Performance marketing is based on the ability of measuring online marketing campaigns which demands that marketers be well informed about the different categories of tools used for performance measurement and optimization that are actively used in all kinds of online marketing disciplines. So read on to gain a brief overview of the relevant key marketing performance figures, their functionality of tracking performance and commonly recurring problems.

What key figures are relevant in performance marketing?

The key figures that are relevant for the performance of the campaign have to be defined first to reasonably measure the success of an online marketing campaign. Most crucial in performance marketing are the sales or leads realized, but the sole measurement of these two figures would ultimately not be enough.

Ideally the tracking specifies the measurement of ad impressions and clicks and continues through the entire online process to discover potential for optimization in all campaign levels. If, in addition, landing pages and online processes are continuously optimized, even more possibilities to increase leads and sales open up, not to mention with performance-based advertising, the advertiser pays only for measurable results.

There are four common pricing models used in the online performance advertising market.

1. CPM (Cost-per-Mille, or Cost-per-Thousand) Pricing Models charge advertisers for impressions - i.e. the number of times people view an advertisement. Display advertising is commonly sold on a Cost-per-Lead pricing model. The problem with CPM advertising is that advertisers are charged even if the target audience does not click on the advertisement.
2. CPC (Cost-per-Click) advertising overcomes this problem by charging advertisers only when the consumer clicks on the advertisement.
3. In recent times, there has been a rapid increase in online lead generation - banner and direct response advertising that works off a CPL (Cost-per-Lead) pricing model, where advertisers pay only for qualified leads - irrespective of the clicks or impressions that went into generating the lead. CPL advertising is also commonly referred to as online lead generation and are therefore regarded as most advertiser friendly.
4. In CPA (Cost-per-Action) advertising, advertisers pay for a specific action such as a credit card transaction (also called CPO, Cost-Per-Order).

However, be careful when choosing between CPL and CPA pricing models as there are important differentiators to take into consideration:

1. CPL campaigns are advertiser-centric, so that advertisers remain in control of their brand, selecting trusted and contextually relevant publishers to run their offers. On the other hand, CPA and affiliate marketing campaigns are publisher-centric. Advertisers cede control over where their brand will appear, as publishers browse offers and pick which to run on their websites. Advertisers generally do not know where their offer is running.
2. CPL campaigns are usually high volume and light-weight, where consumers submit only basic contact information. The transaction can be as simple as an email address. On the other hand, CPA campaigns are usually low volume and complex, where consumers typically have to submit credit card and other detailed information.
3. CPL advertising is more appropriate for advertisers looking to deploy acquisition campaigns by re-marketing to end consumers through e-newsletters, community sites, reward programs, loyalty programs and other engagement vehicles.

Tracking of individual disciplines in performance marketing

The standard tools in performance marketing are search engine marketing and affiliate marketing and for each online an appropriate system for control and optimization is deployed:

• The tracking in search engine marketing is nowadays mostly carried out by so-called bid management tools. Besides the control of click prices and the management of keywords and ads, it also allows measuring the success of individual campaigns and keywords based on ROI.
• In affiliate marketing it is common to use the public affiliate networks and/or private partnership programs. In addition to the program and affiliate management, the tracking of ad impressions, clicks and leads/sales is also enabled.
• Sometimes even display campaigns can be part of performance marketing, though the tracking occurs mainly via ad servers. On the one hand, these tracking tools do the modulation of the advertising material and track in addition ad impressions, ad clicks and derived leads/sales in order to optimize the delivery of banners where required.

In general, cookies are used to measure all systems mentioned above: A click on an ad retrieves a redirect to the tracking server, which sets a cookie on the computer of the user that is used for subsequent recognition of this specific user. How long the user is assigned to the appropriate campaign depends on the cookie lifetime, which can be freely defined. If the user runs through the full online process during this time, a tracking code is called up after the conclusion, which sends the transaction to the tracking system. With the help of the existing user cookies, this transaction can now be assigned to the respective campaign.

Pitfalls and problems in tracking

Exact tracking and accurate mapping of transactions is crucial in performance marketing, yet, when it comes to cookie tracking we often observe measurement inaccuracies. Expert opinion is divided regarding the exact magnitude of these inaccuracies, but it can be assumed it is a value of between 5% and 20% depending on the campaign. There can be several reasons for this measurement error, but most probably it is the use of different measurement systems. Although all tracking systems operate on similar principles, almost every system is in the end different in the measuring process, which leads to a high probability of different tracking results. Pure cookie tracking, for instance, could be amended by the so-called session tracking, that tracks in addition those users that are not accepting cookies or have deleted them, and reduces in this way some inaccuracies.

Campaign managers are nevertheless still worried that they are measuring a lot of overlaps when tracking leads. If an advertiser, for instance, doesn't use a tracking switch, the system is giving out a tracking code for every online marketing tool used, after completion of the transaction on the thank you page. If the user was marked previously by different cookies, one and the same transaction is tracked on several occasions, creating an overlap. These duplicates must be eliminated later by allocating each transaction to a channel. In general, this allocation is done according to the "last cookie wins" rule, as it is assumed that the last advertising contact is usually the clincher for the transaction.

However, the minimization of measurement inaccuracies and errors remains a major challenge for performance marketing, despite such sophisticated techniques noted above. An important step forward is certainly the use of a multidisciplinary tracking tool.

Conclusion

In performance marketing actually all campaign management tools available today fulfill the requirements for tracking the rudimentary data needed for campaign management and optimization. It’s the use of many individual stand-alone solutions that creates the problems, if cross-disciplinary evaluations have to be compiled. Since there isn't a perfect solution in place, yet, the amendment of a multi-disciplinary tracking system makes sense - especially for performance marketing agencies.

Measurement accuracy through advanced technology, comprehensive data collection over the entire conversion path (from ad impressions, clicks, online process to the completed transaction), as well as extensive analysis options are therefore the basis for successful performance marketing and will definitely gain further importance in the future.

By Daniela La Marca