Performance marketing

Performance marketing is a type of digital marketing where businesses only pay when
a specific action happens, like when someone clicks on an ad, signs up, or makes a purchase.
Unlike traditional marketing, which focuses on increasing brand awareness, performance
marketing is all about getting real, measurable results. Every dollar spent is tracked to see if
it leads to success.

This approach uses online platforms like Google, Facebook, Instagram, and affiliate websites
to target the right audience. Some common ways businesses pay for performance marketing
include:

 Cost Per Click (CPC): Paying when someone clicks on an ad.

 Cost Per Acquisition (CPA): Paying only when a sale, signup, or another goal is
completed.

 Cost Per Mille (CPM): Paying for every 1,000 times an ad is shown.

 Return on Ad Spend (ROAS): Measuring how much revenue is made for every dollar
spent on ads.

Why Performance Marketing is Important in

the Digital Age
In today’s online world, businesses need smart ways to advertise. Performance marketing is
important because it helps companies get real results while spending their money wisely.
Here’s why it matters:

1. Pay for Results, Not Just Ads

o Businesses only pay when people click, sign up, or buy something.

o This makes it a smarter and more affordable way to advertise.

2. Track and Improve Ads in Real Time

o Companies can see how their ads are doing instantly.

o If an ad isn’t working well, they can quickly make changes to improve it.

3. Reach the Right People

o Ads can be shown to people based on their age, location, interests, and
online activity.
 o This helps businesses attract customers who are actually interested in their
products.

4. Easy to Scale and Adjust

o Companies can start small and increase their budget if they see good results.

o It works for businesses of all sizes, from small shops to big brands.

5. AI and Automation Make It Smarter

o Computers and smart technology help find the best customers and improve
ads.

o This saves time and makes advertising more effective.

6. People Spend More Time Online

o Since more people shop and browse online, businesses need digital ads to
stay competitive.

o Personalized ads make shopping easier and more enjoyable for customers.

7. Measure Success Easily

o Companies can see exactly how much money they make from their ads.

o This helps them decide where to spend their budget in the future.
 Performance Marketing vs. Traditional
Marketing
Feature Performance Marketing (New Way) Traditional Marketing (Old Way)

Pay only when people take action (click, Pay for the ad, whether or not it brings
How You Pay
sign up, buy). results.

Easy to track—businesses can see how Hard to track—no clear way to know if a
Tracking Results
many clicks and sales come from each ad. billboard or TV ad led to sales.

Ads target specific people based on their Ads reach everyone, even if they’re not
Who Sees the Ad
interests and online behavior. interested.

Ads can be changed anytime if they’re Once printed or aired, it’s expensive or
Making Changes
not working well. impossible to change.

More budget-friendly—only pay for More expensive—pay upfront with no

Cost
results. guarantee of success.

Where Ads Online (Google, Facebook, Instagram, Offline (TV, radio, newspapers,
Appear YouTube, websites). billboards, magazines).

Ads change based on what each person Same ad is shown to everyone, even if
Personalized Ads
likes or searches for. it’s not relevant to them.

Growing the Start small and increase spending if the Requires a big budget from the
Campaign ad works well. beginning.

Customer People can click, share, and engage with One-way communication—people just
Interaction the ad. see or hear the ad.

How Fast It Instant results—businesses see clicks and

Takes time to know if the ad is working.
Works sales quickly.
Key Concepts in Performance Marketing with
Meta (Facebook) Ads for Rabbitoo.in
At Rabbitoo.in, we use Meta Ads (Facebook & Instagram Ads) to attract customers and
grow our business. Let’s understand how performance marketing concepts apply to our
website.

1. Cost Per Acquisition (CPA) – How Much We Pay to Get a Customer

What it means: The amount we spend to get one new customer.

Example from Rabbitoo.in:

 We spent ₹5,000 on Facebook ads.

 We got 50 new customers.

 CPA = ₹5,000 ÷ 50 = ₹100 per customer.

Why it matters: Lower CPA means we are getting customers at a lower cost.

2. Cost Per Click (CPC) – How Much We Pay Per Click

What it means: The amount we pay every time someone clicks our ad.
Example from Rabbitoo.in:

 We spent ₹2,000 on Facebook ads.

 Our ad got 1,000 clicks.

 CPC = ₹2,000 ÷ 1,000 = ₹2 per click.

Why it matters: A lower CPC means we are getting more visitors for less money.

3. Cost Per Mille (CPM) – Paying for Ad Views

What it means: The cost of showing our ad 1,000 times on Facebook or Instagram.
Example from Rabbitoo.in:

 We spent ₹1,000 on an ad.

 The ad was shown 10,000 times.

 CPM = (₹1,000 ÷ 10,000) × 1,000 = ₹100 per 1,000 views.

Why it matters: A lower CPM means we are reaching more people at a lower cost.
4. Return on Ad Spend (ROAS) – How Much We Earn from Ads

What it means: How much revenue we earn for every ₹1 spent on ads.
Example from Rabbitoo.in:

 We spent ₹10,000 on ads.

 We made ₹40,000 in sales.

 ROAS = ₹40,000 ÷ ₹10,000 = 4x (400%).

Why it matters: A higher ROAS means our ads are profitable.

5. Customer Lifetime Value (LTV) – Total Value of a Customer

What it means: The total amount a customer spends on our website over time.
Example from Rabbitoo.in:

 A customer buys 5 times from our website.

 Each time, they spend ₹500.

 LTV = 5 × ₹500 = ₹2,500.

Why it matters: If we know our LTV is ₹2,500, we can afford to spend more on ads to
acquire customers.

6. Click-Through Rate (CTR) – How Many People Click Our Ad

What it means: The percentage of people who click on our ad after seeing it.
Example from Rabbitoo.in:

 Our ad was shown 10,000 times.

 500 people clicked on it.

 CTR = (500 ÷ 10,000) × 100 = 5%.

Why it matters: A high CTR means our ad is interesting and attracting clicks.

7. Conversion Rate – How Many Visitors Become Customers

What it means: The percentage of visitors who buy something from Rabbitoo.in after
clicking the ad.
Example from Rabbitoo.in:

 1,000 people visit our website from an ad.

 100 people buy something.

  Conversion Rate = (100 ÷ 1,000) × 100 = 10%.
Why it matters: A high conversion rate means our website is good at turning visitors
into customers.

8. Cost Per Lead (CPL) – Paying for Potential Customers

What it means: The cost of collecting a potential customer’s contact details (like email or
phone number).
Example from Rabbitoo.in:

 We spent ₹2,000 on a Facebook lead ad.

 We got 200 leads (people who signed up).

 CPL = ₹2,000 ÷ 200 = ₹10 per lead.

Why it matters: A lower CPL means we’re collecting leads at a cheaper cost.

9. Return on Investment (ROI) – Are Our Ads Worth It?

What it means: Compares how much we make versus how much we spend on ads and
products.
Example from Rabbitoo.in:

 We spent ₹20,000 on ads and product costs.

 We made ₹50,000 in sales.

 ROI = ((₹50,000 - ₹20,000) ÷ ₹20,000) × 100 = 150%.

Why it matters: A high ROI means our ads are making a profit.

10. Attribution – Knowing Which Ad Works Best

What it means: Understanding which ad or marketing channel led to a sale.

Example from Rabbitoo.in:

 A customer first saw our ad on Instagram but later clicked a Google ad before
buying.

 Facebook reports that the sale came from Instagram, while Google claims credit too.

 Attribution helps us see which ad actually led to the sale.

Why it matters: Helps us decide where to spend more on advertising