6 Reasons Performance Marketing Is Recession-Proof
Employing internal teams to market, optimize, and drive ROI is an expensive, fixed cost for Fortune 500 brands. The same can be said about service fees for an agency partner running brand awareness advertising. In times of economic uncertainty, performance marketing is a crucial conversion funnel due to its emphasis on accountability, measurability, flexibility, and risk mitigation.
A performance marketing partner can absorb what was a fixed cost for your business – employing, empowering, and expanding a marketing team; this turns it into a variable cost where you only pay for a desired outcome. Below are six principles that demonstrate the value of performance marketing.
Outcome-Based Payment Model
Performance marketing operates on a pay-per-outcome model and businesses only pay when a desired action is taken, like a lead or a fully converted customer. This becomes particularly attractive in times of economic uncertainty or downturn as businesses can ensure they are not spending unnecessarily on advertising. Every dollar spent is directly tied to a tangible outcome. There are no technology fees, consulting fees, media fees, agency fees, or any other fees.
Personalization at Scale
Personalizing ad experiences and tailoring the digital experience results in higher conversion rates and maximum ROI. Performance marketing partners have developed best practices for executing personalized campaigns at scale.
Efficiency and Expertise
Performance marketing partners only get paid when the client gets paid. They help ensure that the client's budget is allocated effectively to drive the desired performance, turning what might have been fixed (and possibly wasted) costs into variable costs tied directly to performance.
Measurability
With a performance marketing partner, companies can closely track, measure, and analyze the impact of their marketing efforts. If a campaign isn't converting, it can be quickly adjusted in real-time to optimize performance. This high level of control and flexibility is extremely valuable in a media environment.
Technology Costs
Technology, training, updates, and integrations are outsourced to your performance marketing partner. They spread these costs across multiple clients, meaning the client doesn't have to bear the burden of these fixed costs. The costs associated with these tools become a variable cost based on the level of service the client needs. Performance marketing also allows for flexibility in vendor selection. Companies can test different vendors and choose those that perform best.
Revenue Recognition
Expenses can be recognized in the period they are incurred, while revenues from these efforts can be recognized when they are realized, which may be in future periods. This can lead to more consistent financial reporting.
Conclusion
By transforming fixed costs into variable costs, a performance marketing agency allows businesses to better control their expenditures, making it easier for them to navigate through economic downturns or periods of lower sales. A performance marketing model makes ROI transparent, which is ultimately beneficial for accounting as it simplifies the process of allocating costs and tracking revenues.
The views and opinions expressed are solely those of the contributor and do not necessarily reflect the official position of the ANA or imply endorsement from the ANA.
Brad Green is chief financial officer at Centerfield, which delivers outcome-based digital marketing solutions and personalized omnichannel experiences for leading brands. Follow on Twitter here.