Get Ahead of The Algorithmic Marketing Shift with Performance Marketing

Get Ahead of The Algorithmic Marketing Shift with Performance Marketing

As we begin the 2020s, the marketing landscape is increasingly driven by machine learning and Artificial Intelligence (AI). In fact, Forrester predicts that “businesses with data-insights-driven teams will grab $1.2 trillion from peers without that culture.”  

Companies that are prepared for this shift stand to benefit greatly. However, most organizations aren’t ready: according to a survey performed by Adobe, only 15% of companies are using AI as part of their marketing strategy.  The same study found that the problem most businesses face is that they lack a framework for taking advantage of the coming algorithmic marketing transformation.

Enter performance marketing

Performance marketing allows companies to leverage technology to automate, personalize, and precisely measure the results of marketing. Originally, performance marketing was an agency model where clients pay the agency based on the number of leads they generated. For many companies, this made a lot of sense: if you know your customer Lifetime Value (LTV) and the minimum margin you need to make per customer to hit your profit targets, then determining what you can pay per lead is simple, predictable, and profitable.

But the concept of performance marketing isn’t limited to agencies; it can be used by organizations directly, with or without outside help.

To accomplish this, businesses need to begin by determining the LTV of a customer. This process is different depending on the type of business you are in. For instance, a SaaS or subscription-based business would look at the average amount a customer pays them per billing period, and then how long the average customer stays subscribed for.

For non-subscription businesses, the idea is the same, but there are added challenges. For example, until recently, it was difficult for a company that sells shoes to track how many shoes the average customer buys over a lifetime. However, this is no longer the case, thanks in part to CRM tools such as Salesforce (more on this later).

For performance marketing to work, businesses also need to understand the cost of acquiring a customer. While different for every business, the process involves tracking everything from media spend to sales and marketing to operations that were involved in customer acquisition or a specific period of time, and then dividing this number by the number of customers acquired over the same period.

How to begin implementing and benefiting from performance marketing

The key to performance marketing lies in customer data. Therefore, companies should start by creating a “best guess” of what a typical customer looks like. To do this, use existing business data and organizational knowledge of your customers. This could be from current CRM setups or web analytics, or data gathered from sales and customer service teams who understand your customers better than anyone.

From here, create marketing personas. A marketing persona is a high-level overview of your ideal customer. They typically include information on demographics such as age, gender, and geographic location, as well as psychographics, like interests, ambitions, and even political beliefs.

Now that you have a rough persona – a hypothesis – you can test it. This is done through various marketing tactics. For instance, you can send your list an email that promotes a specific interest. When a customer clicks a link in the email to go to your site, thereby confirming they hold the interest you hypothesized they would, they can be tagged in your email system as being someone who holds that specific interest.

Finally, once you have enough data on who is interested in what, you can give the data to Facebook or Google to create lookalike audiences to serve ads to. A lookalike audience (or remarketing audience in the case of Google) is generated by combining the data you’ve gathered on a group of people with the data Facebook or Google have gathered on that group, which is then fed into a machine learning algorithm that finds people outside that group but who “look” just like them.

You can also use the interest data you’ve gathered to serve personalized content to them. It is now possible to integrate your CRM with your website to provide blog posts and offers to people based on their CRM tag.

Once you’ve gathered enough data on each of your customer segments, you can calculate LTV and cost per customer acquisition. This will let you know exactly how much return on investment you get for each dollar spent on marketing

With the right tools and systems in place, measuring LTV and cost of customer acquisition is possible for any business. At Gerent, we use Salesforce, Pardot, and the Vlocity cloud to implement and measure performance marketing in real time. These tools together let you gather and store every data point you need, analyze that data for a complete, 360-degree view of your customers, and then integrate with AI and machine learning tools for automated marketing. To learn more about how you can benefit from performance marketing, contact us today.

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