Lead Generation vs Demand Generation: What's the Difference?
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Pathlabs Marketing |
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November 30, 2023 |
Lead and demand generation are important concepts in business, sales, and marketing. In this blog, we take these two concepts a step further, adding our perspective and discussing where paid digital advertising can come into play. Ready to dive in? Let’s do it.
What’s the Main Difference Between Lead Generation vs Demand Generation?
Lead generation refers to performing activities aimed at capturing, identifying, and nurturing leads with the end goal of making them convert into customers. It's about pinpointing users leaning in at the bottom of the sales funnel and tailoring marketing, advertising, and sales efforts to encourage their conversion.
Demand generation involves performing activities focused on the upper part of the sales funnel, striving to generate awareness, interest, and general demand around a brand and its offerings.
Brands and entities can leverage paid digital advertising and non-paid marketing efforts to bolster their lead and demand gen goals.
Understanding Lead Generation
Lead generation refers to performing activities aimed at capturing, identifying, and nurturing leads with the end goal of making them convert into customers.
What Is a lead?
A lead is any user or entity that has expressed interest in a brand’s services or products in the past and/or is ‘qualified’ as having a high probability of converting.
Brands and entities use different criteria to qualify or disqualify leads. For example, if a SaaS company sells B2B finance software, a qualified lead may be an executive or manager at a tech company with X amount of employees and Y amount of annual revenue.
With this lead criterion, teams can quickly identify and prioritize nurturing relationships with customers most likely to convert. Without these criteria, the SaaS company above may waste time cultivating relationships with potential customers who appear to lean in but ultimately have little propensity to convert.
How Does Lead Generation Work?
Lead generation activities primarily occur toward the bottom of the sales funnel and take a few steps.
As users lean in and progress down the funnel, they engage with the brand’s online touchpoints, usually by clicking on a piece of content or ad with a CTA and navigating to a landing page hosted by the brand.
In this location, the user will further engage and provide personal information, such as an email address, through inquiry form submissions, subscribing to a newsletter, or accessing gated content, like an ebook. This is known as lead capture.
Upon capturing this information, the brand’s team will review the user and either qualify or disqualify them as a lead. If the user is a qualified lead, the team will tailor its efforts towards this user to further engage and ‘nurture’ them, making them ultimately convert.
This nurturing may be having the sales team reach out and develop a relationship with the lead. Alternatively, the brand’s team may leverage paid digital advertising and non-paid marketing efforts to retarget, remind, and push the user across the finish line to convert.
All the steps above capture the process and activities involved in lead generation. The end goal is to pinpoint high-engagement users, get info from them, and cater marketing, sales, and advertising efforts to nurture them until they convert.
Exploring Demand Generation
Demand Generation refers to performing activities focused on initiating interactions and relationships with users to propagate a sense of demand for a brand’s product and services.
Demand is intangible and quite synonymous with generating awareness and interest. By performing demand gen activities, brands, in effect, educate their audience, stimulate buzz around their offerings, and create a feeling of desire on behalf of the target users, making them want to learn more, lean in, and become customers.
How Does Demand Generation Work?
Demand generation activities occur primarily toward the top of the sales funnel. The brand’s in-house team or outsourced service partner can implement paid digital advertising and non-paid marketing efforts aimed at a broader audience to cast a somewhat wide net.
By generating demand at the top and middle of the funnel, users are likelier to accelerate down the funnel, become a lead, and, hopefully, a converting customer.
Lead Generation Examples
The following are examples of paid digital advertising and non-paid marketing efforts teams can implement to either initially capture user information and qualify them as leads or to retarget qualified leads further, encouraging them to convert.
Paid Digital Advertising Examples
Display Ads
Target users with display ads with CTA, encouraging them to click, navigate to a landing page, and provide information.
Retarget qualified leads with personalized display ads to encourage conversion.
Paid Social
Target users with paid social ads, encouraging them to click, navigate to a landing page, and provide information.
Retarget leads with paid social ads to encourage conversion.
Paid Search
Run paid search ads in relevant SERPs, encouraging users to click, navigate to a landing page, and provide information.
Run paid search ads to speed up the conversion journey for high-intent leads.
Direct Placements
Negotiate and work with publisher(s) to place ads and content in premium ad locations to capture lead information.
Non-Paid Marketing Examples
Landing Page and Email Management
Create landing pages with a CRM or CMS to link ads to for lead capture.
Target qualified leads with timely and personalized emails to encourage conversion.
Owned Channel Lead Capture
Build sections on the brand’s owned channels for lead capture.
Demand Generation Examples
The following are examples of paid digital advertising and non-paid marketing efforts teams can implement to generate a sense of demand in users and push them down the funnel for ultimate lead capture.
Paid Digital Advertising Examples
Display Ads
Run display campaigns prioritizing broader reach and engagement
Paid Social Ads
Run paid social campaigns prioritizing reach and engagement.
Paid Search
Run paid search ads as an evergreen approach to constantly reach users browsing on search engines.
DOOH
Run interactive DOOH ads in desirable geographic locations.
OTT
Run paid video ads within long-form OTT video content across multiple devices.
OLV
Run paid video ads between short-form video content, text, and page margins.
Non-Paid Marketing Examples
Content Marketing
Produce promotional and non-promotional content like blogs, whitepapers, and ebooks to educate and engage users.
Organic Social Marketing
Publish organic posts on owned social media channels and personally interact with audiences.
Newsletter and Email Marketing
Send general emails to audiences who have subscribed or opted-in to receive email communications.
Events, Webinars, Pop-ups
Host interactive brand events to generate awareness, interest, and excitement.
SEO
Optimize website content to appear organically in relevant SERPs more frequently.
Comparing Lead Gen vs Demand Gen
Goals and Objectives
Lead generation aims to capture information from users engaged in the mid to bottom of the funnel and then tailor the marketing, advertising, and sales efforts to guide them toward conversion.
Demand generation broadly aims to create and sustain demand for a brand's products or services, continuously generating awareness and interest at the top of the funnel.
Target Audience
Lead generation audiences are more defined, often consisting of actual users who have previously engaged with the brand and expressed interest, thus becoming leads.
Demand generation audiences are broader, encompassing engaged customers and users worth informing about the brand. These audiences may still have some granularity; for example, running paid display ads to generate demand in males aged 25-40 in the Pacific Northwest.
Methods and Strategies
For lead generation, teams invest lots of time in running paid digital advertising efforts, building landing pages and touchpoints for lead capture, and trying to directly target and reengage leads to make them convert.
For demand generation, teams use paid digital advertising for broad and high-level awareness and engagement efforts while using non-paid and owned channels like content marketing, organic social media, and SEO to make users aware of, educated about, and interested in the brand.
Relationship with Sales
Demand generation is usually the responsibility of marketing teams, as they handle presenting the brand and facilitating its many touchpoints. As a result, their impact on final conversions may be more indirect, albeit important.
Lead generation tends to involve close coordination between marketing and sales teams. The marketing team will generate demand and push users down the funnel for lead capture. After the lead capture, the marketing team will help nurture the lead to conversion or pass the baton to the sales team to handle nurturing.
KPIs
Demand generation tends to look at broader metrics that indicate overall engagement, awareness, and interest, such as the number of clicks, click-through rates, reach, view-through rates, open rate, etc.
Lead generation is narrower, focusing on performance metrics like form completions, lead quality, number of conversions, cost per conversion, and conversion rates: metrics that provide direct insights into sales effectiveness.
Aligning Lead and Demand Gen Strategies
Teams should prioritize balancing demand generation and lead generation strategies for success, as these two aspects are interdependent.
In the long run, generating leads requires generating demand first. By the same token, to make demand generation efforts worth it, teams must have processes in place to capture and nurture these leads to get them to actually convert. Overall, any team will likely need to cater to both lead and demand generation efforts to water all parts of the funnel.
“Another way to optimize this alignment is to continuously analyze the types of leads captured and converted and use these results to inform demand generation efforts.
For example, suppose a brand’s team can identify which advertising or marketing activities made the user cross the finish line to convert, like a targeted ad or a compelling piece of organic content. In this case, they can try to incorporate or enhance these efforts more into the top of the funnel. ”
Common Challenges and Roadblocks + Solutions
Demand Is Intangible
Demand is generally an intangible concept, much like the metric of ‘attention,’ as it is challenging to measure precisely how much demand certain efforts generate and the specific level of demand a user or audience has at a given time.
To address this, consider demand generation holistically, thinking of it as a long game of consistent marketing and advertiser activities meant to spur awareness and interest rather than activities that will immediately generate performance for a single KPI.
Lead Criteria
Brands often base lead qualification criteria on a few factors. When targeting entities, lead criteria may be company size; when targeting users, lead criteria may be their device or demographic. However, just because an entity or user meets specific criteria doesn’t mean they will ultimately lean in or be a quality lead.
A remedy is for teams to develop their qualified lead criteria while developing their target audience and, once again, look at which leads are coming in and converting, picking apart this information to find the best qualifying factors.
Lead Generation Takes Time
The moment between lead capture to when a lead converts can take days, weeks, or months; this makes it difficult to track and continuously reengage leads.
Having more than one lead criteria also solves this problem, as teams can indicate which leads are ‘hot’ and need immediate attention and which are ‘cold’ and need reinvigorating.
Utilizing a CRM or pipeline platform can be a valuable tool to chart out the entire funnel, account for what demand and lead gen efforts are in place, and indicate where each lead is at in the funnel.
In Conclusion…
Lead generation focuses on identifying, nurturing, and converting leads at the bottom of the sales funnel, emphasizing tailoring marketing, advertising, and sales efforts to transform leads into customers.
In contrast, demand generation operates at the upper funnel, aiming to build awareness and interest around a brand and its offerings, essentially setting the stage for lead generation. Both strategies can leverage a mix of paid digital advertising and non-paid marketing efforts.
The synergy between lead and demand generation is crucial; one feeds into the other. Therefore, for a brand or entity to thrive, it is imperative to strike a balance and effectively cater to both its lead and demand generation strategies, ensuring a holistic approach to attracting and converting customers.
