Why knowing the difference between Lead Generation and Demand Generation helps you market
Most marketing strategies begin with the assumption there is market interest in the products you’re selling. For example, if you’re selling a SaaS solution that solves a productivity problem, people must be out there searching for a solution to that problem, right? All you need to do is to connect their needs to your product. But what if there is an even bigger market out there that doesn’t even know they need you? There is a lot of business potential in teaching your market about pain they don’t even know they need to solve. This is Demand Generation.
The best example of demand generation is the Apple iPad. When it came out, we didn’t even know we needed tablets in our lives. Many of us laughed at the idea of a huge, over-priced phone with no working keyboard. But through carefully placed marketing and media relations, Apple showed us how much more creative we could be and more mobile our lives could become with a tablet in our households. Fast forward to 2020 and Apple sells 14.3 million iPads a year, and they defined a whole new category of personal computing.
You may not have market-defining ad budgets like Apple, but creating demand can happen on a small scale, and it can directly link to success in your lead funnel.
Marketers use the lead generation funnel to build awareness, educate, and then convert potential customers into committed buyers. Because the lead generation funnel is so widely used, many marketers operate on the assumption that their target audience already wants the type of product or service they offer. But if your marketing strategy only leverages a lead generation funnel, you could be limiting the size of your overall market.
Today, we’re going to remind you about (or introduce you to) the magic of demand generation: a marketing strategy that creates demand where there originally was none.
Understanding the difference between Lead Generation and Demand Generation
What is lead generation?
Lead generation aims to attract and convert prospective customers into qualified leads in a defined market. It’s a marketing strategy that operates on the premise that demand already exists for your product or service. Any marketing content (e.g. lead magnets , webinars, newsletters, free giveaways, checklists, etc.) created during this funnel is designed to help your business identify and empathize with your lead’s pain points and problems. You then offer solutions to those problems in the form of your products and services.
What is demand generation?
In a nutshell, demand generation is based on the idea that people don’t know they have a problem. Or they have a pain-point but have no idea how to solve it. It’s then your job to educate them about why they need your help. Any marketing content produced should be created with this intention.
Like lead generation, demand generation aims to pull qualified customers down the funnel. The difference is that it involves a longer customer journey by building awareness in a new market. Your content aims to educate people about a pain they didn’t know they have yet and sets up your product or service as the solution to generate demand. Because demand generation is focused on education, examples of effective content include videos, blog posts, podcasts, conference sessions, events and interviews.
More businesses should have a demand generation strategy
Before you consider how much work this is, know that this investment in customer education comes with significant benefits. Here’s why you should leverage a demand generation strategy.
Build customer trust
Demand generation focuses on education and brand awareness early in the customer journey. Using this strategy is great for building customer trust (especially if you’re selling B2B). Education is a value-add from the customer perspective, so the more you focus on providing value in this way, the more authority you build as a brand and as a leader in your industry.
Nurture high-quality customers
Demand generation involves a longer customer journey and sales cycle. But it provides you with the opportunity to develop strong customer relationships. The longer you nurture a lead, the higher the likelihood of them converting into committed—or even repeat—customer. And when customers are happy, they’re more likely to be advocates of your brand.
Demand generation is a useful strategy for growing revenue because most markets are highly competitive. Demand generation efforts enable your business to create new interest and expand into different markets.
Studies revealed that businesses that invest in nurturing leads make 50 percent more in sales at a 33 percent lower cost and win 47 percent larger purchases from those nurtured leads compared to non-nurtured leads. This amazing impact on ROI is the reason why 78% of marketers say their demand gen budget will grow or remain the same this year in 2021.
How to start demand generation marketing
Much like a lead generation strategy, the first step to creating demand is to identify segments of your market who don’t understand or haven’t thought of the pains you solve. If you’re an IT MSP, maybe you’ll target CFOs of non profits to talk cost savings; if you’re a Data Platform company, maybe you start educating marketers on the importance of data quality. You’ll use podcast interviews, webinar events, and conferences to promote your ideas. But each demand generation effort needs good persona building and channel selection, so take your time and consider all the factors.
When building your demand generation marketing budget, map out the target industry, company size, and chosen lead generation channel. For example, in the tech services industry, one marketing qualified lead can cost up to $200 to acquire, so it wouldn’t be uncommon for companies to spend 15% or more of gross target revenue on lead generation in that market. Since demand generation goes the extra mile of creating demand before attracting leads, you’ll have to allocate more funds for the creation of quality, educational content.
Once you’ve finalized a budget, you can start thinking about strategy. Here are some points to help you get started:
- How will you define your brand identity and message?
- What are your ideal customer personas?
- What channels will you use to create and distribute content?
Hopefully this article helped you understand the difference between lead generation and demand generation. If you ever feel confused about which strategy is best suited to your business needs or not sure how to start creating a demand generation strategy, Paper Sword can help.
Simply reach out to our team about our lead generation services, and we’d be happy to jump on a call with you.