Buying $10 for $5
Over the past decade, marketing has become more complex and harder to execute. Audience fragmentation has accelerated each year of the new millennium, making old stand-bys like upfront TV buys and mass-market targeting seem ossified and indefensible to all but the largest brands. There has also been democratization of content as citizen bloggers and social media replaced networks and magazines as authoritative contexts where product shout-outs and endorsements drive sales and market share. Add to all of this the proliferation of digital media channels -- email, search, social, mobile, and display -- and it is easy to see how unfit for duty yesterday's marketing assumptions and budgets have become.
More importantly, advertising and marketing have become more targeted and measurable, appropriately raising expectations. We can now determine, with accuracy and predictability, marketing ROI by the specific campaign and/or program component. In this environment, early 20th century department store mogul John Wanamaker's cry for help ("Half the money I spend on advertising is wasted; the trouble is I don't know which half.") is dead -- and soon to follow it into the grave will be the annual, set-in-stone marketing budget.
Performance marketing's advantage
What if I offered to sell you $10 bills for $5 dollars each -- how many would you want? What would your budget for $10 bills be? Most of us would choose to not cap our spend, taking as many of the crisp ten spots as were available. The implication is that if you know you are going to make a profit, the constraint is not a budget but the supply of profit drivers. Online advertising and the performance marketing revolution that has helped fuel its growth has enabled CMOs to figuratively buy $10 bills for $5 each. Good performance marketing online offers the opportunity to spend adverting and marketing dollars that create demonstrable profits at a predictable and repeatable rate.
Building marketing programs with predictable and reliable profits is the original promise of marketing on the internet but, as stated earlier, is hard to do and getting more complex. Online performance marketers start with the premise that advertisers will reach the right customers (i.e., those who are in market with a demonstrable interest in your product or service). This enables advertisers to only pay for the action (the search click, the form fill, etc.) that is proof positive the potential customer is in the market and considering your particular offering.
