What is performance marketing? Definition, pricing models and lead gen

Performance marketing is advertising where the advertiser pays for a measured result, such as a click, a lead, a sale or a share of revenue, instead of paying for ad space or views. Also called performance based marketing, it ties every payment to a tracked action. Lead generation, paid per lead, is one of its main forms.

Performance marketing definition

Performance marketing is a way of buying advertising in which payment depends on an action that can be counted. The advertiser decides which action it values (a click, a submitted form, a sale), agrees a price for that action, and pays only when tracking records it. If nothing happens, the advertiser pays nothing, or pays only for the cheaper actions that did happen.

Most performance marketing programs have four parts:

• The advertiser: the business that wants the result, such as a law firm, a contractor or a lead buyer.
• The publisher or affiliate: the person or company that runs traffic and produces the action. See what is a lead gen affiliate.
• The platform or intermediary: an ad platform, network or broker that connects the two and counts the results.
• Tracking: links, sub IDs and records that tie each action to its source. See tracking links and sub IDs explained.

How does performance based marketing work?

1. 1

   Define the action

   The advertiser sets the event it will pay for and the rules that make it count, for example a completed form from a person in a set state who gave consent to be contacted.

2. 2

   Agree the price and terms

   Both sides agree the price per action or the revenue share, plus how invalid actions are handled (returns, chargebacks or reversals).

3. 3

   Run traffic

   The publisher sends visitors from search, social, native ads or its own sites to an offer or a landing page.

4. 4

   Track and validate

   Tracking records each action and its source. Invalid or duplicate actions are filtered out.

5. 5

   Pay on results

   The advertiser pays for the actions that met the rules. Actions that are later found invalid are deducted under the agreed terms.

Performance marketing pricing models

The pricing model decides when money changes hands. CPM is included below for contrast: it is the impression-based model most brand advertising uses, and it is not a performance model.

CPA offers and the networks that run them are covered in what is CPA marketing. The two payment models publishers meet most in lead generation are compared in rev share vs CPL. For how buyers measure the result, see cost per lead and cost per acquisition.

Where does lead generation fit in performance marketing?

Lead generation is the part of performance marketing where the paid action is a lead: a person who asked to be contacted and gave permission to be called or texted. The buyer does not pay for the ad that the person saw, only for the lead. That makes lead generation a CPL model at the point of sale, even when the publisher behind it is paid another way.

In consumer lead generation one lead often passes through several businesses, and each step can use a different model:

1. A publisher buys traffic on a CPC or CPM basis from an ad platform, or earns it from its own site.
2. The visitor completes a form and consents to contact. That record is the lead.
3. The lead is offered to buyers in real time and sold to a buyer whose filters it matches. See ping post explained.
4. The buyer pays per lead. The publisher is paid per lead or as a share of the sale price.
5. Invalid leads are returned under agreed terms, and the payment for them is reversed.

Summit Leads is a lead generation brokerage that buys and sells leads by real-time ping/post in two verticals: MVA / personal injury and home improvement. Publishers are paid rev share on sold leads; unsold leads are not paid, and returns are deducted under return terms agreed during onboarding. Buyers receive leads that are exclusive by default. For the wider picture, see what is lead generation.

Performance marketing vs brand marketing

Brand marketing is usually bought by reach (CPM, flat sponsorships, TV and radio spots) and is judged on awareness over months. Performance marketing is bought by result and judged on cost per result within days or weeks. Most businesses use both. The differences, and when each is used, are set out in brand vs performance marketing.

How to evaluate a performance marketing program

Whether you buy results or produce them, check these points before you start:

• The paid action is written down, with the rules that make it valid.
• Tracking ties every action to a source and a sub ID, so you can cut what does not work.
• Return or reversal terms are agreed in advance, with a time limit and the reasons that qualify.
• Payment terms are agreed in writing before traffic runs.
• Consent is captured on every lead form, with a record you can produce later. See TCPA consent.
• Buyers can handle the volume and follow up quickly; sellers know which leads go unsold and why.

Common mistakes

• Comparing prices across models. A cost per click and a cost per lead measure different events. Convert both to cost per customer before you compare.
• Paying for actions with no validation. Without checks, a performance program pays for bots, duplicates and fake forms. See fake leads and lead fraud.
• Ignoring returns. For a publisher, revenue is what remains after returns, not the gross payout.
• Treating every lead as a sale. A lead is a request for contact. What it is worth depends on follow-up speed and close rate.

Frequently asked questions

Related guides

• Lead generation statistics: Sourced figures on ad spend, consent and enforcement.
• The lead generation industry: How the whole industry fits together.
• Brand vs performance marketing: How the two approaches differ.
• What is CPA marketing: CPA offers and how they work.
• Rev share vs CPL: The two common publisher payment models.
• Cost per lead: Definition and formula.
• How lead networks work: Publishers, brokers and buyers.

Generating leads on your own forms? Sell your leads.