Digital Transformation is a process that aims to transform the business by leveraging digital platforms. Performance marketing plays an important role in digital transformation because it helps companies to reach their target audience, increase sales and build a loyal customer base.
Direct-to-consumer (DTC) brands often use performance marketing because it allows them to target specific audiences and track the return on investment (ROI) of their advertising efforts. Performance marketing includes tactics such as pay-per-click (PPC) advertising, affiliate marketing, facebook ads, instagram ads, and influencer marketing, which can be more effective at driving sales than organic marketing methods, such as content marketing or social media posts. It gives better leads that have a higher conversion rate. The results are faster since the strategy is guided by focused objectives. Additionally, DTC brands often have limited marketing budgets and need to be able to measure the effectiveness of their campaigns in order to allocate resources effectively.
We shall be taking a deeper dive into this in our article. Read on to find more.
What is Performance Marketing?
Performance marketing is a form of online marketing where advertisers (also known as merchants or vendors) pay affiliates, partners, or publishers (also known as performance partners) for specific actions taken by their customers, such as a sale, lead, or click. The payment is typically based on a pre-agreed upon commission or a cost-per-action (CPA) model. Performance marketing is different from traditional forms of advertising, such as display ads, where an advertiser pays for the number of impressions or views an ad receives rather than the number of actions taken by customers.
Reasons Why DTC Brands Choose Performance Marketing
There have been plenty of major DTC brands that are making the switch from organic marketing to performance marketing. To understand this better, let’s delve deeper into the reasons.
Customer Acquisition Cost
The answer to that question lies in the fact that it's not about how much you spend on customer acquisition; it's about the cost of customer acquisition. The cost of customer acquisition is the amount spent to acquire a customer, and it differs from industry to industry and channel to channel.
For example, suppose you're trying to sell products directly through your website or social media channels (organic). While the cost involved is limited because these channels don't require much investment on your part, the conversion rate will be limited. However, if you want access to more traffic and more qualified leads, advertising through Google AdWords or Social Media, Ads will get you that at a nominal spend.
Organic marketing is not always scalable for DTC brands, because it relies on building a large following or audience over time, which can be a slow and uncertain process. On the other hand, performance marketing allows DTC brands to target specific audiences and track the return on investment (ROI) of their advertising efforts, which can be more effective at driving sales and providing a predictable ROI. Additionally, DTC brands often have limited marketing budgets and need to be able to measure the effectiveness of their campaigns in order to allocate resources effectively, which is more possible with performance marketing.
Loyal Customer Base
Performance marketing can be a great way to build a loyal customer base for DTC brands. Because it allows advertisers to target specific audiences and track the return on investment (ROI) of their advertising efforts, it can be more effective at driving sales and acquiring new customers than organic marketing methods. Additionally, performance marketing allows DTC brands to continually test and optimize their campaigns based on data, which can help improve the customer experience and increase customer loyalty over time.
Additionally, performance marketing offers more benefits than organic marketing. Performance marketing allows DTC brands to reach a larger, more targeted audience, which is especially important for newer companies that don't have a large organic following yet. Performance marketing is also more measurable, giving DTC brands the ability to track and optimize their campaigns in real time, and it's more efficient, providing a predictable ROI.
ROI and ROAS
Unlike organic marketing, which can be expensive and time-consuming, performance marketing provides an opportunity for companies to create loyal customers by targeting people who are already interested in their products. These customers are likely to convert at higher rates than those found through other channels like social media or search engine optimization (SEO).
Performance marketing generally has a higher return on ad spend (ROAS) compared to organic marketing because it focuses on paying for specific actions taken by consumers, such as clicks or purchases. This allows for more accurate measurement of return and optimization towards desired outcomes. Organic marketing, on the other hand, relies on building brand awareness and relying on consumers to eventually take action, often with less direct measurement of success.
Marketers often use retargeting techniques to show ads based on previous visits or purchases made by users who have visited their site before. This allows them to reach potential buyers who may not have been aware of the brand before but are now interested in learning more about its offerings after visiting once before.
DTC brands are the way forward for finding new customers. The cost of customer acquisition has come down significantly over the past few years; hence, DTC brands can afford to spend more on performance marketing than they would have ever been able to. However, if you are new to this, relying on professionals is your best bet! At Saffron Edge, we aim to deliver. We are a digital marketing agency specializing in performance marketing. Scale boundless heights with us. Contact us today!
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