“Half the money I spend on advertising is wasted; the trouble is, I don't know which half.” This well-known quote has been attributed to some of the most fortunate businessmen of the nineteenth century from John Wanamaker to Henry Ford. This was true for the past but up until recently, the situation hasn’t changed much. Marketers from all around the world have been making attempts to control their ad spend, and only with the emergence of digital advertising, we’ve finally got a real chance.

In this article, we are going to discuss one of the potential solutions to this puzzle - performance based advertising. Digital marketing changed a lot within the industry, but perhaps the most noticeable change lies in more sophisticated technologies that allow precise counting of the results of your advertising efforts. Such an analysis can be then used as a foundation for building a marketing strategy, which is the main idea behind performance advertising. Let us now explore what it is and how it works.

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What is performance based advertising

Performance based advertising is a strategy designed to achieve specific and measurable financial results within a short amount of time. Such goals can include boosting sales, retaining the audience, increasing loyalty or a chosen specific metrics. Performance advertising makes all of your channels work together and allows you to get the most out of your marketing budget. The main aim of such a strategy is to make every dollar spent on advertising work and maximize return on investment.

Performance based advertising is different from brand based advertising which is aimed at building relationships between brands and their customers through building a recognizable brand image. Large brands, such as Coca-Cola or McDonald’s are usually applying this strategy. However, as it is hard to directly measure the success of such efforts, performance advertising cannot be used for these goals.

How performance advertising works

The primary task of performance-based advertising specialists is to determine which channels and tools will bring the best results at the best price for each particular business. These channels and tools are then put into the ideal complex strategy that involves working simultaneously at all levels of the sales funnel both online and offline. The process can be divided into a few simple steps:

Step 1. Deep research and analytics

At this stage, the more data about its clients and products are provided by the company, the more detailed and precise will be the overall strategy. Each and every piece of information is carefully collected and analyzed:

  • The current state of business - its strong and weak points and overall performance, SWOT-analysis;
  • Previous marketing efforts - which campaigns worked the best and what didn’t work at all;
  • Products and services provided by the company - pros and cons and how they respond to clients needs and problems, what can be done to improve them;
  • Customers - what are the target audiences and buyer personas, what they are looking for, where and when they are searching for it;
  • Online visibility - SEO delivery, traffic sources, and their performance, as well as the semantic core;
  • Market and competitor analysis.

Having this information will make it much convenient to build up realistic goals and precise strategies to reach them, so this step should be performed especially carefully. The more conclusions are drawn from this process, the easier it will be to proceed.

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Step 2. Setting goals and building strategy

At this stage, the company should already have a realistic view of the current situation and compare it to the desired state of their business. From this comparison then the goals can be set.

Goal setting is the starting point for campaign development - apart from the desirable achievements, they should also depend on available resources, such as budget, timing, and advertising tools. The goals themselves should be specific, measurable, and achievable. To track progress, set deadlines for reaching these goals, as well as checkpoints to make timely adjustments, if necessary.

Based on the available information and resources, it is then possible to build a comprehensive strategy. The most effective case-specific advertising tools and channels should be selected at this stage. Afterward, marketers choose a unique approach for every channel based on their performance and target audiences. Marketers should determine how to allocate the budget between these methods and targets.

To avoid mistakes and misunderstandings, it is also important to define clear responsibilities and set direct communication channels inside the company. As a result, the business should have clear goals, measurable KPIs, and a precise step-by-step strategy to reach them.

Step 3. Campaign creation and development

Once the goals and strategies are defined, it is time to act:

  1. Based on the chosen channels and available resources, marketers are launching campaigns in accordance with the strategy.
  2. The strategy is closely monitored and the budget is analyzed to view how much profit is generated from each point of the campaign.
  3. During the campaign, chosen techniques are constantly adjusted, and the weak tools are replaced by new ones.

A nice practice is to track the interactions between brand and customers throughout the whole buyer’s journey. This will help to make conclusions which channels and creatives work best. Every touchpoint from first impressions to an actual sale should be analyzed and optimized to create an integral customer journey. Such an adjustment would help build up a solid brand image and promote the company's values.

To further manage the campaign marketers closely monitor every channel’s performance and promptly decide on adjustments to the budget based on these observations. This employs a basic principle behind performance based advertising - each spent dollar should bring a result.


While performance-based advertising seems to be one of the most effective promotion techniques, it is important to note that this strategy should go along with other forms of marketing in order to open up your company’s full potential. However, even if this form of advertising doesn’t exactly fit all of your business needs, it is certainly beneficial to employ at least some of its basic principles. For instance, you can sign up at a demand-side platform and experiment with multiple ad channels to track their effectiveness in relation to the budget. This way your campaigns can become much more reasonable and, thus, profitable.

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