Performance Marketing 101 for Small Business Owners

I’ve been a full-time marketer for over ten years. For the past seven, I’ve worked with companies like Google, Facebook, and now Fivestars, where I market to small business owners like yourself.

While I’ve created many marketing campaigns targeting small businesses, I’ve never tried to distill down my marketing learning in a consistent, concise, and relevant way that you as business owners can use to attract and retain your own customers.

I want to do that through this blog, and in this post, I want to share an important framework on how to do one part of marketing really well. It’s a framework I use every day, and I hope other small business owners will be able to benefit from it as well.

For context, I break marketing down into two broad areas: brand marketing and performance marketing.

The Difference Between Brand Marketing & Performance Marketing

Brand marketing is what a lot of people think about when they think about marketing—touchy feely stuff around what does my brand stand for and ensuring that a lot of customers know your brand and get attached to it. It’s what large brands like Coca-Cola, Red Bull, or Nike focus on.

Performance marketing on the other hand is focused on getting customers to take direct immediate action in response to your marketing. Usually that action is a customer responding to something you’ve sent to them (like an email or a mailer) and ultimately making a purchase from you. It’s called “performance” marketing because it focuses on results and how well you’re achieving your objective to get customers to buy. It’s often measured by the number of sales achieved or the cost to acquire new customers or the ROI (return on investment) of the marketing or advertising campaign.

Download our free retail customer loyalty success guide to learn how to drive customers back 2x more.

How to Drive Customer Visits with Performance Marketing

From my experience in working with small business owners, I know that many need help with performance marketing. You want to drive tangible and cost-effective results, which means more in-store customer visits, but you many not be sure how to make that happen. You may be evaluating different tactics, like advertising in newspapers, sending out emails, or hiring a sign spinner. I hope this post provides some practical guidance on how to do these types of performance marketing tactics well.

The overarching framework that I use to ensure performance marketing success is 50% targeting, 25% offer, and 25% creative. It’s not meant to be a precise equation, but the percentages help you think about what’s most important in your marketing tactics and what to prioritize. Let’s walk through the formula step by step.

50% is Getting Your Marketing Target Audience Right

I’ve found that getting your audience target right makes the biggest difference whether you achieve breakthrough results. It can drive far more impact than changing up the creative or the promotional offer. From my experience, getting the right targeting can lift your marketing results by over five times.

The Target Audience Most Likely to Bite? Your Current Loyal Customers

As a simple example, the best target audience for your marketing is generally people who already know about your business. At Fivestars, we specialize in helping local businesses build a huge database of existing customers, so business owners can target them in the future for efficient marketing.

Simply targeting customers who already know about your business can lift marketing results by several orders of magnitude (that means A TON). It’s not unusual for us to see the marketing campaigns of Fivestars merchants targeting their existing customers have 10 percent conversion rate (10% of customers visit from their promotion sent). That may not sounds like a big number but, when most small business owners target brand new customer audiences—customers who have never ever visited the business–the conversion rate can often be only fractions of a percent.

I really can’t overstate how important targeting is for great performance marketing. My advice is to start with people who are already familiar with your business, and if you want to go beyond this audience, look at your existing customers and figure out what they have in common. Maybe they’re all around the same age or from the same part of town or have similar interests. Try to target them with your marketing.

You might be tempted to send flyers to every person in your town to tell them about your business, but it’s better to get more precise. One of the reasons why Google AdWords works so well for many small businesses is that it allows you to target people searching for things related to their business. Better to target someone actively searching for your product than just the general population—the vast of majority of which may not be interested in your business.

25% is Crafting the Right Promotion or Offer

The next thing I usually think about when doing performance marketing is the promotional offer. The reason why this is so important is that when you have limited time to explain yourself and what you do, which is usually the case with marketing, the easiest way to attract attention and move people to immediate action is a great offer.

What should you offer in your marketing? This takes some experimentation and intuition. Generally the more you offer, the higher your response will be, but you also want to make more money than what you would have made without the offer. I would just figure out what your baseline is, start with something reasonable, and see if the response justifies what you give away. For example, if you offer 20 percent off in your marketing promotion, and instead of getting 20 customers in the door spending $10 each like you normally do (for a total of $200), you get 40 customers spending $8 (a total of $320), you have come out ahead, and the offer is justified.

Think carefully about creating an effective offer that moves people to action but still drives incremental profit for your business.

25% is the Creative Design and Copy (the images and words!)

The last thing to think about is the creative aspect of your marketing. This includes the design and copy of the marketing piece. A lot of times small business owners make the mistake of over-complicating this part of marketing. From my experience, optimizing your creative can drive lift of 10 to 40 percent, but this is still generally small relative to the impact of the right targeting. Still, it can’t be ignored.

My advice in designing and evaluating performance marketing creatives is to use the “2 second rule.” Where does your eye go in the first 2 seconds of looking at your creative? What do you take away in those first 2 seconds? This will give you a good sense if the creative is good or not. For example, does your eye first go to the pretty person on the creative and not to the central message? Does your eye go to the offer only and not to your core message? Does it take more than 2 seconds to comprehend your marketing piece?

The ideal situation is that you understand the message and are motivated to take action or to learn more in only a few seconds. If you haven’t achieved this, you might need to go back to the drawing board.

A caveat is that the above advice applies more to advertising pieces and not necessarily to a medium like email. Still, with email, the principles are the same. I don’t think you need to overthink it. Even if it’s a simple text-based email, if the reader can understand your message and offer and be motivated to action in short order, you’ve done a good job.

So that’s it—my framework for performance marketing. It’s served me well for thousands of marketing campaigns. I hope it serves you well, too!

Chris Luo
About the Author
Chris Luo

Chris Luo is the SVP of Marketing at Fivestars. Previously he was the Global Head of SMB Marketing at Facebook. He enjoys running marathons and figuring out ways to get more Twitter followers than his twin brother.

1 Comment

  • My husband and I are small business owners and we are working on boosting our business performance through our great employees. Our business has been doing pretty well over the past few months but I know that it can always be better. Some friends of ours suggested looking into business performance monitoring tools and I think that it would be a great idea. I don’t know much about them but I will definitely be doing some research. Thanks for the tips!

Leave a Comment