especially in times of GDPR and strong data privacy requirements.
When thinking about brand management, the mix should be even broader (depending on your brand’s size). Think about TV, Branded Content, and more.
Staying at the top of mind.
In most cases, people do not buy out of a second, just because they have seen an ad. They simply don’t.
This means, that marketing has the job to make sure, a brand stays at the top of mind (consideration set) of every potential customer, who somewhere somehow has entered the sales funnel.
How this relates to Performance Marketing:
Performance Marketing can play a vital role here. Think about search ads. Quite often, before the final purchase, the potential customer googles it again. So, popping up at this specific time can be extremely important.
However, do not think of this as a one measure gets them all logic!
Branding is also very important here. Thinking about the retention block above, that’s the reason, why you still need to think about the complete mix here.
This also depends on your product and sales channels. Do you sell online only? Digital advertising should be stronger. Do you sell rather offline? Maybe even the package design has a greater impact than some Facebook Ad.
Again: There simply is no one-fits-all blueprint.
Also mind the fact, that properly measuring this effect is not possible via explicit KPIs, you get from any Performance Marketing tool!
Attracting new people.
Getting to the part, which is often primarily focused. How to attract completely new customers.
How this relates to Performance Marketing:
Of course, every performance measure, from search ads to social ads, is quite interesting here. You have tools like “Look-Alike-Audiences” to find new customers based on your current ones (mind that this usually is not GDPR compliant!), and even within the Google or Bing search, you are looking at potential new ones.
Still, there is some kind of a paradox here!
Performance ads are expensive. That’s why people optimize the bidding and strategy to generate a positive return. However, by “optimizing” them, you target them closer to the profile of current customers. You basically no longer talk to other people. Imagine you would, they would turn out to expensive, because maybe they click, think, leave, click again, wait 2 months, before actually buying.
Still, they could be valuable long-term customers!
Performance Marketing, again, is no wrong measure here, but it simply only catches a tiny part of the market. The other part could be played with other measures, like TV commercials.
Thinking about ROI measurement, it gets tricky here. As soon as you start other measures, you can basically trash all performance models. Because doing it the right way, you would need to differentiate between those, who knew the product before, then watched the TV ad, then heard about it on the radio, then googled it, clicked an ad, bought it — and all variations of it! Impossible — even with Google’s multi-channel analytics.
My recommendation: Do not trash your models, but PLEASE, do not put them on a golden pedestal, reading them as if they hold the one and only truth. They don’t. They are strongly biased indirect indicators for potential success. They can help to spot problems, but they are definitely not there to benchmark things. At least, if you are not dealing with an online only web shop, with one product, without any other marketing channel, that does not want to scale.
So, what’s wrong?
Thinking about the examples in the beginning, it should be quite clear by now, why the have failed.
- They thought of digital Performance Marketing as the new way of doing marketing, neglecting the marketing mix, moving budgets away from other, also valuable channels.
- They were expecting to generate revenue from those measures only, directly, and immediately.
- They thought, that performance metrics directly related to their overall business success.
- They blindly trusted in advisors, who earned money by selling them Performance Marketing only.
- They no longer looked at marketing in a holistic way.
- They no longer thought about marketing strategy with putting the target audience first. They rather let others “decide”, who the audience looks like.
Mind, that it makes a huge difference, if we are talking about large brands or small startups, about FMCG or some luxury car company.
There are so many things, that decide how a solid and ideal marketing strategy looks like.
In the end, you need to understand that there is no blueprint for this. Your marketing mix always needs to be tailored to your specific product and market.
And that’s the major mistake when talking about Performance Marketing!
- It can be a good channel for some, but not necessarily for everybody.
- It can be a good part of one marketing mix, but could even do harm for the strategy at another company.
- It is almost never the ideal strategy to focus purely on, because Performance Marketing or “Digital Marketing” is just one measure.
It is not “Marketing 2.0”!
And please, do not put all your trust in performance metrics. Especially not, when your are assessing the overall marketing strategy.
For an alternative perspective on this issue, read “The new old Holy Grail of Marketing Targeting”.
Performance Marketing is not dead, neither is Google Ads a “Scam” or “useless”.
Performance Marketing is a tool or a channel, not a new way of doing marketing!
Getting rid of this missunderstanding, often solves most problems.
If your marketing efforts, respectively specific channels, still do not deliver any results, you most probably execute the wrong strategy (maybe even the wrong way).
In most cases, you should question, which agencies and advisors you trust. They are usually good in what they do, but in my honest opinion, you should never outsource the overall marketing strategy and keep at least one holistic expert employed directly! Ask yourself, why an external agent should ever advice you in saving marketing dollars.
In addition, never split your marketing into “Digital” and “Non-Digital”! It alwas should be just marketing. Your customers also do not differentiate, if they have seen an ad online or offline!
In general, we need more professionalism at the media consultant and marketing strategist side. Doing so, marketing will turn out just fine. 🚀