So you think you are ready to start performance marketing?

The Performance Marketing fundamentals that are not discussed enough

I was talking to the Chief Product Officer at a very successful mobile app last week. Despite a decade in business and a loyal, engaged userbase, they had never ventured into performance marketing. After years of steady organic growth through word of mouth, they were starting to see their growth plateau - making this the perfect time to explore performance marketing as a new acquisition channel.

The conversation ended up being quite lengthy and meaningful. After all, I was talking to a senior professional who was looking to impact their business’ bottom line. Everything had to be hard-hitting, and the content ended up being such that it was only natural for me to convert it into this post.

Here's what they needed to know - and what you need to know - before embarking on performance marketing for the first time.

The Finance Foundation

I told them straight up: this whole endeavor is a finance exercise. Before you get caught up in creative testing or channel selection, you need to be dialed in on the Lifetime Value (LTV) of your acquired users and set your Customer Acquisition Cost (CAC) targets accordingly for your desired payback period.

Looking at their data, I pointed out how LTV isn't a static value - it's an ever-evolving metric that requires constant monitoring. In their case, they had discovered significant LTV variations based on acquisition timing: their highest-value users were those acquired during Q1, when people are in a goal-setting and resolutions mindset. This wasn't just an interesting observation - it was a crucial strategic insight.

I explained how such patterns should shape their performance marketing strategy. They should be significantly more aggressive with acquisition spend in Q1. Yes, they'll still get better users during this period - but I emphasized they need to maintain that critical assumption: even these Q1 paid users will likely perform 30% worse than their organic baseline.

Why such a stark difference? Performance Marketing is direct response - it brings scale, fast. But this rapid scaling inevitably includes less valuable users compared to those who come through organic channels like word of mouth. This reality drives one of paid acquisition's fundamental challenges: not only do you spend more money to acquire your last customer, but that customer is often worth less than your organic, word-of-mouth loyalist.

📸 Snap Recap:

• Track Lifetime Value (LTV) of acquired users

• Set Customer Acquisition Cost (CAC) targets for desired payback periods

• Account for LTV variations based on acquisition timing

• Expect paid users to perform ~30% worse than organic users

• Understand that scaling through paid acquisition often means acquiring less valuable users

The Technical Foundation

Without context on how their analytics and tracking are set up, I told them that before launching any campaigns, they need to get their technical foundation right. Implement an attribution SDK like Adjust to centralize in-app event tracking and conversions across platforms like Google and Facebook. This enables optimization for meaningful user actions—not just installs.

Modern performance marketing is based on automated bidding strategies - which makes conversion tracking being spotless a necessity and a sophisticated choice of the optimisation event one of the key levers for campaign success.

Pro tip: Don't choose your optimization event based on what you want to report on. Use this heuristic: select the closest event to business value that also has significant (>30) weekly volume. Decouple optimisation from reporting - you can report on multiple metrics, and you don't even need to report on the optimisation event itself. Don't fall into this trap. More here: A lesson from a DTC marketer to a B2B marketer

A lesson from a DTC marketer to a B2B marketer

📸 Snap Recap:

• Implement attribution SDK (e.g., Adjust) for centralized tracking

• Ensure flawless conversion tracking for automated bidding

• Choose optimization events strategically:

  • Select events closest to business value

  • Ensure >30 weekly volume

  • Decouple optimization from reporting

Incrementality Above All

Incrementality, Incrementality, Incrementality. I get it, you are not surprised, it wouldn't be a session with me if this word wasn't included. 

Be vigilant about focusing on whether your new activity actually boosts your backend numbers, and don't let the ad platforms overestimate their impact with view-through / branded search conversions.

Great ad account setup won't win you the game, but poor setup will make you lose even if you had all the other elements in place for success. Make sure your accounts are set up with incrementality in mind - and decouple your success criteria from what you see inside the ad platforms. Looking at them often guides you to do the opposite of what you need to be doing, like overinvest in retargeting.

Especially for a business that already has a baseline of resilient organic demand - ensuring that your performance marketing is actually driving incremental value vs just claiming credit on acquisitions that would happen regardless is paramount. A recent example of a mobile app finding out that the incremental impact of their Google campaigns was 30% of what was reported is quite eye-opening.

(Credits: Olivia Kory from Haus)

📸 Snap Recap:

• Verify that new activities boost backend numbers

• Don't let ad platforms overestimate impact through view-through/branded search conversions

• Set up accounts with incrementality in mind

• Decouple success criteria from ad platform metrics

• Be particularly vigilant if you have strong organic demand

The Bottom Line

Only after you have all of these elements in place should you start thinking about campaign creative and the sexy stuff. Performance marketing isn't about jumping in with flashy ads - it's about building a systematic approach to growth that can scale.

For seasoned performance marketers, especially in e-commerce, this might sound like Performance Marketing 101. I get it, and I am not reducing Performance Marketing’s success to these metrics.

The best campaigns leverage a strong offer, sophisticated testing protocols, psychology-backed creatives, and excellent platform optimization. I'm constantly impressed by marketers achieving exceptional results through performance marketing - it’s not easy nowadays. 

But here's the thing - every successful performance marketing program, regardless of its sophistication, relies on these often-overlooked fundamentals. They're what make scaling possible in the first place.

What's Next?

First, take a hard look at your finance exercise results. They might tell you that performance marketing doesn't make sense for your business right now - and that's okay. Better to know before spending.

If the numbers work out, remember: this isn't a magical solution that will instantly clone your best customers. Performance marketing is a different beast that requires constant monitoring and adjustment. Keep a close eye on those cohort metrics - they'll tell you whether your acquisition strategy is truly sustainable or if you need to course-correct.

You have the above covered? Then yeah, you can start thinking about what goes into your campaigns - that’s where the hard work begins. It’s tough out there :)