Performance Marketing: What Is It & How Does It Work?

by Isabel Greenfield

13 Min Read

Advertising may often feel like a lofty brand awareness play straight out of Emily in Paris. Billboards on the highway or a coveted spot in the Super Bowl. While these efforts are often splashy, it’s hard to quantify what they are actually driving for the business.

Performance marketing is the solution to this problem. Instead of investing a certain amount of money into a campaign and hoping it works, performance marketing flips the marketing narrative on its head. The whole point is that you are paying for the performance of a campaign rather than the campaign itself.

If that sounds like a marketing strategy worth pursuing, read on to learn the ins and outs of this powerful technique.

What Is Performance Marketing?

Performance marketing is a results-oriented strategy where advertisers pay only for specific actions such as leads, sales, or clicks. This approach allows for real-time tracking and optimization, ensuring campaigns are continuously refined for maximum efficiency.

Performance Marketing vs Growth Marketing

Growth marketing focuses on experimenting with various strategies across the customer journey to drive business growth and retention. The primary difference is that performance marketing specifically targets measurable actions like leads or sales, optimizing campaigns for immediate, tangible results.

Learn more about performance marketing vs growth marketing.

Performance Marketing vs Brand Marketing

Brand marketing aims to build a strong, positive perception of a brand over time, emphasizing awareness and loyalty. In contrast, the focus of performance marketing is less about branding, and more about quick results.

Learn more about performance marketing vs brand marketing.

Performance Marketing vs Digital Marketing

Digital marketing encompasses all online marketing activities, including SEO, content marketing, and social media. Performance marketing is simply a branch on the tree of digital marketing.

Learn more about performance marketing vs digital marketing.

Benefits of Performance Marketing

There are no surprises with performance marketing: You get exactly what you pay for, regardless of whether it’s a B2C or B2B performance marketing campaign.

So, what are the primary benefits? Here’s a breakdown:

1. Pay-For-Results Model

Performance marketing ensures advertisers only pay for specific outcomes, such as clicks, conversions, or completed views. This eliminates wasted ad spend and allows businesses to maximize efficiency by focusing their budget on measurable success.

2. Advanced Audience Targeting

With access to first- and third-party data, behavioral insights, and demographic filters, performance marketing enables precise audience segmentation. This ensures ads reach high-intent users who are more likely to engage and convert.

3. Real-Time Performance Tracking

Advertisers can monitor campaign performance as it happens, allowing for instant adjustments based on key metrics like CTR, conversion rate, and ROAS. This data-driven approach helps brands optimize their strategies for maximum impact.

4. Scalability and Budget Control

Since performance marketing is data-driven and flexible, businesses can scale campaigns up or down based on real-time results. This approach allows for better budget allocation, ensuring ad spend goes where it delivers the highest returns.

5. Enhanced Attribution & Data-Driven Insights

Performance marketing provides detailed attribution models, allowing advertisers to track the entire customer journey from first touch to conversion. By leveraging in-depth analytics, businesses can identify high-performing channels, refine targeting strategies, and continuously improve campaign effectiveness.

How Does Performance Marketing Work?

Performance marketing offers a unique advertising approach. But what steps are involved?

A typical campaign might look something like this:

Market Research: This phase is crucial for gathering important data about consumer behavior, market trends, and competitor strategies.
Goal Setting: At this stage, clear and measurable objectives are set, including key performance indicators (KPIs) to track success.
Strategy Formulation: Here, marketers develop a comprehensive plan that aligns with the set goals and the insights gathered from market research.
Campaign Creation: This involves designing compelling ads, choosing appropriate channels, and deciding on targeting parameters for the promotion of products or services.
Tracking & Analytics: This step ensures that the performance of the marketing efforts is consistently monitored and measured against the predefined KPIs.
Optimization: Based on the tracking data, marketers adjust and enhance the campaigns to ensure optimal results and improve ROI.
Scaling: After optimizing, successful campaigns are amplified to reach a broader audience and maximize results.

Performance Marketing Channels

Performance marketing isn’t limited to one location. Let’s take a look at some of the top performance marketing channels.

Social Media Marketing (SMM): Platforms like Facebook, Instagram, and LinkedIn allow advertisers to target precise audience segments based on demographics, interests, and behaviors. With performance metrics like click-through rates, conversions, and engagement levels, brands can fine-tune campaigns for efficiency.
Search Engine Marketing (SEM): Paid search campaigns on platforms like Google Ads and Bing Ads connect advertisers with high-intent users actively searching for products or services. With a pay-per-click (PPC) model, businesses can directly link ad spend to site traffic and conversions.
Over-The-Top (OTT) Advertising: Streaming platforms like Hulu, Netflix, and Amazon Prime Video deliver non-skippable ads to engaged, on-demand audiences—bypassing traditional cable and broadcast TV. With performance metrics like completion rates and verified site visits, advertisers can track exactly how OTT advertising drives real business outcomes.

If your ad budget isn’t tied to measurable performance outcomes, it’s not a true performance marketing channel. That’s why SEO—while valuable—isn’t classified as performance marketing, since results aren’t directly linked to ad spend.

How to Develop a Performance Marketing Strategy

Although the benefits of performance marketing are easy to see, that doesn’t mean that you should go into a performance marketing campaign without a clear approach. Like any marketing strategy, performance marketing provides the greatest ROI (return on investment) when you spend time planning your campaign, determining your KPIs (key performance indicators), and tweaking your campaign as you begin to see results.

Let’s take a look at how to develop a strong performance marketing strategy.

1. Decide on Your Campaign Message

The first step to any advertising campaign is to know what you’re trying to communicate with your target audience. Are you creating a back-to-school campaign? A holiday sale?

In addition to deciding what you’re trying to say, you should also think about how you want to say it. Consider what images you want to bring to life, or what emotions you want to evoke, and create a powerful campaign message that your target audience can’t help but become invested in.

Typically, a performance marketing campaign will call out a specific action to take, whether that’s to request a demo or to check out a specific new product. Brand awareness creative, on the other hand, may be broader and speak to the values and associated emotions of the brand overall.

2. Plan Your Brand Positioning

Brand positioning is a term that refers to the unique value you provide to a customer. When it comes to a performance marketing campaign, you need to decide how your brand relates to your campaign message and what value you’re providing within the context of that campaign.

Here’s an example: Imagine a company that wants to create a back-to-school campaign. The company sells padlocks.

So what’s the value to the customer? What do padlocks have to do with going back to school?

As the company plans its back-to-school campaign, the brand positioning aspect of its plan would tell them to focus on talking about protecting students’ lockers, keeping their expensive electronics safe, or preventing pranksters from stealing their gym clothes. Suddenly, they don’t just have a campaign–they have a powerful story to tell.

3. Create Performance Targets

How will you decide if your performance marketing campaign was a success? Creating targets, or goals, helps you measure your successes and learn from your failures. KPIs will vary from advertiser to advertiser depending on what they hope to receive from the campaign. Some advertisers may want to use their performance campaign to drive a certain number of leads while others are looking to decrease the cost of acquiring new customers.

4. Know Your Channel Mix

Your channel mix is how you’re going to invest your marketing budget across different marketing channels. These performance marketing channels may include paid search, paid social, or Connected TV advertising. Determine which channels you’re going to use for your campaign and how much money you’re going to allot to each of those channels before you get started.

5. Get Your Website Ready

Since performance marketing is often looking to drive a specific action, your website is an important piece of the equation. Once someone sees your ad and either clicks or Googles your company, it is now up to your website to drive the action.

What do you need to do to prepare your website for your campaign? Consider things like:

Whether or not you need to create a unique landing page for this campaign
Whether your website and ad campaigns match in feel, tone, imagery, etc. so that a user has a cohesive experience
Whether you want to create any content pieces, like blog posts, to complement your performance marketing campaign
Whether you need to optimize your website’s user experience to ensure ease of use
Whether your website’s servers are equipped to handle a sudden influx of traffic

Getting your website ready before you launch your campaign prevents you from scrambling after the campaign has been launched and missing potential conversions.

6. Create and Launch the Campaign

Once you’ve done all the planning you can, the time has come to create and launch your campaign. This is your marketing team’s opportunity to show off their creativity and ingenuity.

Look for performance marketing channels that make it easy to set up and launch your campaign. A set-up process should roughly follow a 1-2-3 approach:

Select your target audiences (who you want your campaign to reach)
Input the campaign details from the main KPI to budget and flight dates
Upload your creative(s)

From there, you are ready to launch!

7. Measure and Optimize Along the Way

After you’ve launched your campaign, you’ll want to keep an eye on how it performs and manage your budget along the way. Measure its successes against the KPIs you identified when during the planning phase. If you’re not on track to meet those goals, you may need to make adjustments–such as adjusting your target audience or running A/B testing–to improve performance and knock your goals out of the park.

Performance Marketing Measurement

We’ve already discussed the importance of setting goals and choosing metrics to measure performance marketing success. Let’s take a look at some of the top digital marketing metrics and KPIs you may choose to measure during your performance marketing campaign.

Cost Per Acquisition (CPA): Measures how much it costs to turn a prospect into a paying customer, making it a critical metric for evaluating sales efficiency.
Return on Advertising Spend (ROAS): Calculates the revenue generated for every dollar spent on advertising, providing a clear measure of profitability.
Cost Per Lead (CPL): Tracks the expense of capturing high-intent prospects, helping brands understand lead generation efficiency.
Cost Per Click (CPC): Indicates the price paid for each click in a campaign, offering insight into how effectively your ads drive traffic.
Click-Through Rate (CTR): The percentage of viewers who click on an ad, reflecting how engaging and relevant your messaging is.
Conversion Rate: Tracks how many users take a desired action after clicking, making it a key indicator of campaign effectiveness.
Customer Lifetime Value (CLV): Predicts the total revenue a customer is expected to generate over time, essential for long-term growth strategies.
Sales Conversion Rate: Specifically measures how many visitors make a purchase, helping businesses optimize for direct revenue impact.
Engagement Rate: Analyzes interactions like clicks, shares, and comments, ensuring that campaigns are driving meaningful audience engagement.
Cost Per Thousand Impressions (CPM): Breaks down the cost of reaching 1,000 viewers, helping advertisers assess the efficiency of brand awareness efforts.

Performance Advertising Best Practices

To maximize efficiency and ROI, performance advertisers must leverage advanced strategies that optimize targeting, personalization, and bidding in real-time. Here are five innovative best practices to enhance your campaigns.

1. AI-Powered Predictive Targeting

AI-driven predictive targeting analyzes historical data and user behavior to identify high-value prospects before they take action. By anticipating audience intent, advertisers can serve relevant ads at the perfect moment, increasing engagement and conversion rates.

2. Dynamic Creative Optimization (DCO)

DCO technology automatically adjusts ad elements in real-time based on user data, location, or browsing behavior. This ensures every impression is personalized for maximum relevance, improving ad performance and reducing wasted spend.

3. Cross-Device Sequential Messaging

Consumers move between CTV, mobile, desktop, and tablets, making it essential to create a seamless ad experience across devices. By delivering sequenced messaging that follows users throughout their journey, brands can reinforce their message and drive higher conversions.

4. First-Party Data Integration

Integrating first-party data from CRM, website interactions, and purchase history allows for more precise targeting and personalization. This strategy helps advertisers bypass third-party data limitations while improving ad relevancy and campaign efficiency.

5. Machine Learning Bidding Strategies

AI-powered bidding algorithms analyze real-time auction data and user intent signals to optimize bid amounts dynamically. This ensures advertisers maximize results while reducing acquisition costs, making every ad dollar work smarter.

CTV: The Ultimate Performance Marketing Platform

Want to turn every ad dollar into measurable results? MNTN’s platform brings performance marketing to television advertising, combining AI-powered targeting, automated optimization, and real-time attribution to ensure your campaigns drive real business impact. No wasted impressions—just data-backed streaming advertising that delivers.

Here’s what you get with MNTN Performance TV:

MNTN Matched – AI-driven targeting finds high-intent audiences based on behavior, demographics, and purchase signals.
Premium CTV Inventory – Secure guaranteed ad placements on top streaming networks where engaged viewers are actively watching.
Verified Visits™ Attribution – Tracks site visits and conversions tied directly to ad exposure, providing clear performance insights.
Automated Optimization – AI continuously fine-tunes your campaign in real time to maximize efficiency and return on ad spend.
Reporting Suite – Access real-time performance data to track engagement, optimize campaigns, and prove ROI.

Make CTV the smartest part of your performance marketing strategy—sign up today to launch your campaign with MNTN’s self-serve software.

Performance Marketing: Final Thoughts

Performance marketing is a powerful tool for generating leads and increasing conversions. Channels including CTV can help by promoting your performance marketing efforts on a large scale, using a platform your audience is already invested in.