Pros and cons of performance marketing

Some businesses and brands might benefit more from performance ads than others. While they offer control and clear data, they require testing and learning and some time and money investment.

Performance marketing pros

1. Control over spending
Unlike traditional advertising, where you commit to a fixed cost upfront, performance marketing lets you maintain tight control over your budget. You can start small, pause anytime, and adjust your spending based on results. If something isn't working, you can stop spending immediately.

2. Clear, measurable results
Every dollar you spend can be tracked to specific outcomes. You'll know exactly how many people clicked your ad, signed up for your newsletter, or made a purchase, and how much each action cost. This helps you make confident decisions about where to invest your marketing budget.

3. Flexibility to scale up or down
As your business grows or seasons change, you can easily adjust your performance marketing efforts. Having a slow month? Scale back. Holiday season approaching? Ramp up your campaigns. This flexibility is particularly valuable for small businesses managing cash flow.

Performance marketing cons

1. Time and resource requirements
Even though you only pay for results, you'll need to regularly monitor your ads, create different versions to test, analyze what's working, and stay updated on platform changes. This means investing hours of work in addition to the advertising spend.

2. Learning curve
Each advertising platform has its own unique rules and technical requirements. You'll need to figure out how to track your results correctly, understand which numbers really matter for your business, and learn how to improve your campaigns over time. It's a marketing skill that takes patience and practice.

3. Budget realities

While you can start small, you'll need some money set aside for testing and experimenting. You want enough budget to gather meaningful data about what works, plus a little extra to handle seasonal changes. Advertising gets more expensive during busy shopping seasons like Black Friday, when advertisers are competing for customer attention.

Creating your performance marketing strategy

Before you jump into your strategy, take the time to evaluate whether performance marketing is right for your business.

Performance marketing might be particularly valuable if:

• You have healthy profit margins that can absorb marketing costs.

• Your product or service has repeat purchase potential.

• You can handle an increase in customers or orders without sacrificing quality.

• Your offering solves a problem people are actively searching for.

• You have a way to capture value from interested prospects who aren't ready to buy immediately (like an email list).

However, consider holding off if:

• You're still testing and refining your product or service.

• You're not sure who your ideal customer is.

• Your website isn't set up to convert visitors effectively.

• You will struggle to produce or fulfill orders if you get a sudden surge in sales.

• You can't afford to spend at least a few hundred dollars on testing.

1. Set clear goals

Before launching your first campaign, keep your goal simple and focused. For instance, if you run a handmade jewelry business, you may want to start by focusing solely on generating direct sales, as opposed to a secondary goal like growing your social media following.

Focusing on one clear goal will help you learn what works without getting overwhelmed. If you're not sure where to start, think about where in the marketing funnel you're reaching your prospects, and how you can move them to the next phase.

Make sure your goal is specific and measurable. For example, your goal may be to bring in five new customers per week at a cost that makes sense for your marketing budget. Understanding your average sale value will help you determine how much you can reasonably spend to acquire each customer.

2. Choose your first channel

Start with one channel and master it before expanding. Your choice should align with how your customers naturally look for products or services like yours. Visual products often perform well with social media performance ads, while service providers, like photographers or consultants, might see better results with search-based PPC.

Consider your budget when determining your channel. Social media performance ads often let you start with as little as $10 per day, making them an accessible entry point for many small businesses. For instance, a local fitness trainer might start with Facebook performance ads where they only pay when someone signs up for a free consultation. This way, they're paying for concrete results rather than just ad views or clicks.

3. Measure results

Understanding your campaign's performance doesn't have to be complicated. Focus on two key metrics at first: how much you're spending to acquire each customer and whether you're making more than you're spending on ads. These basic metrics will tell you if your campaign is working and guide your future decisions.

Track these numbers from day one, even with a small budget, but understand it may take some time to figure out what works and see results. This early data is your guide for future growth.

4. Scale your efforts

Once you've found success with your first channel, growth should be gradual and controlled. Instead of making big changes, start by increasing your budget by small amounts, perhaps 20% at a time. Watch your results carefully for a week or two after each increase. If your costs start rising too much, you can scale back.

Only consider expanding to new channels or audiences once you've established a reliable pattern of success with your initial campaign and have the budget to invest in new testing.

Remember that performance marketing is a learning process, and just one tool you can use for marketing. Many successful businesses take months to find the right combination of channel, message, and audience.

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