Imagine you are a chocolate seller. Your brand is well know in your country but now you want to expand to another country. You decide to run a series of print advertisements in all newspapers to create a brand familiarity which would lead to sales. It worked! You have started to sell your chocolates. However, at the end of the month you realize that you have spent way more money in advertisement that you cannot recover in the year let alone the quarter.
This is where performance Marketing comes in.
Now imagine you pay the newspaper every time they help you make a sale. Well, that would not be possible as there would be no way of tracking how many sales are made from seeing an advertisement from a newspaper. Luckily, that is possible in the digital industry. You can select a range of publishers (more on this in another article) who can run the advertisement on their digital channels. A potential customer sees the advertisement for the chocolate on their screen and decide to purchase it wherein they can collect it from the store or get it delivered to their home. As a chocolate manufacturer you now know who helped you make the sale and can compensate them for their advertising efforts.
This in short is Performance Marketing for you. Below is a picture to help you visualize it.
On the background what actually happens is the traffic source or the publisher sends a click where the user is directed to the landing page. In this landing page the user has some interaction with the product. The interaction can be of various types. It can be a simple app install or purchase etc. Once the interaction is complete a conversion notification known as postback is sent to the traffic source acknowledging its contribution to the successful event. Below is an image to help you picture it.