If you’ve ever seen influencer and revops leader Chris Walker’s LinkedIn polemics, you’ll likely have heard his praise for “dark social” and “word of mouth” as lead sources.
The basic point is that if you focus on generating demand, buyers will find a way to reach out - even if not through easily attributable lead generation channels. Start asking the right questions (“how did you hear about us”) and get scrappy with reporting, and you’ll see demand gen unveil itself as the source of many leads you may not have known the story of before.
On the other hand, marketing teams are often pushed to be able to attribute results to their actions: a dollar in, and more than a dollar out.
Add to this that lead generation and demand generation are often used interchangeably (they aren’t the same thing), and they’re often attributed to different parts of the funnel (also not necessarily true) and you can see how many individuals get into misunderstandings about which is more important.
In this article we’ll try to clear the air of misconceptions about demand generation and lead generation. We’ll outline the pros, cons and differences of each. And we’ll present our argument as to why demand and lead generation are actually both necessary for the modern B2B marketing team.
What is demand generation (pros, cons, and definition)
Demand Generation is a comprehensive marketing approach focused on driving awareness and interest in a company's products or services. It encompasses various strategies and tactics that aim to create a demand for the offerings rather than just capturing existing interest. Essentially, demand generation helps in building a market for your products and nurturing potential customers through the sales funnel.
Pros of Demand Generation
1. Long-term Engagement: By focusing on creating awareness and interest, demand generation fosters a deeper relationship with potential customers. This long-term engagement can lead to higher loyalty and customer retention.
2. Strategic Alignment: Demand generation allows for alignment between marketing and sales teams, ensuring that marketing efforts resonate with the audience's needs and desires, leading to higher quality leads.
3. Brand Awareness: It builds a strong brand presence in the market, positioning the company as a thought leader or industry expert. This helps in creating trust and credibility in the brand.
4. Effective Utilization of Content: Content marketing plays a crucial role in demand generation, enabling organizations to educate and inform prospects, leading them smoothly through the buying journey.
Cons of Demand Generation
1. Complexity and Resource Intensive: Implementing a successful demand generation strategy often requires significant time, effort, and financial investment. Managing various channels, content, and tactics can be complex.
2. Measurement Challenges: Assessing the direct ROI of demand generation can be more difficult than with other strategies like lead generation. The impact might be spread across various touchpoints, making attribution more challenging.
3. Potential Misalignment with Sales: If not managed properly, demand generation can create leads that are not yet ready to buy, potentially causing friction with sales teams expecting immediate conversion.
4. Slow Return on Investment: The nurturing and awareness-building nature of demand generation may lead to slower immediate returns compared to direct lead generation efforts.
Demand Generation is a multifaceted approach that focuses on creating a market for your offerings rather than merely capturing existing demands. While it offers substantial benefits like building long-term relationships and brand awareness, it also comes with challenges like complexity and slower ROI. Understanding these aspects can help marketing leaders strategically deploy demand generation as a part of a well-rounded marketing strategy, aligning it with overall business goals and sales objectives.
What is Lead Generation (Pros, Cons, and Definition)
Lead Generation is a specific subset of marketing strategies focused on stimulating and capturing interest in a product or service with the ultimate aim of developing a sales pipeline. It involves actions and processes that attract interested prospects and convert them into leads. The goal is to generate high-quality leads that are ready and willing to engage in the sales process.
Pros of Lead Generation
1. Immediate Results: Unlike demand generation, which focuses on long-term engagement, lead generation aims at achieving quick results by converting interest into tangible leads.
2. Measurable and Quantifiable: Lead generation efforts often result in clear, measurable metrics such as the number of new leads captured, making it easier to gauge the effectiveness of specific campaigns.
3. Highly Targeted: Lead generation strategies allow businesses to target specific segments of the audience who have shown interest in their product or service, leading to higher conversion rates.
4. Strengthens Sales Pipeline: By continuously feeding the sales pipeline with new leads, lead generation helps maintain a steady flow of potential customers for the sales team to work on.
Cons of Lead Generation
1. Short-term Focus: Lead generation can sometimes become too focused on the short-term, potentially overlooking the need for sustainable, long-term customer relationships.
2. Quantity Over Quality: If not done right, lead generation can focus more on the quantity of leads rather than the quality, which might not be beneficial in the long run.
3. Potential for Intrusive Techniques: Certain lead generation tactics can potentially be perceived as intrusive, causing annoyance and leading to a negative perception of the brand.
4. Limited Engagement: Unlike demand generation, which aims at nurturing a deeper relationship with the audience, lead generation is typically more transactional and may not lead to as strong brand loyalty.
Lead Generation, as a targeted approach aimed at capturing and stimulating interest, plays a crucial role in creating a robust sales pipeline.
It has distinct advantages, such as immediate results and measurable metrics, but it also comes with challenges, like the potential for a short-term focus and limited customer engagement.
Balancing these factors and aligning lead generation strategies with broader marketing objectives can ensure that the leads generated are not just numerous, but also high-quality and likely to convert.
Read more: Our Guide to Linkedin Lead Gen Forms for B2B
Demand Generation Versus Lead Generation
One analogy for understanding demand and lead generation is that of farming versus hunting.
Demand Generation as Farming:
- Planting Seeds: Like a farmer planting seeds, demand generation is about nurturing interest over time. It involves educating the market, building awareness, and fostering relationships.
- Long-term Investment: Just as crops don't grow overnight, demand generation is a long-term strategy. It requires consistent care, watering, and time to grow.
- Harvesting When Ready: When the seeds have grown into full plants, they are ready to be harvested. Similarly, demand generation leads to customers when they are fully engaged and ready to purchase.
Lead Generation as Hunting:
- Immediate Pursuit: Like hunting for game, lead generation is about identifying and pursuing immediate opportunities. It's about capturing interest that already exists, rather than cultivating it over time.
- Targeted Approach: Hunters identify specific targets and go after them. Similarly, lead generation often involves targeting specific segments of the market or individuals who have already expressed interest.
- Quick Results: Hunting can lead to quick results if the game is successfully caught. In the same way, lead generation can lead to quick sales if the leads are successfully converted.
As with the analogy (apologies to vegans), you’re likely to need to rely on both strategies to keep your pipeline fed through the seasons. Relying too much on short term gains can radically reduce the ability to craft a meaningful brand and broader awareness. Focusing too much on long-term brand plays can leave your sales team with leads who don’t have the intent needed to close as well as a lower number of leads in the present.
Read more: Our Guide to 1st, 2nd, and 3rd-Party Intent Data for B2B Lead Gen
Ask an Expert: An Expert Marketing Perspective
We reached out to Alex, one of our expert freelancers, to gain his perspective on the relationship between demand and lead generation among companies we work with.
MH: How do you perceive the relative importance of lead generation versus demand generation in your marketing efforts?
A: I've seen a positive shift in the perception of demand gen. B2B brands are increasingly aware that demand gen investment will drive long-term growth in their overall marketing and lead gen strategy. I'm not sure of the specific reasons for this shift but I believe it could be a side-effect of the fact that many B2B brands are seeing a reduction in the number of leads they're able to generate from gated content.
MH: Which metrics do you rely on the most for B2B demand generation?
A: For most clients the ultimate metric is cost per acquisition at each stage of the funnel and, in particular, how demand gen can improve that number. Overall lead volumes are obviously important too, but crucially it's about cost - if demand gen can slash the cost of an SQL down by 20% then we're doing something right.
MH: How do you successfully secure buy-in for investing in longer-term demand generation activities?
A: Proof of concept is usually the most effective way to achieve buy-in. This may be through a pilot campaign using a limited budget or examples of previous successful initiatives with past clients.
Balancing Short-term Goals (leads) with Long-term Strategies (demand)
In the pursuit of balancing short-term leads with long-term demand, it's crucial to focus on actionable strategies that drive both immediate and sustained growth. Here are some key takeaways that can help B2B marketing leaders effectively navigate this balance:
1. Integrate Demand and Lead Generation: Encourage collaboration between your demand and lead generation teams. This can ensure that the interest created by demand generation smoothly feeds into lead gen tactics, creating a seamless transition for potential customers.
2. Solve Crucial Customer Problems: Your demand generation efforts should focus on solving your customers' most pressing challenges. This can be done through SEO-focused content, free tools and resources, and thought leadership on social media.
3. Use SEO with Intent: Make sure your search-focused content is deeply valuable to the reader and designed to serve their specific search intent. This can help drive new traffic to your site while providing prospects with a step-by-step guide to a persistent problem.
4. Offer High-Value Gated Content: To generate high-intent leads, differentiate between free and gated content. Your gated content should guide readers through actionable, proven strategies for solving a crucial challenge, offering unrivaled value in exchange for their contact information.
5. Target Bottom-of-Funnel Prospects with Webinars: Webinars can be a useful tactic for separating high and low-intent leads. Consider taking a product-focused approach, targeting potential buyers toward the bottom end of the sales funnel who are evaluating a purchase.
6. Reduce Friction in Free Trial Signups: Make it easy for prospective customers to register their interest in your product by removing the barriers in your free trial signups. Decide what's necessary for signup and collect any extra information later.
7. Make Conversational Marketing Feel Human: When developing chatbot conversation flows, make it easy for visitors to connect with a human and provide multiple options to continue. Try to pinpoint where visitors are in the buyer’s journey early and include a lead generation opportunity at each step that matches visitor intent.
Customizing Approaches for Different Markets and Targets
While both demand generation and lead generation play vital roles in a comprehensive marketing strategy, the specific focus and balance between the two can depend on the target market and audience. Understanding the nuances of different markets and target audiences can guide marketers in customizing their approach for maximum effectiveness.
Different Markets
The characteristics of the market you're operating in can influence whether a demand or lead generation strategy might be more effective.
For instance, in a mature market with a lot of competition, a strong focus on lead generation can help a business stand out and capture the attention of customers who are already interested in the type of product or service being offered. Here, the audience is likely already educated about the product category, so the task is more about standing out amongst competitors.
Conversely, in a nascent or emerging market, demand generation strategies can be more effective. Here, the task is often about educating the market about the product category itself and building awareness. This long-term strategy can help cultivate interest and demand that will eventually lead to lead generation.
Different Targets
The specific audience or customer segment being targeted can also affect the balance between demand and lead generation. For example, if targeting a technically sophisticated audience that tends to conduct thorough research before making a purchase, a robust demand generation strategy could be key. This could involve producing in-depth content that educates and engages the audience, cultivating interest over time.
On the other hand, if targeting a cost-conscious segment that is driven primarily by price, a strong lead generation strategy with clear calls-to-action and promotional offers might be more effective.
Category Creation and Demand Generation
Category creation is a strategic move that companies use to define a new market space that they can dominate. This approach requires a heavy focus on demand generation as it involves educating the market about a new category of product or service.
For example, when Salesforce first introduced cloud-based CRM, they weren't just selling a new product; they were creating a new category. To do this, they had to generate demand by educating the market about the benefits of cloud-based solutions compared to traditional on-premise software. This involved a long-term, holistic marketing approach focusing on building awareness and interest—essentially, a demand generation strategy.
There is no one-size-fits-all strategy in B2B marketing. The key is understanding your specific market dynamics and target audiences and then customizing your demand and lead generation strategies accordingly. This ensures that your efforts are focused and effective, helping you capture leads and build demand in the most efficient and impactful way possible.
Metrics and Reporting: Striking the Balance between Attribution and Impact
As you likely know (or could have guessed) demand and lead generation rely on fairly distinct measures of success. This can sometimes result in tension between the two, but a collaborative approach can bridge this gap, driving better alignment and results.
Attribution in Lead Generation
Lead generation often focuses on immediate and tangible results, which makes it somewhat simpler to attribute successes. The key metrics for lead generation typically revolve around quantity and quality of leads. This might include the number of new leads generated, the conversion rates of these leads, and the eventual sales made from these leads.
With a dollar-in, dollar-out mindset, lead generation teams often focus on metrics that can directly attribute sales to specific campaigns or activities. This often involves tracking metrics like click-through rates (CTR), cost per lead (CPL), and return on ad spend (ROAS).
Impact in Demand Generation
Unlike lead generation, demand generation is a long-term strategy that focuses on building awareness and nurturing relationships. As a result, its success is typically gaired through more abstract and longer-term metrics. This might include brand awareness, market share, customer lifetime value, and overall engagement levels.
However, because these metrics are often spread across multiple touchpoints and over extended periods of time, attributing successes can be more challenging. This sometimes results in tensions between teams focused on demand generation and those driven by the more immediately measurable results of lead generation.
Striking the Balance
The key to resolving these tensions lies in acknowledging the value of both attribution and impact metrics, and understanding how they contribute to the overall marketing strategy.
Lead and demand generation teams can work collaboratively by aligning their metrics with the customer journey. For example, the demand generation team could focus on metrics related to the awareness and interest stages of the journey, while the lead generation team focuses on metrics tied to decision and action stages.
Moreover, advancements in marketing technology can now provide more sophisticated tracking and attribution capabilities. For example, multi-touch attribution models can provide a more nuanced view of the customer journey, attributing value to multiple interactions rather than giving all credit to the final touchpoint.
Conclusion
To navigate the complex and competitive world of B2B marketing, understanding the complementary nature of lead generation and demand generation is paramount. Both hold critical roles in the sales funnel, each with their unique benefits and drawbacks, and they operate on different timelines. However, when used in harmony, they form a formidable marketing strategy that can yield both immediate and long-lasting results.
Through dissecting the nuances of your target markets and audiences, aligning short-term and long-term objectives, and consistently measuring and attributing success across all efforts, a balanced marketing approach can be achieved. Whether you are navigating a mature or an emerging market, strategically combining demand and lead generation can provide a robust, all-encompassing, and effective marketing strategy.
However, finding the right talent to balance these vital areas can prove challenging.
If you're looking to level up your marketing efforts, seeking to create harmony between your demand and lead generation strategies, or simply want to engage with seasoned experts, reach out to meet the top 2% of marketers.