🕵🏻‍♂️ Demand generation vs lead generation vs demand capturing

Dear Trencher,

Customer acquisition fuels business growth, and three concepts play pivotal roles: lead generation, demand generation, and demand capturing.

In this newsletter, we strip away the confusion and lay bare the distinct strategies behind each approach.

Get ready to amplify your marketing prowess and drive unprecedented growth!

First, let’s nail down what demand generation is and how it is different from lead generation and demand capturing.

What is demand generation (DG)?

Demand gen is a long-term ongoing activity that consists of creating awareness in the target market, and generating demand for your product. The ultimate goals of demand generation are:

• Increasing the volume of inbound opportunities (companies reaching out to you about your product) from your ICP;

• Warming up target accounts to make it easier for sales to connect with them. Sales will talk to accounts that are already aware of your product;

• Shortening the sales cycle and increasing the win rate

What is lead generation?

Lead generation can be defined as a set of short-term sales-focused tactics that are supposed to generate sales opportunities fast, even from companies that are not actively buying. Lead generation tactics heavily depend on volume and include standard tactics like:

• direct ads;

• gated PDF with further sales outreach;

• webinars where they pitch their product.

This graph perfectly explains lead generation tactics.

What is demand capturing?

Demand capturing is identifying engaged accounts that fit your ICP (companies that demonstrate a significant interest in your product) and marketing to companies that are actively looking for the solution.

To wrap it up, check out this graph created by Gaetano Di Nardi which provides a great comparison of all three functions.

Most B2B companies don’t understand lead generation and treat it as an offensive tactic. They assume that there are tactics that can convert companies that are not actively looking for a solution with a specific tactic, fast.

Hence, they run direct ads, promote gated content, and webinars where they pitch their product. And what's worse, those companies are impatient and want the results NOW.

This is probably because many of them operate under pressure from investors, or are run by CEOs/CROs with no marketing background. These people assume that marketing is all about drawing customers' attention to the existence of their product.

Even if different marketing initiatives make sense to them, these ideas are shut down just because:

• it takes time to launch and get results

• it seems non-scalable and non-predictable.

These companies are ready to spend years changing marketers, marketing agencies, and SDRs to get short-term results. But they are not ready to invest the same time in doing the right things that produce long-term wins and growth.

They are product-biased.

They assume they have the best product in the market, and that they just need 2 things: a skilled person who can write great copy for ads + sales veterans who can sell anything to anybody.

They live in their delusional world looking for people who excel at «sell me this pen».

This continues until they learn the lesson the hard way and understand that «LEADS» are the consequence of

• brand awareness;

• demand generation;

• WOM & customer advocacy;

• great product.

They become interested in your product not because they saw an ad showing them how great your product is or a cold email from one of your SDRs.

Instead, they become interested when they believe your product is one of the best possible solutions to their challenges.

See, dear Trencher, lead generation is not a linear function. At least, not in B2B enterprise sales and marketing.

Don’t expect that automated, templated email and Inmail cadences amplified by multichannel ads will grow your pipeline.

This is a buyer-driven market, and you need to market the way your customers buy, not by applying gimmicks and growth hacks.

If it makes sense, why then do B2B companies still prefer lead generation to demand generation?

Here are 5 reasons.

1. It’s easier and faster to launch.

You can buy ZoomInfo, LinkedIn Sales Navigator, and sales outreach software to launch a cold outbound campaign in a few hours. The same with direct-response ads.

Compare it to marketing activities that should create awareness or generate demand where you need to leverage customer insights and have the right skill set.

2. Scalability.

Lead gen can be scaled faster by adding more budget or hiring more SDRs. Awareness, demand generation, and ABM programs take a lot of time to scale.

3. Direct attribution.

Lead generation campaigns can be easily attributed to revenue in your analytics software, so they seem to be more predictable.

Demand gen campaigns require a mix of self-attribution, customer interviews, and digital tracking which most companies don’t have. As a result, they can’t see an impact on revenue.

4. Linear funnel.

Lead generation function is linear: ad/cold email → Landing page → Demo call → Deal Won/lost.

B2B demand generation is not linear.

5. Lead gen can be easily outsourced.

You can quickly find and hire a lead gen agency or growth hacker that will be working on booking meetings for you without involving your team.

Demand gen can be outsourced only partially and requires close collaboration with your marketing team.

Here is a harsh truth about lead gen.

Most of your buyers are not actively buying, so your ads and outreach will be ignored and generate miserable ROI. You’ll burn out your budget and your market fast.

The lead gen function puts leads, not revenue, as a core metric, so your team will never focus on demand generation and market to the cold audience. As a result, your product will always be compared to others and your company will be perceived as “yet another vendor”.

Lead gen scales faster, but in the long term, the lead gen performance significantly decreases.

Drawbacks caused by lead gen:

• Non-differentiated positioning and marketing message

• Lack of account research and personalization

• High CAC

Compare it to demand generation and ABM programs that scale slower but in the long term significantly outperform lead gen with:

• Shorter sales cycle

• Higher ACV

• Higher lead to conversion/win rate

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QUESTIONS FROM FELLOW TRENCHERS

Dear Trencher, your help is needed. If you can answer any of the questions below, please click on the link and share your ideas.

• Hi - Has anyone had experience and/or knowledge of pricing with Clearbit, Seamless, and/or Salesloft?

• I’m trying to create alignment across the revenue team by defining the pipeline opportunity stages across marketing and sales and reflecting that in Hubspot. What have you found that works well for pipeline stages?

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See you in Trenches 😉

Adechina D. ODJO