Difference Between Demand Generation and Lead Generation
November 11th 2021
Sales Best Practices
Demand Generation Campaign
Despite being different concepts, demand generation and lead generation are used interchangeably. One of the most common misconceptions regarding demand generation is that it focuses only on creating demand for a product or service. But it covers a host of customer touchpoints that are mainly designed to create awareness of the customer pain points, generate leads, create brand loyalty, and sell your product or service. When done right, it could drive long-term engagement and build brand presence.

Lead generation, on the other hand, is a subset of demand generation. It focuses on creating awareness that attracts prospects to your business. These prospects are then qualified and made ready to be sent forward to the sales team, which will try to convert these leads into potential customers. Let’s unravel the differences and the depths of demand and lead generation together in this blog.

Table of Contents

  1. What is Demand Generation?
  2. Developing an Effective Demand Generation Strategy
  3. Key Metrics for Demand Generation
  4. Components of Demand Generation Funnel
  5. Finer Aspects of Lead Generation
  6. Lead Generation Process
  7. Key Metrics for Lead Generation
  8. Difference between Demand Generation and Lead Generation

What is Demand Generation?

Demand generation is an umbrella term that covers all your marketing and sales initiatives. It is a process that incorporates all the customer touchpoints, from igniting interest in the prospect to closing the deal. It creates awareness and interest about your product or service and, at the same time, increases certainty about the growth pipeline. It is carried out with the help of several tactics that will help in generating leads. Some of the popular tactics used in the industry are signing up for a webinar, filling out a form, guest blogging, offering free trials, etc.

Demand generation tactics help you identify leads, qualify them, nurture them, reach out, and finally close the deal. Over the last few years, demand generation has grown out of this single-use approach. What do we mean by the greater scope of demand generation?

Well, demand generation is a process that has multiple advantages like

  • Driving long term engagement with customers
  • Fostering brand loyalty
  • Enhancing brand identity and brand awareness
  • Cost reduction in the customer acquisition process
  • Acquiring more qualified leads
  • Increasing revenue

According to the Forrester research, organizations that focus on nurturing the leads and other aspects of demand generation experience 50% more sales lead at 33% less cost. Thus, most organizations have started focusing on adopting an effective demand generation strategy to reap such benefits. The question which often occurs at this point is: What is an effective demand generation strategy?

Developing an Effective Demand Generation Strategy

Building an effective demand generation strategy can be challenging. Here are five pillars to focus on while developing an effective demand generation strategy:

Effective Demand Generation Strategy
  1. Brand Awareness

  2. Brand awareness has several intentional and unintentional advantages. It is a process that helps you generate more leads and improves the other aspects of the funnel. It requires identifying your target customer, building a strong brand identity, harnessing your social media presence, establishing your brand as a thought leader, and creating a positive experience for the users.

  3. Inbound Marketing

  4. Demand generation is a function of Inbound marketing. You can use inbound marketing to build an effective demand generation strategy. Some options are paid advertising, blogging, and SEO, email marketing, gated content, etc. It aids in acquiring leads, and many organizations depend on this primarily for their lead generation.

  5. Sales Enablement

  6. Sales enablement helps in filling the gaps with customers and their pain points through early solutions. It can help in engaging prospects from the beginning and throughout the sales journey. The most common techniques used are testimonials, case studies, FAQs, estimate and discount calculators, etc. The tactics under this pillar are mainly employed to push the already interested prospects towards closing the deal.

  7. Customer Retention

  8. While closing new deals is essential, delighting and satisfying present customers is also crucial for customer retention. What this leads to is a recurring business from the existing customers. One could employ this with the help of customer appreciation activities, encouraging feedback and working on them, improving Net Promoter Score (how likely someone will recommend your product on a scale of 1-10), and undertaking client marketing initiatives.

  9. Investment in Partner Marketing

  10. Over the last decade, there has been an increase in digital interactions. Thus most organizations are now focusing their efforts majorly towards creating a robust digital presence. Towards this objective, they have started partnering up with third-party providers, which can help them reach a curated and prescreened audience. It helps in optimizing the efforts by ensuring you acquire qualified leads. It also makes the process more efficient and faster.

Key Metrics for Demand Generation

You can use the following metrics to measure the performance of your demand generation strategy through essential metrics.

  1. Number of Meetings Generated

  2. One must have data on the number of meetings generated by your strategy. It is a crucial performance indicator of the quality of leads your demand generation marketing efforts are acquiring. Based on this data, you can modify your strategy to improve the quality of leads, thus, in turn, improving lead conversion.

  3. Average Deal Size

  4. This metric is a good indicator of how much money each customer brings to the organization. It helps in anticipating future revenue and aids heavily in the decision-making process.

  5. Customer Acquisition Cost

  6. Marketing spending of an organization towards acquiring each customer is one of the most popular metrics. It helps the organization understand the performance of its marketing efforts. It also aids in the decision-making process of whether to make the marketing efforts leaner and narrower or scale them up.

  7. Customer Lifetime Value

  8. This metric deals with how much business a customer will bring to the organization throughout its association with it. Customer lifetime value will be high for organizations that focus on customer retention strategies. Thus, as a metric of long-term success, this metric is useful.

Components of Demand Generation Funnel

When we talk about demand generation, we also need to foc\us on the more refined components of the demand generation funnel. These components need to function effectively to get satisfactory results and close more deals. Let's take a closer look at the features of a demand generation funnel:

  1. Targeting the Ideal Customer

  2. A general survey of your industry will help you understand the existing demand for similar products in the market. It can help you identify and build your ideal customer profile. Gaining a better perspective into your industry dynamics and ideal customer will help you tap into the customer demand effectively. The most common techniques that could be used are referrals, content distribution, third-party intent data, and more.

  3. Lead Acceleration

  4. After successfully gaining insights into the industry and your target customer, the next step involves gaining more data about your target prospects. This aids in pushing the prospect down the sales funnel in a more speedy and effective manner. This is generally carried out by enhancing your engagement with your prospects and using multi-channel engagements. Some channels could be creating targeted content, using gated content, experiential marketing, conferences, etc.

  5. Lead Generation

  6. It is one of the essential components of demand generation. It includes attracting prospects, gaining their interest, and including them in your prospect database. These prospects will be nurtured, qualified, and then handed to the sales team who will take them further down the sales funnel and close the deal.

Finer Aspects of Lead Generation

Lead generation often gets mixed up with demand generation. Let's shed more light on lead generation and give you an in-depth understanding of its finer aspects. But first let's start from the basics and understand what is a lead?

Lead is any person or organization that has indicated an interest in your products or services. They are generally generated through websites, social media platforms, advertisements, redirects, and others.

Different Types of Leads

  1. Sales Qualified Lead (SQL):
  2. These are the contacts that have suggested a strong interest in your product or service through their actions. These actions can include registering for a free trial, filling out a form on the website with a strong intent to buy, enquiring about your product/service, etc.

  3. Marketing Qualified Lead (MQL):
  4. These are the contacts that have engaged with marketing efforts and activities. These contacts are still in the consideration phase and require more guidance and nurturing before they are ready to receive a sales call. A prime example of this lead is a contact who fills out a form on the landing page for an offer or discount.

  5. Product or Service Qualified Lead:
  6. These include prospects who have used your product or service and have suggested that they are interested in becoming a paying user through their actions. This lead is typically for those organizations who have products/services which can have trials or free or limited versions with options to upgrade.

Lead Generation Process

To help you visualize and understand the process with better clarity, we will walk you through the lead generation process step by step.

ead Generation Process
  1. Prospect discovers your product or service through your marketing efforts such as website, social media page, influencer marketing, blog, etc. They relate the solution your product or service offers to the problem that they might be facing.
  2. Prospects click on your call-to-action (CTA), which can be a button, a message, or an image that will lead them to your website landing page. Some organizations have collaborated with Instagram and Facebook to sell their products. In this case, the CTA will lead them to the product page on these marketplaces.
  3. The landing page will have some offers designed to capture the attention of the prospects and push them to give up their information in exchange for the offer. The offer can be anything from gated content access, free trial, discount, etc.

It is a simple lead generation process involving finer aspects and support from marketing and sales teams. Through this, you can make the process more efficient and improve the lead quality.

Key Metrics for Lead Generation

You need an efficient lead generation to ensure consistency in acquiring new customers and closing more deals. To better understand how your strategy is performing, we must have some metrics for this performance.
  1. Click Through Rate (CTR): It is a metric that gives you insights on how many clicks or submissions your CTA receives. It indicates the audience receives your message. You can use this data to modify your social media campaigns, email marketing, and other tactics.
  2. Cost per lead: The amount of money invested in getting a single leader helps you understand the effectiveness of your strategy. A lower Cost per Lead will indicate that you are generating more leads for the exact cost, thus creating more chance of conversion for the same investment.
  3. Lead to Qualified Leads: The leads you will receive initially will require vetting and proper classification to arrive at leads with a higher probability of conversion. Having a higher ratio of Lead to Qualified Leads will indicate that your marketing efforts are sharp, attracting the target customer.
  4. Leads per channel: Leads are generated through free trials, sign-ups, gated content, demos, etc. To understand the efficiency of each channel, we can use the data on lead per channel. It improves by acquiring data on conversions per channel.

Difference between Demand Generation and Lead Generation

To address the misconceptions surrounding demand generation and lead generation, let's deep dive into the differences. It will not only bring more clarity to their uniqueness but also apprise you of their finer aspects.

  1. End Goal:
  2. Demand generation primarily focuses on converting leads into potential customers. Secondary goals of demand generation may include improving brand image and enhancing brand loyalty.

    Lead generation, on the other hand, has a much narrower scope. As lead generation is the subset of demand generation, it primarily focuses on obtaining, nurturing, and qualifying leads. These qualified leads received through lead generation are passed through the demand generation funnel to acquire customers.

  3. Content:
  4. The content published with the help of inbound marketing techniques in the initial stages of the funnel is focused on creating awareness. Secondary goals of demand generation make it necessary for the content to be easily accessible and foster curiosity.

    On the other hand, lead generation makes it necessary for the content to be used for generating leads. Thus, tactics like gated content, sign-ups, and others are essential to fulfilling this objective.

  5. Call-to-Action Strategies:
  6. Call-to-action (CTA) differs according to the objective and end goal. The CTA will lead you to the landing page in lead generation, aiming to obtain more leads. This landing page will have offers for signing up, discounts, and free trials, all of which can be used to gain leads.

    CTAs used in demand generation, on the other hand, will route the prospects towards content which will help the prospect know more about your product or service and organization. For example, blogs, videos, and other content give the user more insights into customer problems and solutions.

  7. Impact:
  8. Lead generation as an individual process will only help you to obtain, nurture & qualify leads. This process alone will not drive customer acquisition. The impact is limited to receiving information regarding potential customers.

    On the other hand, demand generation involves obtaining leads, qualifying them, reaching out to the leads, & closing the deals. It will drive customer acquisition & revenue influx. It also impacts brand image & loyalty.

Key Takeaways

Demand generation and lead generation both are essential components of the customer journey. While the former aids the organization in understanding the prospect better, the latter helps build trust for the organization. Both processes need to be coordinated effectively to gain as many new customers as they can. Both of them start at the extreme stages of the customer journey but hold much influence over others.

Suyog Ghawali
Contributing Writer
Suyog Ghawali
Contributing Writer
Sales Best Practice
How to Build a Successful Demand Generation Campaign
The evolution of sales has transformed from door-to-door hard sales to remote selling, which focuses on prospect pain points. Identifying and ...
Richa Sharma
Content Marketer