Growth Marketing vs. Performance Marketing: Key Differences
If you’ve searched for marketing strategies or follow #MarketingTwitter, there’s no doubt you’ve seen the terms “growth marketing” and “performance marketing” before. If you have, you’ve probably wondered, “What’s the difference?”
All marketing is created with the aim of high performance to help your company grow. Poor naming aside, there are substantial differences between growth marketing and performance marketing.
In this article, we'll define each strategy and describe each's tactics and goals, as well as the most significant differences between them.
By the end of the article, you’ll have a better idea of whether you should pursue a growth marketing or performance marketing strategy for your company.
Understanding the Differences Between Growth Marketing and Performance Marketing
Growth marketing is a data-driven and experimentation-focused approach to marketing that seeks to maximize the rate of user acquisition, activation, and retention. It’s about finding the most efficient ways to grow a business, often through testing and iteration.
It’s called growth marketing because the metric that rules them all is growth.
On the other hand, performance marketing is a results-driven approach that focuses on delivering a measurable return on investment (ROI) for every marketing dollar spent. It’s often associated with pay-per-click (PPC) advertising and affiliate marketing.
It’s called performance marketing because businesses pay performance marketing teams when they get a click, sale, or lead.
There’s a specific time and place for your company to decide on performance marketing. You may want to consider performance marketing teams if your goal is to increase your email sign-ups or sell a certain amount of products this month.
However, these things do happen organically through growth marketing campaigns. Growth marketing focuses on your business's overall, long-term growth instead of a specific sales goal.
If you are an early-stage Saas or tech company looking to grow an audience and aren’t worried about specific sales goals, growth marketing may be the best strategy for your next marketing strategies.
Successful companies use both strategies, and neither one is better than the other. Our goal is to help you better understand the ins and outs of each strategy to help you make a more informed decision for your company.
What is Growth Marketing?
Growth marketing is a full-funnel approach to marketing. While most traditional marketing focuses on generating traffic and leads, growth marketing teams use their expertise to influence the AAARRR funnel, which we call the “6 Levers of Growth”:
- Awareness - how many people know about you and what you offer?
- Acquisition - how many website visitors can you get into your funnel using a lead magnet?
- Activation - how well do you nurture and further qualify your leads to ready them for a sales conversion?
- Revenue - how many leads do you convert into paying customers?
- Retention - how do you reduce churn, upsell, and otherwise prevent customers from leaving?
- Reputation - how do you foster a positive brand reputation and leverage the experiences of your current customers to influence Awareness, Acquisition, Activation, and Revenue?
Growth marketing teams aren't simply looking to get new business in the door. They also play a key role, along with sales and customer success teams, in turning customers into fans.
Growth marketing focuses solely on driving growth and the metrics directly influencing growth. Growth teams use a strategy and data-driven approach to experiment rather than implement "best practices" or measure vanity metrics.
Common Growth Marketing Tactics and Channels
The tactics and channels growth marketers use depends on goals and established growth strategies. Because the focus is on all AAARRR metrics, growth marketing teams use nearly every tool in their marketing arsenal.
That said, growth marketing teams generally gravitate toward tactics that compound over time rather than one-off plays.
A good example is a piece of well-written content that attracts and converts leads the day it's published and from that point on. On the flip side, Google ads require continuous financial investment.
They may produce leads when they are running, but that only lasts as long as the budget does.
Likewise, with other paid channels. They tend to get more expensive and less profitable over time. Even if you constantly adjust and tune your ads and targeting, there’s a ceiling to how much business you can drive with your budget.
And when it’s spent, it’s gone.
Growth marketing tactics and channels revolve around content and using it to influence and deliver value in each lever of growth:
- Consistently published blog posts with CTAs leading to contextually relevant lead magnets
- SEO: Keyword research, optimization, and link building
- Automated and targeted email marketing campaigns to specific lists or contacts based on past behavior
- Repurposing content across social media, search platforms, and in different formats
- Creating lead magnets for use across cold, warm, and hot webpages on the website.
- Sales enablement content that helps move qualified leads through the sales process
RELATED: 5 Steps To Building A Growth Team To Maximize ROI
Growth Marketing Metrics & Goals
As we've discussed, growth marketing's “North Star” metric is growth rate. But there can be numerous other metrics that growth teams measure based on the AAARRR funnel we mentioned earlier.
Awareness: Focuses on traffic metrics like impressions, page views, time per page view, bounce rate, and top traffic sources. Identify pages that are performing well so you can reverse engineer them to figure out what’s working.
You can also break traffic down by page type and discover where traffic is coming from. I.e. direct, organic search, referral, social, and email marketing.
Related: SaaS Content Writing: How to Attract, Engage, and Delight Your Customers
Acquisition: How many visitors turn into qualified leads? And how many leads turn into Marketing-Qualified Leads (MQLs)? MQLs are leads that meet your minimum criteria to market to. In other words, they’ve opted in to hear from you or perform specific actions like downloading your lead magnets.
Your conversion rate is the successful transition from one part of the buyer’s journey to another. Track conversion across multiple channels and see how many potential customers convert on your offers, lead magnets, and CTAs.
Related: 10 Call To Action Examples And Ideas You Can Steal to Get More Clicks
Activation: Growth marketing teams work to convert MQLs into Sales-Qualified Leads (SQLs). An SQL is a prospect ready to talk to your sales team. Ideally, your marketing team qualifies a prospect as a genuine lead. Think of it like this: an SQL is an MQL that takes a sales action such as booking a call.
Revenue: A few metrics to track here are
- MRR (Monthly Recurring Revenue): The total revenue generated by your business per month.
- ARR (Annual Recurring Revenue): Same as above, but annually. This helps predict future growth.
- CAC (Customer Acquisition Cost): How much does it cost your business to acquire customers?
- Marketing ROI: The amount of revenue generated by a campaign compared to how much you spend on it.
- Close Sales Rate: Your closing rate is crucial to assess how all the other levers are performing.
Retention: It’s no use crushing your marketing and sales if you can’t keep customers. Churn is normal, but it’s still important to track and minimize. Why are customers leaving? How much does it impact your revenue and operations?
You’ll also want to track Customer Lifetime Value (CLTV) here so you know roughly the total revenue your business can expect from a customer throughout their time using your product or service.
Reputation: Track your number of reviews, both positive and negative, your number of case studies, and your NPS (Net Promoter Score). As they say, your reputation precedes you.
Related: The 6 Growth Marketing Metrics Every Business Needs to Track (& How to Track)
What is Performance Marketing?
Performance marketing refers to online marketing and advertising programs where advertisers pay only when a specific action occurs. This action may be a generated lead, a product’s sale, a click on an article, or any number of user-driven actions.
In contrast to growth marketing, the goal is to obtain new customers. Performance marketing is all about impressions, clicks, and leads.
There is little to no focus on activation, and revenue, retention, and referrals are a consideration for another team in the marketing department.
Performance marketing is also a one-and-done system. As long as you have the budget to keep ads going, they will produce. But once the budget is gone, the campaign is turned off, and your asset isn’t visible.
Because it's biased toward short term, easily-measured wins, performance marketers typically miss out on the exponential growth that can come from long-term strategies like organic content, organic social, and brand building.
This is why performance marketing is usually best for one-off campaigns.
Common Performance Marketing Tactics and Channels
Performance marketing relies on paid marketing channels. Performance marketing teams use common tactics like:
- Native advertising: Unlike traditional ads, these ads align with the publication's editorial style and tone and provide information that the publication's audience wants.
- Sponsored content: Promotional content that is paid for by advertisers but created and shared by others. Sponsored content involves companies sponsoring a company or influencer who aligns with their target audience. Rather than feeling like an invasive advertisement, sponsored content feels natural.
- Affiliate marketing: Influencers earn commission by promoting other people’s products. Often, brands will partner with influencers with an “affiliate” link, where the influencer gets a small profit for generating that sale.
- Social media advertising: This may take the form of sponsored advertising or native advertising, or it may also be a banner or video ad.
- Search engine marketing: When you use websites like Google, the first few results usually say “ad” next to them. You can pay to advertise on search engines and be one of the first things people see when looking for a specific product.
Performance Marketing Metrics & Goals
Is your goal to generate sales? Is your goal to have a potential customer sign up for an email blast? Determining your most important and impactful metrics is crucial before deciding on performance marketing.
Performance marketing campaigns typically track metrics like:
- Return on Ad Spend (ROAS): how much your business earns per dollar you spend on advertising.
- Return on Investment (ROI): Your sales growth minus your marketing cost, divided by your marketing cost. This tells you how much you gained from your investment in advertising.
- Cost Per Impression (CPM): The amount the advertiser pays a publisher per one thousand impressions.
- Cost Per Click (CPC): The amount the advertiser pays per click of their ad. It is the total ad spend divided by the number of ad clicks.
- Cost Per Sale/Cost Per Conversion (CPS/CPV): The amount an advertiser pays per sale generated by an ad. It is the total ad spend divided by the dollar amount of sales generated by the ads.
- Cost Per Lead (CPL): What the advertiser pays when they receive a sign-up from a customer from an ad.
- Cost Per Acquisition (CPA): What the advertiser pays when a specific action occurs. This action may be a form of completion, a click, or a sale.
Growth Marketing vs. Performance Marketing: Which is Right for You?
When answering this question, there are many factors to consider, but let’s look at two of the most important ones:
- What stage is your company in?
- What are your goals for the next 3-5 years?
Related: Go-To-Market Strategy for Startups: 10 Key Steps (+ Examples)
Growth marketing is the better fit if you’re an early-stage company with a solid product that fulfills a need the existing alternatives don’t. Why?
It focuses on optimizing and building for growth, not just impressions, clicks, and downloads. Growth marketing looks at how a company grows from all angles, not just dumping leads (qualified or not) in a database.
Growth marketing teams hone in on what makes a company grow and then execute it, using data and experiments to guide them on their way. And goals in a growth marketing strategy aren’t subjective.
Whatever the growth goal, you create the model and either hit the numbers or don’t. Growth is achieved by making customer acquisition a profitable endeavor.
Performance marketing requires a higher budget, and you need to know how to use the necessary platforms. Of course, you can outsource to marketing firms, but those may be more expensive, and their answer for any shortcomings will be “Spend more to get more.”
Performance marketing doesn’t focus on qualifying leads and nurturing them through a buyer journey; it’s purely transactional. Performance marketing works well as one facet of a larger marketing team and strategy.
However, it’s typically not the right play for early-stage companies that need to build awareness, convert customers, and prevent them from churning.
Growth Marketing is a Proven Path to Growth
That might seem like a bold claim, but we’ve done the math and know growth marketing works. We’ve helped brands generate over $100,000,000 in net new revenue and raise over $90 million in funding.
If you have a growth mindset and want to become a high-growth company, we may just be the right outsourced growth team for you.
Your next step is to use our free tool, The Growth Grader. With this resource, you can measure and track all of the Six Levers of Growth to quickly identify what's working best and what is causing friction within the buyer journey.
Get the insights you need and start planning for growth!
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