What is the status quo of performance marketing in 2021, and how will it evolve in the near future? What do the success factors "creative," "data-driven," and "customer-centric" mean in concrete terms, and how are they related? As part of this year's Digital Festival, which was held under the motto "Make it personal," I gave an entry entitled "Performance Marketing's Trinity: Creative, Data-driven, Customer-centric." I've captured the key points from it in this blog post.
What is performance marketing?
Performance marketing is typically used to drive a specific action such as buying a product or signing up for a newsletter. It is based on the premise that these actions can be measured, analyzed, and reported to subsequently optimize marketing efforts based on this data.
In principle, any online channel can be used for performance marketing. However, there are those that are more suitable - e.g., SEA or social media - because the diverse targeting options of these channels make it possible to play out the ads precisely to the target group and thus keep waste low.
Evolution: from the beginnings to tomorrow
Performance marketing has been around almost since digital marketing began 20 years ago. During this time, not only the technological possibilities, but also the billing models and bidding strategies, have continued to evolve:
- Cost-per-impression: Initially, the success of advertising measures was determined by the number of views, modeled on advertising in traditional media, such as TV or print, where advertising was sold based on impressions.
- Cost-per-click: The first real justification of performance marketing began with developing tracking and measurement options. This allows advertisers to pay only when the ad generates a click.
- Conversion-based strategies: The most common bidding strategies today are Target CPA or Target ROAS. The aim here is to generate as many conversions or as much revenue as possible based on a predefined target value.
- Customer lifetime value: In the future, performance marketing will increasingly develop toward optimizing customer lifetime value. The aim here is to manage the value of a customer over the entire duration of an active customer relationship, rather than just in terms of individual transactions. The idea behind this is to address customers again and again during their relationship with the company and to bind them to the company long term.
Key influences on performance marketing
Artificial intelligence, machine learning, and automation
Google, Amazon, and Facebook have long been intensively leveraging the benefits of Artificial Intelligence (AI) and Machine Learning. The impact on processes and workflows, as well as the levers for growth in marketing, is huge. Automation is making its way into online marketing, and as a result, strategic issues are gaining traction. Already today, much more complex setups and targeting are possible because, for example, algorithms take over the clustering of customer segments - and the development continues in this direction.
Increased focus on customers
One failed interaction with the company, an outdated platform, or simply a slow-loading website, and users are already looking for their product at another provider. As price and quality become easier to compare in the digital age, brand loyalty is harder to achieve than in the past. Generation Z, for example, is much less loyal to brands than previous generations were. Companies need to focus on customer experience, which is key to sustainable competitive advantage.
More intense need for transparency and privacy
The Holy Trinity: creative, data-driven, customer-centric
The above developments and change processes show that performance marketing has been subject to constant change since its beginnings and is still (still) evolving due to technological and social trends. Which factors are currently and in the near future relevant for successful performance marketing? Let's review: performance marketing aims to deliver a personalized message to the relevant target group at the right time and on the right channel in the desired environment to increase the chances of a potential interaction. And how does this work? By making digital marketing efforts customer-centric, data-driven, and creative.
Customer-centric performance marketing
Let's look at the first factor of successful performance marketing: In a nutshell, customer-centricity means aligning a company holistically with customer needs without neglecting its economic interests. The predominant goal is to build proximity to the target group so the company can better address and respond to them, thus creating a loyal business relationship. So what does the implementation of customer-centricity look like in performance marketing? A few examples of common uses:
- Email marketing: Emails individually tailored to the user with personalized content and product suggestions.
- Personalized advertising: Individual banners and targeted playout reduce waste and give users a positive feeling.
- Relevant product recommendations in e-commerce: Relevance ensures a positive shopping experience, increases customer activity, and helps customers make decisions.
Data-driven performance marketing
The second factor for successful performance marketing puts data in focus and supports customer-centricity: Data-driven marketing stands for collecting, analyzing, and using the data generated along the customer journey to make informed decisions and execute targeted and personalized campaigns as automatically as possible. This is usually based on existing customer data - name, address, e-mail address, age, gender - which is available via the CRM system. In addition, other data obtained within the company can also be used, such as results from customer surveys, the selection of topics for newsletter subscriptions, or usage behavior on the company's website. It is important this data is not stored in silos, but is consolidated, analyzed, and grouped, in a data management platform, for example. The goal of data analysis is to determine the behavior, interests, and preferences of the target group in much detail to be able to address them in a targeted manner and, ultimately, to keep waste low.
Creative performance marketing
The third success factor of performance marketing focuses on the advertising media. Basically, the better the creatives and messages are tailored to the target groups and fit the channel, the greater the impact of the advertising.
A McKinsey study concluded that companies that use creative and data in tandem have twice the growth rates of companies that do not. A campaign has the greatest chance of success if it strikes a chord with the target audience. The knowledge about the target audience's behavior and preferences is in the data, which brings us back to the first two success factors of customer-centric and data-driven. How do advertisers win the battle for attention? By using advertising media tailored to the target group and contain creative, eye-catching elements that ideally evoke positive connotations in users. Dynamic ads illustrate personalized creatives: Using a feed, rules are created for when which elements should be used for which target groups. The text, the visual, the product, the price, the call-to-action, and the deposited landing page are adapted and combined differently depending on the user. Dynamic ads are used in many areas of performance marketing, including Google Ads or social media.
Inseparably linked: customer-centric, data-driven, and creative
The three aforementioned key success factors in performance marketing - customer-centric, data-driven, and creative - are inextricably linked and influence each other. Let's take creatives, which should match the interests of the target group, which in turn are collected using data-driven marketing. Data-based customer-centricity with creative execution leads to effective performance marketing. The prerequisite is a sound understanding of the customer, which is achieved through the process of data collection and data segmentation.