This is your comprehensive guide to understanding performance marketing and what makes a great peformance marketing agency.
If your business is focused on growth this year- performance marketing may be a great fit.
In this guide we will cover:
What is performance marketing?
Who is performance marketing for?
What are the pros of performance marketing?
What are the cons of performance marketing?
How much does performance marketing cost?
And finally, I will provide a list of performance marketing agencies to check out.
So without further ado,
Let’s dive in.
What is Performance Marketing?
Performance marketing is a type of pricing model where an agency will bill the client based on measurable results or key performance indicators.
This can be a lead, a call, or a sale.
This model is more common among digital marketing agencies and is less common among traditional advertisers.
Performance Marketing has a greater focus on ROI of marketing dollars.
So this means it will work well in industries that have direct sales as a main objective (as opposed to increased brand awareness)
Who is Performance Marketing For?
Performance marketing tends to be more prevalent at the enterprise level of businesses.
However, there are some options out there for small business owners (like us… hint hint).
Performance marketing is perfect for businesses that tend to make most of their revenue from their clients in the purchase through the first year.
Meaning a relatively short life cycle for a client.
It is also a great option for businesses that have had bad results in the past from previous agencies.
Finally (and most importantly)
Performance marketing is for businesses that have a great product or service…
Great sales and customer support…
But have trouble generating demand for the business.
What are the Pros of Performance Marketing?
The obvious benefit of performance marketing is lowered incurred risk.
If your agency doesn’t perform- it costs you very little.
If your agency does well- your sales should make up for the increased cost.
Another major benefit is the lessened cost of startup.
This will not be true for EVERY agency but-
In our case, a new client gets the following for free when signing up:
-Fully Customized WordPress Site
-Marketing Strategy & Campaign Viability Reports
-Google Ads Strategy and Account Buildout
-12-Month SEO Plan and Full Site Optimization
-Marketing Automation Build Out
-Content Marketing Strategy & Plan
-Data Studio Report Setup
-Google Analytics and Search Console Setup & Integration
Additionally, the first few months are focused on A/B testing.
This means your first few months of service are typically much less than later months as performance improves.
One benefit that is often overlooked is your agency’s motivation and participation.
When results are the only way your agency drives revenue it quickly becomes very important for that agency to only deploy effective strategies.
Many traditional agencies will value their time over your performance.
You may notice very few agencies offer a performance pricing package.
Finally, the best part of performance marketing is exclusivity.
We do not work with 2 businesses in the same market.
The reason is simple-
Why would we want to compete with ourselves?
In summary, there are many benefits to performance marketing but the answer is very simple:
You only pay for what you get. Nothing more, nothing less.
Fair.
Cons of Performance Marketing
The cons of performance marketing can really depend on the agency you work with.
Each one will have some different terms, and I will cover some of the main points that I know.
The first is over performance.
If your business is not focused on growth & scaling, you may be outrun by your marketing.
This is usually a good problem to have.
However, many performance agencies won’t allow you to “turn off” the campaigns.
In theory it makes sense.
You don’t want to punish your agency for doing too well.
But make sure you have a plan in place (in case your business really takes off).
The second is variable cost.
One benefit to working with an agency on a traditional retainer or flat-fee is that your costs are fixed.
When putting together an annual budget for the year it may be nice to know exactly what you are paying in marketing costs.
With performance marketing, your rates may change from month-to-month as performance changes.
Obviously, if your fees are tied to results it should directly mean that more (or less) business directly correlates to your bill.
But let’s say a seasonal business is on a performance deal.
You’ll need to be prepared for changes costs depending on the month.
The third con is contract length.
If you decide to take a performance deal you will almost 100% see results get better with time.
For this reason many agencies will not offer month-to-month contracts.
This is because there is A LOT of work on the front end.
So expect 6mo-12mo contracts in most performance marketing deals.
The fourth con is spam.
Remember when negotiating your terms you specifically ask about bot traffic.
Nobody wants to pay for leads or calls that aren’t even a real person.
Most companies should accommodate that, but make sure to have the conversation.
The fifth con of performance marketing is not understanding expectations.
Let’s say you are on a $50 pay-per-lead marketing deal.
It is important that you understand your close-ratio to decide if your rate will work for you.
What I mean is-
If a lead is $50 but you have a close ratio of 5:1 then you’ll need to expect a new customer to cost you $250.
And more importantly, that means that 4 out of 5 leads will NOT be a good fit.
It’s a tough pill to swallow when a bad lead costs you $50.
But keep track of your sales and look at big picture figures to see if performance marketing is right for you.
I know I’d rather have a bad lead than no leads at all.
How Much Does Performance Marketing Cost?
Performance marketing packages can come in many different ways.
They all essentially get to the same idea.
But in this section I will describe common pricing structures.
And also break down our pricing structure in detail.
This will provide you with a more in depth look at what you might expect to pay.
Let’s start with the old school packages first.
(**Scroll down to new school to see purely performance based pricing**)
The first package is a percentage-spend based pricing.
Essentially, an agency will take a management fee percentage from your total marketing budget.
The idea is- The better the performance, the more you spend on marketing.
Obviously, this isn’t DIRECTLY tieto to performance so I’ve only included it as more of a distance cousin.
Another more “old school” style would be revenue percentage INTO a marketing budget.
This package is for much larger businesses with an internal marketing manager.
In this method, a business dedicates a percentage of revenue back into marketing.
Let’s say a business dedicates 10% of it’s revenue into marketing and grows 20%.
Then the following year the business might increase it’s marketing budget by 20%.
Here is where I agree and disagree:
I agree by the standar rule that businesses should reinvest:
5% to maintain
10% to grow
20% aggressive growth and/or new business (for market share)
However…
These old school plans really do not take much risk away as you will still need to work with a company for a period of time to measure results.
This type of performance marketing might work for a large company- Let’s say McDonalds.
You can’t directly credit your agency for the sale of a cheeseburger.
However, if the monopoly game saw an increase in total sales by 20% in that quarter-
You might be able to attribute that to an effective campaign.
This is often associated with brand awareness vs. direct sales.
Now for the NEW SCHOOL
For small-to-medium sized businesses there is a better pricing structure.
Some call it CPA or cost-per-acquisition pricing.
Sometimes it’s referred to as KPI or key-performance-indicator pricing.
And often, it’s simply called cost-per-lead or cost-per-[action].
This type of structure really turns your marketing into a digital sales arm of your business.
E-Commerce is the easiest because sales can be directly measured from the same website the agency is marketing from.
Thus, a commission based structure is easy to implement.
With service based businesses it’s harder to measure because of potential variable costs and the agency’s inability to follow sales (short of a bank account audit).
Because we only work with businesses that provides a service (not a product)-
Let’s do a behind-the-scenes price breakdown for your business.
To find out what you might pay for performance marketing, we need to do some simple math.
(**I’ve left an example below if you are a visual learner**)
First, let’s look at your clients lifetime value.
CLV can be measured in 2 ways.
Your Rates + Frequency (or what your service costs times number of times average client receives that service)
Or
Total Revenue ÷ Total Clients.
Once you have your CLV then calculate your Call-To-Action Close Ratio.
If your website Call-To-Action is a phone call-
Then how many phone calls does it take to get a new client?
Now divide Client Lifetime Value by Close Ratio and you have a Value-Per-Action.
Take 10% of the Value-Per-Action and you have a fair commision in the form of a Price-Per-Lead
Here’s a quick example:
Heather is a Therapist.
She charges $175/hr session
An average client comes for 20 sessions over 6 months.
Heather’s Client Lifetime Value = $3,500
The Call-To-Action on Heather’s site is: “Schedule a Free 20-min Consultation”
For every 2 consultations, she gets 1 new client (2:1 close ratio)
$3,500 (CLV) / 2 Consultation = $1,750 Value-Per-Action
Heather pays $175 per consultation.
So how does this look for Heather?
On average, it would cost her $350 to get a new client.
She would make $3,500 on that client.
So Heather makes $10 per $1 on marketing.
This is an example of what a good performance marketing structure looks like.
It’s fair to both sides, and really acts as a partnership.
As Heather’s private practice grows, so does her investment in her agency.
The best part?
Let’s say Heather starts to get busy and decides to raise her prices by 10%.
Now, her CLV=$3,750 and she has built her marketing costs into her pricing so it is no longer costing her anything to get a new client.
Performance Marketing Agencies
Here is a list of some well respected performance marketing agencies.
I have tried to categorize them by type so you can find the best fit for you.
Before choosing an agency I recommend a marketing assessment to see if it will work for you.
You can book a free marketing assessment here.
Market: Small Business (Service Based)
Average Cost: $$
Expertise: Contractors, Hospitality, Healthcare
Website: https://www.johnsonjonesgroup.com
Specialty: Search Engine Marketing & Lead Generation
Obviously, I am biased here (I mean, my cartoon face is in the logo).
Johnson Jones Group is a small 8 person marketing agency that offers pay-for-performance marketing packages to small businesses that are service based.
This includes industries like healthcare, contractors, and hospitality.
We offer Marketing Strategy, Web Design, Content Marketing, SEO, Google Ads, Marketing Automation, UX/UI Design, CTA Optimization, and Data Analytics.
Find Out How We Can Help Grow Your Business
Let’s discuss your marketing needs, and we’ll help you put together a digital marketing strategy that will generate more leads and save you time.
You get a dedicated account executive and only pay for the results you get.
Setup includes all above services and is free of charge to start!
Plus what sets us apart- You keep everything if you decide to go a different direction.
Ok enough of my shameless plug. Let’s share the love.
Market: Medium-Large Business
Average Cost: $$$$
Expertise: Saas, B2B, Ecommerce
Website: https://nogood.io/
Specialty: Growth Marketing & Multi Channel
About No Good:
NoGood is one of the most reputable performance marketing agencies in the US and Europe.
They were voted one of the top performance and growth agencies in the US by the TechCrunch community.
They combine strong expertise in performance, data analytics, and creative under one roof.
NoGood was founded by proven growth leads, engineers, and data specialists from Silicon Valley and New York City.
Regardless of the size of the business, this agency has consistently delivered results at a high level.
With their expertise across multiple marketing channels, campaigns, and measurables, NoGood has saved hundreds of thousands of dollars for businesses.
They work with companies such as Ghostery, P&G, Nike, and Southern Marsh.
Market: Enterprise
Average Cost: $$$$$
Expertise: B2C Brand Awareness (H&M, Verizon, Allstate, Toyota)
Website: https://www.performics.com/
Specialty: Media Marketing
About Performics:
The “Original Performance Marketing Firm”
Founded in 1998, Performics is a performance pioneer, originally operating as an affiliate network, and rolling out search marketing services in the early 2000s.
Today, Performance Marketing has moved from a specialty service to the strategic center for brands.
We’re connecting marketing investment to consumer intent, redefining performance by using data, consumer intent signals, technology, media and content in novel ways.
We’ve built Growth Solutions to foster innovation.
And we’re structured globally to serve multi-market clients at scale.
Built by DoubleClick. Bought by Google. Now the performance marketing agency of Publicis Groupe.
Market: Small-Medium Business
Average Cost: $$$
Expertise: Branding, Networking, Design
Website: https://www.performancemarketing.com/
Specialty: Cross Channel Marketing (w/ multiple business under one umbrella)
About Performics:
Different Specialties, Same DNA.
Today’s toughest business challenges are a bit like safety deposit boxes-
They just can’t be opened with a single key.
Often, unlocking these requires both marketing and technology solutions that work in unison.
At Anthologic, our companies share a common viewpoint of imagination and mindfulness, which means while we’re separate companies, we’re seasoned partners.
So you don’t have to deal with interagency funk, multiple project downloads or coordination nightmares.
Market: Medium-Enterprise Business
Average Cost: $$$
Expertise: Travel, Health & Wellness, Food & Beverage
Website: https://union.co
Specialty: Branding, Performance Media, Content
About Union:
A digital agency for brands that want more.
As a performance marketing agency, we help brands create meaningful relationships with today’s highly-connected consumers.
It’s why we never stop looking for ways to do more for brands that want more.
Our capabilities are defined by our imagination and refined by our experience. Built on strategy, driven by data.”
Market: Small Business
Average Cost: $$
Expertise: Saas, Technology
Website: https://www.upgrow.io/
Specialty: Web Design, SEO, PPC
About Upgrow:
We created the agency we wanted to hire ourselves.
Our co-founders each had been hiring and managing digital agencies for over 10 years before starting Upgrow.
We found that while agencies were experts in SEO and digital ads, they were painfully lacking in a broader marketing strategy.
That resulted in driving traffic but no conversions.
At Upgrow, we support our clients all the way from strategy to optimization.
Market: Medium-Enterprise Business
Average Cost: $$$
Expertise: E-Commerce
Website: https://tinuiti.com/
Specialty: SEO, Paid Social, Paid Search
About Tinuiti:
Their offerings through their digital performance marketing divisions employ expert practitioners, platforms, and technology that deliver results across Streaming TV and the Triopoly of Google, Facebook, Amazon.
They received the highest possible score for eCommerce Advertising Strategy in Forrester’s first-ever Performance Marketing Wave.
Market: Small-Medium Business
Average Cost: $$$
Expertise: Web Design & Development
Website: https://innovisionbiz.com/
Specialty: SEO, Web Design, Development Strategy
About InnoVision:
They approach marketing and advertising differently than other companies. InnoVision looks to partner with our customers to see how they can improve the performance of their marketing budget.
InnoVision is dedicated to protecting and building your brand while positioning you correctly through more than just Google, Yahoo, and Bing. Your entire internet marketing approach should be spread through different entities and target the correct market.
They will develop and update your website regularly, so as new targeted traffic is driven to your website and consistently giving you the opportunity to maximize your conversion of visitors.
Market: Medium-Enterprise Business
Average Cost: $$$
Expertise: Enterprise Advertising
Website: https://klientboost.com/
Specialty: Paid Advertising, SEO, Conversions
About Klinet Boost:
Klient Boost is a group of marketers with a strong understanding of conversion focused design.
They will choose to focus on just a few clients at a time. They do this so they can dedicate the resources it takes to thoroughly understand and grow them to their fullest potential.
They help educate, fuel, and build long lasting relationships with the clients we work with and strive for your success.
Market: Medium Business
Average Cost: $$$
Expertise: B2B Performance Marketing
Website: https://metrictheory.com/
Specialty: SEM, Paid Social, Ads
About Metric Theory:
Metric Theory works with the most ambitious marketing experts and data wonks who see our clients’ goals and budgets as our own, using all the tools at our disposal to propose solutions to their aspirations and challenges.
There’s no greater point of pride than helping their businesses succeed and grow.
They will look beyond the digital marketing channels we manage directly to find new sources of data and information that will help us get there together.
Market: Medium Business
Average Cost: $$$
Expertise: Mobile Advertising
Website: https://www.tapjoy.com/
Specialty: App Advertising, Offerwall
About Tapjoy:
Tapjoy is revolutionizing the mobile advertising and app monetization industry.
They work with Advertisers to help them reach their ideal mobile audience through rewarded video ads and our offerwall.
They also work with Publishers to help them acquire new users and monetize their mobile apps.
Market: Medium Business
Average Cost: $$$
Expertise: Franchise Marketing
Website: https://puredriven.com/
Specialty: Paid Social, Ads
About Pure Driven:
Consumers like to find things easily, if they have to click more than three times to get what they want, they lose interest.
Outside of expensive SEO campaigns, PureDriven is able to pay for searches within Google, being searched near your business called Geo-Fencing.
For searches where you are the answer to their question, they get your business to pop up at or near the top of a google search result.
This is a highly powerful tool for lead gen or capturing the attention of someone about to spend money on something you carry in location.
They have helped hundreds of businesses just like yours increase revenue and build long-term relationships with customers.
