Performance marketing has become such an essential driver of business success that those CEOs who overlook it do so at the detriment of their business.
For those who still think of performance marketing as when advertisers billed you only when your ad “performed” by inviting a click or generating a sale — it has evolved.
Performance marketing has grown into an indispensable technique by which marketers formulate, test and revise their hypotheses — allowing data to reveal what pitches and approaches perform best for which audiences.
Practically speaking, all marketing is becoming performance marketing.
No one expects CEOs to become full-fledged experts in the field. But CEOs do need to acquaint themselves with the fundamentals in order to ask the right questions of themselves and their direct reports. To that end, below we examine the three M’s of performance marketing: the marketing team, the methodology and the metrics.
The Marketing Team
The world of marketing grows increasingly complex by the day. So the first question for a CEO to ask is: Did I hire the right marketing leader?
Who constitutes the right marketing leader? We’ve found that all great marketing leaders share six qualities:
- Self-directed learners
Of these six, I think the first two — being analytical and detail-oriented — are the most important for a marketing lead to possess.
As I've written previously, modern marketing is more about being math men than Mad Men. Today’s marketing VPs need to be comfortable experimenting with different approaches, deploying tech solutions and evaluating, based on hard data, what works and what doesn’t.
Possessing the analytical and detail-oriented characteristics — as well as the other four — is just as, if not more, important than marketing experience, because the job requires doing things differently from the way they’ve been done before.
That can range from tinkering with small changes to testing totally new approaches. Performance marketers understand that the idea that worked last week might not work this week. They display a curiosity about how things change every day, and they adapt quickly to those changes. Succeeding consistently requires a systematic approach.
When CEOs check in with their marketing VPs, they’ll want to ask essential questions: What is your goal today? What channels are you in? How often are you optimizing?
The best performance marketers will be able to do more than recount what they’re doing: They’ll also be able to explain why, in terms of a test-and-learn methodology.
In short, it’s a simplified version of the scientific method. Marketers formulate a hypothesis and a plan — that is, an experiment. They’ll analyze the results and draw conclusions, and the lessons they learn will inform their next steps. Likely, the next step will be another experiment, unless they discover a valuable insight that leads to a business decision.
Performance marketing is a continual learning process. Thoughtful planning matters a great deal, but marketers are at their best when they’re prepared to pivot when results turn out differently than expected. And the results rarely turn out as expected.
Take an example from Jeff’s work involving politically themed ads for the federal government’s Home Affordable Refinance Program (HARP). The marketing team hypothesized that Facebook ads with copy and art echoing the Republican presidential candidate would perform better with a conservative audience, while the ads echoing the Democratic candidate would perform better for a progressive audience.
Yet somehow the opposite proved true. Conservative messages performed better with liberals — and vice versa.
So much for instincts.
That’s why no matter the business model and no matter the industry, marketing VPs should rely on a test-and-learn methodology. They won’t pretend to know all the answers. Instead, they’ll have ideas about how to find an answer. Once they do, they’ll be able to tell you how their experiment — that is, how the data — led to an actionable insight.
Two of the most important aspects of collecting metrics and data — after security and privacy — are deciding what to record and how to analyze it.
Getting this part of the process right can require just as much tinkering and troubleshooting as the process of formulating, testing and revising hypotheses. After all, you can’t draw useful conclusions from a faulty data set.
Performance marketers check their work, and they re-check the work of others. Jeff once tested a series of education and mortgage-related ads on a number of Yahoo’s stock behavioral targeting groups. Yahoo specifically designed one group for mortgage products, another for education, another for insurance and so on. Intriguingly, the mortgage group turned out to be more interested in the education ads than the mortgage ads.
It goes to show why performance marketers don’t make assumptions: they test them.
Performance marketers collect data at both the highest strategic level and the most granular, too. For any given ad, a CEO should be able to ask about more than the conversion rate, cost per acquisition and return on advertising spend. They should be able to understand the type of people who found the ad compelling and what drives their decision making.
Measuring at a granular level makes it possible for the marketing team to apply data analytics techniques and set the right metrics for success. Using that systematic process of formulating a hypothesis and creating a model to test it will — if all goes according to plan — uncover useful patterns. So as a rule, measure everything first, ask questions later.
But for all the talk in the Silicon Valley about data and metrics, CEOs should also recognize its limits.
Data is of little use unless it is in the hands of talented people who are harnessing it in meaningful ways. As Julian Koenig, the creative mind behind the classic “Think Small” Volkswagen ad, famously said: “I’ve yet to see a good ad created by research.”
The best performance marketers will combine the best of all aspects of marketing: good instincts made greater through data analytics.