How Performance Marketing Works [+ 6 Tools You Can Use]

By mbretous@hubspot.com (Martina Bretous)

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Many companies have employee referral programs where referring someone who gets hired comes with a reward (typically a cash bonus).

This is the same principle of performance marketing: marketers set a performance goal (like driving conversions) and reward the partners/people who help them get those conversions.

Let’s dive deeper into how performance marketing works, how to create a performance marketing strategy, and the tools you can use to implement one.

Table of Contents

What is performance marketing?
How Performance Marketing Works
How To Create a Performance Marketing Strategy
How do you measure performance marketing?
Top Performance Marketing Software
Top Performance Marketing Verticals

What is performance marketing?

Performance marketing is a digital marketing strategy driven by results, where advertisers (like a brand or business) only pay once a goal is met, which can be anything from making a purchase to filling out a form on a landing page.

With a traditional ad campaign approach, there’s no guarantee you will get a return on your investment, and you can only monitor performance and make adjustments after it launches.

Even seasoned media buyers can have unsuccessful campaigns if there’s a misalignment between the campaign and the target audience.

Since you’ll only pay when your goals are met, you accomplish three things:

Your campaign is less risky
There’s a guaranteed return on investment (ROI)
You have better control over your ad spend

Is affiliate marketing the same as performance marketing?

While somewhat related, affiliate marketing and performance marketing are different.

Affiliate marketing is a subset of performance marketing based on paying a commission after each sale or target goal/conversion.

Performance marketing has grown broader than just affiliate marketing, with the target goal of improving a company’s performance as a whole.

Types of Performance Marketing

There are various performance marketing partners/channels to consider for your campaigns:

Affiliate marketing: A partner uses an affiliate code or link to promote an advertiser to their audience and is paid by tracking the conversions from their unique link.
Influencer marketing: Brands work with creators and influencers that promote their offer to their unique audiences to inspire them to take action.

Paid marketing and advertising: Businesses work with a publisher to display their ad (like on a webpage) and pay the publisher for actions like clicks, purchases after clicking, or the number of impressions from where they feature the ad.
Search engine marketing (SEM): Advertisers feature advertisements in search results for business-related terms and pay the publisher if their ad is clicked.
Native advertising: Advertisers create ads that blend in on the channels they’re on, and advertisers pay an affiliate or influencer based on their target conversion.
Social media marketing: Creators and influencers advertise for partners on different social media channels.