Growth marketing vs performance marketing - what's the difference?

Performance marketing is one of those terms that a lot of folk get mixed up with growth marketing.

And I can completely understand why.

I mean, they’re both focused on results and both are pushing your offer out to potentially interested people.

But how are they different?

Let’s kick this off with some basic explanations of growth marketing vs performance marketing.

What is performance marketing?

Performance marketing usually leverages paid acquisition and is highly tied to the ROI.

You’re paying for an action, once the action is performed, the advertiser pays.

The action for performance marketing is usually one of the below…

A click
A sale
A lead

Because the action is so easy to track (was the thing clicked, did we make a sale etc), it makes it easy for the advertiser to understand if this is worth it.

These advertises will be looking at their performance marketing campaign from an ROI perspective.

“We’ve put $1 in, we need $1+ back from the campaign”.

It’s a pretty short-term approach and usually focuses on that single metric. With performance marketing there’s not so much focus on downstream actions or brand.

When it comes to activation of the leads or the reduction of churn from the sales driven from performance marketing, it’s handed off to another team or person.

Performance marketers are one-and-done people. Get the action, then look for someone else to take the action. Rinse and repeat.

As long as you’re getting more out of the campaign than you’re putting into it, the ads keep running.

Pros of performance marketing

Cost-effective: Performance marketing allows businesses to only pay for actual results or actions, such as conversions or sales. This ensures that marketing budgets are spent efficiently and effectively.
Measurable results: With performance marketing, businesses can track and measure the success of their campaigns in real-time. This allows for data-driven decision making and optimization to improve campaign performance.
Targeted audience: Performance marketing enables businesses to specifically target their desired audience based on their demographics, interests, and behaviors. This ensures that marketing efforts are reaching the right people who are more likely to convert.
Scalability: Performance marketing campaigns can easily be scaled up or down based on the desired outcomes and budget. This flexibility allows businesses to adapt and optimize their marketing strategies as needed.
Risk mitigation: Performance marketing minimizes the risk for businesses as they only pay for desired actions or results. This reduces the chances of wasting marketing budgets on ineffective campaigns and ensures a higher return on investment.

Cons of performance marketing

High Initial Cost: Performance marketing can be expensive, especially if you are paying for every action or conversion. It requires a significant budget to continuously invest in advertising and promotional activities.
Risk of Fraud: There is a risk of fraudulent activities in performance marketing, as some affiliates or partners may engage in unethical practices to drive conversions or actions. This can lead to a waste of resources and damage to the brand’s reputation.
Lack of Control: Performance marketing relies heavily on external affiliates or partners to promote products or services. This lack of control can result in inconsistent messaging, poor quality leads, or misrepresentation of the brand.
Short-Term Focus: Performance marketing often focuses on immediate results and quick conversions, which may not be sustainable in the long run. It may neglect building long-term customer relationships and brand loyalty.
Dependency on Metrics: Performance marketing heavily relies on metrics and data to measure success. This can lead to a narrow focus on specific metrics, such as click-through rates or conversions, while overlooking other important aspects of marketing, such as brand awareness or customer satisfaction.
Potential for Negative Customer Experience: When performance marketing prioritizes immediate conversions, it may neglect the overall customer experience. This can result in customers feeling pressured or misled, leading to dissatisfaction and negative reviews.
Competitive Pressure: In performance marketing, brands often compete for the same audience and keywords, leading to increased competition and higher costs. This can make it challenging for smaller businesses with limited resources to effectively compete against larger competitors.

How performance marketing actually works

As mentioned above, with performance marketing you’re paying when a predetermined action or threshold is hit.

Below are a couple of the common payment structures for advertisers within performance marketing.

CPC (cost per click)

You pay a set price per click.

Sometimes the price is determined on an auction basis. the more people bidding on a targeting metric, the more expensive that click will be.

If you want to make a profit with this, you need to know your numbers.

If your conversion rate for the offer is 1%, you know you need 100 people to see the offer before you make any money.

If you can drive traffic at $1 per click, that’s $100 to make one sale.

If your product is priced below $100, you’re losing money and need to change something.

CPL (cost per lead)

Here you pay if someone directs a new lead to your business.

Traffic and impressions don’t count here. The advertiser only pays when someone hands over their details and becomes a qualified lead.

A lot of brands will double this with the below CPA.

Brands pay a small amount (maybe a dollar or 2) for a lead, and a higher fee if the lead becomes a customer.

CPA (cost per acquisition)

Here the payment is tied to the leads actually becoming a customer.

Usually, the payments for this are much higher because the majority of leads do not buy.

It’s a lot safer for the brand to pay this way as they’re paying out of the money the customer has given them. But it’s not as good for the publisher as they are dependent on the advertiser having a good sales page and sales system.

CPM (cost per thousand)

This is where you pay a set fee per 1000 impressions.

My least favourite and the payments for these are often pennies.

Common performance marketing strategies and examples

Let’s look at some real-life examples.

I’ve worked with plenty of performance marketing brands and specialists over the years so will try and weave in a little of what they’ve taught me.

Native advertising

Native ads are those clickbaity-type pieces at the bottom of news articles on popular sites.

They’re often made to look like another news story and will be highly targeted like…

“Men in Westminster born between 19XX and 19YY are now able to get cheaper life insurance. See if you’re eligible”.

Example of a native advert on a news site often run by performance marketers

These are often run by third-party lead generation and performance marketing agencies who get those leads on behalf of big brands like insurance companies etc.

They’ll sell the leads to the insurance companies for a fee.

It’s risky as an agency as you’ve often got a 3-month timeline fro when the lead is generated to getting paid for it making cashflow a pain in the arse.

Social advertising

We’ve all seen these ads.

Facebook, Twitter, LinkedIn, wherever you go on social there will be ads.

Social platforms are great for advertising because they have a scary depth of knowledge on the users meaning you can target a lot of very specific audiences.

Example of a performance marketing social ad

The trouble here is that you’re getting the user to switch their intent.

They’re on social to stalk their ex, not buy a new cooler. So your ads have to be super compelling.

Search advertising

These are the ads that take up the top above-the-fold section on sites like Google.

They’re good because you can target them for people whoa re actively searching for a solution to a problem.

Get the ad targeting and copy right and you can get really great CTR.

Affiliate marketing

I like affiliate marketing as you only pay the affiliate if they make a sale.

With this, an affiliate promotes an advertiser’s product for them.

the advertiser only pays the affiliate of there’s a sale made.

It’s low risk for the advertiser, but 99% of affiliates aren’t ever going to generate any decent sort of traffic or sales.

Summing up performance marketing

With performance marketing you’re really looking at making as many sales as possible.

The major metrics you’ll be tracking are…

ROI – return on investment
ROAS – return on ad spend

Basically the quick feedback on whether that $1000 you put into a campaign generated more than $1000 in sales.

What about growth marketing?

Growth marketing has one primary goal. To scale your business fast.

However, there’s a focus on the entire strategy and model of your business. The goal with growth marketing is to have a coherent model where each and every step builds into the next.

With performance marketing you’re looking at one lever.

How can I acquire people for cheaper through this ad campaign?

With growth marketing, you’re looking across the entire customer journey and looking at where the biggest impact actions might be.

For example, a growth marketer will look at a brand that’s struggling for growth and try to understand where the biggest problem is.

Is the offer not being seen by enough people?
Are people not taking the conversion action?
Are people churning out before it becomes profitable?
Are users not advocating for your brand?

Once the growth marketer has identified a potential problem, they’ll look at the solution and run tests to fix that specific element which will strengthen the strategy as a whole.

With growth marketing, there’s a wider focus. A good growth market will know which levers to pull and where to focus their attention to get longer-lasting gains.

If you want to see more about this, you can read about my process for effective growth marketing here.

I used my own ACCER model to help build a sustainable system for scalable growth.

Pros of growth marketing

Increased customer acquisition: Growth marketing focuses on strategies and tactics that help businesses attract new customers at a faster rate.
Cost-effective: Growth marketing often relies on data-driven approaches, allowing businesses to identify the most effective channels and tactics, resulting in better ROI.
Scalability: Growth marketing strategies can be easily scaled up or down based on the business’s needs and goals, allowing for flexible growth.
Higher customer retention: Growth marketing emphasizes building long-term relationships with customers, which leads to higher customer loyalty and retention rates.
Faster growth: By utilizing innovative and targeted marketing strategies, growth marketing can help businesses achieve faster and more sustainable growth.
Improved brand awareness: Growth marketing often incorporates tactics that increase brand visibility and recognition, helping businesses establish a stronger presence in the market.
Adaptability: Growth marketing is constantly evolving and adapting to changes in consumer behavior and market trends, ensuring businesses stay ahead of the competition.

Cons of growth marketing

Time-consuming: Implementing growth marketing strategies can be a time-consuming process, as it involves extensive research, planning, and experimentation. This can divert resources and attention from other important business activities.
Uncertain outcomes: While growth marketing aims to drive business growth, there is no guarantee of success. It often involves trial and error, and not all strategies may yield the desired results. This uncertainty can be discouraging and frustrating for businesses.
Increased competition: As more businesses adopt growth marketing strategies, the competition in the market intensifies. This can make it harder for businesses to stand out and achieve sustainable growth, especially in saturated industries.
Risk of overreliance on tactics: Growth marketing often focuses on short-term tactics to drive immediate results. However, relying too heavily on these tactics can lead to a lack of long-term strategy and sustainability. Businesses may become too dependent on tactics that may not be effective in the long run.
Potential for customer dissatisfaction: Rapid growth can sometimes strain a business’s ability to meet customer demands effectively. If a business fails to deliver on promises made during growth marketing campaigns, it can lead to customer dissatisfaction and damage the brand’s reputation.
Difficulty in maintaining growth: Sustaining growth can be challenging, especially if growth marketing strategies are not integrated into a comprehensive business plan. Without a solid foundation and long-term strategy, businesses may struggle to maintain growth and face setbacks once initial growth spurts fade.

How growth marketing actually works

I’ve written about growth marketing extensively so I’ll offer the short version here with links out to the most relevant deeper reading piece.

Growth marketing is (unsurprisingly) focused on growth.

It’s all geared to getting a positive result for your business, those results often being…

More customers
Greater revenue

To do this, growth marketers usually take a very data-oriented approach.

First, you understand who you’re serving and how the offer you’re growing helps them overcome their problems.

Then, you look into the actual results to identify weak spots within the overall strategy.

Good growth marketers will not only hypothesise experiments to fix those low engagement steps, but they’ll also consider how they affect the stages that come before and after them.

The best growth marketers will always try to include some form of hack to supercharge the results at each and every stage.

While many marketers who go deep into one vertical (say ads) will be focused on singular metrics like the CTR from their ads, growth marketers will look at the same ads and wonder how they can change things to increase the sales they drive.

The focus is on overall business growth, not on improving singular tactics.

As a result, good growth marketers need a good understanding of the entire marketing approach and different channels.

Common growth marketing strategies

Here’s the thing, there is no typical growth marketing strategy or example in my opinion.

It’s all about getting results.

Let’s imagine we end up working together after you fill out an application.

I’m not going to just say “Facebook ads are the way to go”.

After analysing your brand and audience, we might discover that the fastest way to reach them is through LinkedIn ads, or native advertising at the end of 50+ focused news sites.

Growth marketing is far more flexibility than other forms of marketing. We’re here to get results, and we’ll do whatever it takes to see them.

Growth marketing vs performance marketing – what are the key differences?

In conclusion, performance marketing functions better when you have a bottom-of-funnel approach and can directly tie your ads to revenue.

It’s great for brands with a proven product and who know who their audience are.

Growth marketing has a wider focus on growing the business as a whole.

It’s great for businesses of all stages who want to grow more sustainably and hit higher revenue goals.

You could sum it up by saying performance marketing is narrow in its scope, whereas growth marketing has a very wide scope that encompasses the whole business.

Growth marketing vs performance marketing – what’s the difference?