What is Performance Marketing and why is it important?
The Marketing Funnel
A still life reinterpretation of a marketing and conversion funnel in the style of Matisse.
Welcome to Folta Consulting, where we specialise in empowering retail businesses in the luxury fashion, jewellery and interior sector to thrive in the dynamic landscape of digital marketing. With the ever-evolving world of online advertising, it's crucial for retailers to harness the power of performance marketing to stay ahead of the curve and maximise their growth potential.
Why “Performance Marketing: matters and how is it different from “Digital Marketing”
In 2021, global digital advertising spending soared to $455.3 billion, with projections indicating a staggering $646 billion by 2024, by Statista. Amidst this exponential growth, performance marketing emerges as a strategic cornerstone for retailers. The distinction between "performance marketing" and "digital marketing" is crucial to understanding the evolving landscape of online advertising. While these terms are sometimes used interchangeably, they represent distinct approaches. Performance marketing is centered around delivering tangible outcomes, such as leads or sales, through targeted campaigns. On the other hand, digital marketing encompasses a broader spectrum of activities, including branding and awareness initiatives. This delineation underscores the strategic importance of performance marketing in today's competitive marketplace, where measurable results drive business growth and success.
Understanding Performance Marketing
Performance marketing is not just another buzzword; it's a strategic paradigm shift in the way retailers engage with their audience. By leveraging a blend of paid advertising and brand marketing, performance marketing enables retailers to target campaigns with surgical precision, ensuring maximum return on investment. This results-driven approach fosters mutually beneficial partnerships between retailers and paid medias, driving real-time results.
The Marketing or Conversion Funnel
The marketing and conversion funnel is a conceptual framework used by marketers to understand and optimise the journey a customer takes from initial awareness of a product to making a purchase (and potentially becoming a loyal customer). It visualises the stages of this journey as a funnel, with the widest part representing the initial stage of awareness and the narrowest part representing the final stage of conversion/purchase.
Here's a breakdown of the key stages in the marketing and conversion funnel:
Awareness: At the top of the funnel, potential customers become aware of a product or service through various marketing channels such as advertising, social media, content marketing, or word-of-mouth. The goal here is to attract as many relevant prospects as possible.
Interest: In this stage, individuals who are aware of the product or service show interest by engaging further with the brand. This might involve visiting the website, signing up for a newsletter, or following the brand on social media. The aim is to nurture their interest and keep them engaged.
Consideration: Prospects in the consideration stage are actively evaluating the product or service and comparing it to alternatives. They may research product reviews, compare features, or seek out recommendations. Marketers need to provide compelling information and address potential objections to move them towards a decision.
Intent: At this point, prospects have shown a clear intent to purchase. They may have added items to their cart or initiated the checkout process. The focus here is on facilitating the conversion by removing any barriers and providing a seamless experience.
Purchase: The conversion stage is where the prospect becomes a customer by completing the desired action, whether it's making a purchase or signing up for a subscription. The goal is to make this process as smooth and frictionless as possible to maximise conversion rates.
Retention: Once a customer has made a purchase, the relationship doesn't end there. Retention involves nurturing and retaining customers by providing excellent post-purchase support, delivering value through ongoing communication, and encouraging repeat purchases or referrals.
Advocacy: In the final stage of the funnel, satisfied customers become brand advocates by sharing their positive experiences with others. This word-of-mouth marketing can be incredibly powerful in attracting new customers and building brand loyalty.
By understanding the marketing and conversion funnel, marketers can tailor strategies and tactics to each stage of the customer journey, ultimately driving more conversions and maximising the return on investment. Performance marketing plays a pivotal role here as demonstrated in Figure 1.
Conversion Funnel | Figure 1.
Measuring Performance Marketing Success
Effective performance marketing hinges on meticulous tracking and measurement. Key metrics such as Cost Per Acquisition (CPA), Pay Per Click (PPC), and Customer Lifetime Value (CLTV) provide actionable insights into campaign effectiveness, enabling retailers to refine strategies and drive sustained growth. As we can see in Figure 1 different Key Performing Indicators (KPIs) are attributed to stages within the conversion funnel*.
Conclusion: Empowering Retailers for Success
At Folta Consulting, we're committed to empowering retailers with innovative performance marketing strategies that drive tangible results. Whether you're a seasoned e-commerce veteran or an entrepreneur, our team of experts is here to guide you on your journey to success in the digital realm. Let's elevate your brand, expand your reach, and unlock your full growth potential together.
*To note, this is a simplified overview and KPIs will vary depending on use case and retailer.
References:
Digital advertising spending worldwide 2021-2026, Published by Statista Research Department, Aug 29, 2023