As long as you have a product, you can do performance marketing, but properly preparing for launching a product or company into a growth phase can mean the difference between sputtering off the line and rapidly building a program that accelerates company growth.
Defining Performance Marketing
Performance marketing is the process of exposing consumers to your product while constantly measuring and verifying that each of your tactics is achieving targets for a KPI that is aligned with your business objective. This process involves a feedback loop of reviewing your KPI and metrics that are associated with it in order to modify existing tactics, test new tactics, and discontinue activities based on that feedback. The ultimate goal of this process is to acquire every customer possible for a cost that is equal to or less than the value they add to the company. In reality this decision making happens at the cohort level, not the user level, but the more precise your cohorting is, the more accurately you can manage your marketing.
Preparing the Company for Growth
Openness to Testing
At its core, performance marketing is applying analytics to optimize marketing. In order for useful measurements to be made, a wide variety of things must be tested, from a creative, channel, and targeting perspective. The organization should have priorities for testing, but restrictions will only result in missed opportunities. Any hard rules from a legal or brand perspective should be outlined and agreed to by all stakeholders as early as possible to avoid friction. Ideally these restrictions should be minimal, related to legal limitations or company values that can’t be compromised.
Clarity on Goals
All teams (product, finance, marketing, analytics, etc.) should be aligned around the ultimate goal of the organization and the key performance indicator for performance marketing. It is necessary that other metrics be used to describe the KPI and to understand how to improve the KPI and not be used in addition to the KPI. Not clearly establishing this from the outset can result in wasted analytics cycles, and meeting marketing targets, without driving the type of growth the larger organization is aiming for.
Business Goals
Revenue
For 99% of companies, the answer here should be to grow revenue. There may be some exceptions here, but if you feel that it is not revenue, I would dig into this as an organization and be sure that the entire leadership team is aligned on targeting something other than revenue.
A few exceptions here may be for products that are not yet ready to monetize and the current growth phase is about driving active users or products where the monetization cycle is lengthy and conversion to paid takes longer than is realistic to measure from a marketing campaign.
Aligning Organizational Goals with Performance Marketing KPI
Tie Your Input to Your Output
Every performance marketer has the same input – money. At minimum, you will need your cost of ad space, but could also include, agency fees, creative costs, attribution costs, analytics costs, and performance marketing personnel costs.
Your output is your organizational goal. Tie these two metrics and create a cohort metric to be your key performance indicator for performance marketing.
| Goal | KPI |
|---|---|
| Revenue | Return on Ad Spend at day x |
| DAU | cost per unique days of user activity by day x OR cost |
| Signups | Cost per unique signup |
Mapping Out Your Funnel
Map out every step in the process that gets you to your KPI. This will allow you to determine the metrics you need to track to understand the steps in your funnel and better evaluate what can be done to improve your KPI. The table to the left as some funnel steps as well as related metrics. Some of these may relate to your business and some steps for your business may also be missing here.
| Funnel Event | Key Metrics |
|---|---|
| Impression (Ad view) | CPM |
| Click | CTR, CPC |
| Download | |
| Install | CVR, IPM, CPI |
| User creation | User conversion rate, CAC |
| Trial start | Trial conversion rate, cost per free trial |
| Purchase | Payer conversion rate, CPA, ROAS |
Customer Profiles
Customer Profile Sources
The performance marketing organization should own the creation of these profiles, but data should be sourced from multiple departments and data sources. Do not worry about whether there is overlap between profiles. The goal here is not to create mutually exclusive groups, but to provide useful input to the creative development and campaign creation process.
- Who the product team think their customers will be
- Who the company founders envision their customers to be
- User segments from the analytics team, based on different user behavior
- Survey and interview information from the existing userbase
Availability of each of those categories will be dependent on product lifecycle
User Profiles
User profiles have great value in providing direction for generating and prioritizing targeting criteria and creative production for performance marketing tests. Each business will have different components to their profiles based on the type of product and information available, but here is a short list of potential components.
- Age range
- Gender
- Geo
- Marital status
- Familial status
- Home ownership status
- Annual household
- Income
- Interests
- Expected revenue value per customer
- Average time spent in the product per day
Competitors
Define Your Competitors
Identify your top three to five competitors that you feel you are in closest competition with. They should, to some degree, be selling the same product, solving the same problem, and targeting the same audience. There will be some variation here, so to the best of your ability, try to rank these competitors from most to least competitive with your product.
Uses for Defined Competitors
- Creative research
- Creative benchmarking
- Network research
- Understanding what differentiates your product
Value Proposition
Purpose: Inform messaging and creative direction for ad creatives.
Source: For companies and products in their early stages, the value proposition document should be assembled as a collaboration between product, marketing, and company leadership. Once a product is in the market, this should be defined by what customers say the value is to them.
Components: The key questions to answer are
- What value does a customer derive from the product?
- How does the product improve the customer’s life?
- How does the product do this better than competitors?
Budgeting
Define Budget Constraints
Key stakeholders in the organization need to have a clear understanding of the performance marketing budget and what will trigger it to change in the future.
- The currently allocated budget
- Positive triggers that would result in more budget (e.g. payback of marketing cost improved to day x)
- Negative triggers that would result in reducing budget (e.g. payback of marketing cost worsens to day x)
- Ultimate constraints (short term profitability expectations, cash on hand)
- Cadence for reevaluating the budget
Testing Budgets
Immediately after you kick off your first campaigns, you’ll run into the challenge of allocating budgets to testing new creatives, campaigns, and channels versus allocating the budget to campaigns that are already live and the performance is known. Without new tests, there is no chance that performance can improve, but on average, testing performance will be worse than what you already have live. You will need to decide the level of risk you are willing to take in this area. Generally, allocation to testing should be very high to begin with as the program is being established, and shrink over time. It is very valuable to be able to track performance of your testing separately from established campaigns to better understand whether dips or jumps in performance are due to real changes in your core campaigns, or a change in your testing allocation.
Advertising Restrictions or Guidelines
Audience Building and Data Restrictions
This document should be created in conjunction with the company’s legal counsel. This should outline any targeting groups that are off limits based on geo, age, race, income or other restrictions based on the industry you work in. There may also be limitations on what data you can share back to vendors. Having this centrally located will make it easy to update when laws change and simple to share to new team members or outside companies that are providing support.
Creative Restrictions
Any restrictions on what can’t be included in ad creative (or what must be included) should also be aggregated into the same document. This exercise should include representatives from legal, brand marketing, licensors, and performance marketing who can act as representatives for ad platforms. This document should include
- Brand guidelines and restrictions
- Legal guidelines and restrictions
- Ad network policies that are relevant to the business
Next Steps
Going through these steps should prepare your performance marketing team (or person) to begin experimenting with different marketing tactics with everyone in the organization on board for the ride. The output will provide the key next steps for getting analytics ready, producing creative, outlining test campaigns and launching your first tests.