Insights

Demand Generation vs Lead Generation: Where To Invest Your Marketing Dollars

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on

February 10, 2024

Insights

Demand Generation vs Lead Generation: Where To Invest Your Marketing Dollars

Discover the difference between demand generation and lead generation and learn where to invest your marketing dollars. Make informed decisions for your business.

Posted on

January 2, 2024

Alan Zhao

Head of Marketing

Demand Generation vs Lead Generation: Where To Invest Your Marketing Dollars

One of the trickiest things about building out a marketing strategy is deciding where to allocate your budget.

This is especially true in the land of startup sales and marketing, where budgets are naturally limited, and the need to generate (and demonstrate) significant ROI is high.

So, as you ponder the different potential strategies you could implement, it's likely that you’re weighing up whether to go all in on-demand generation or lead generation.

You might even be wondering what the difference between these two approaches is.

Whatever your question, we’ve got you covered in this in-depth guide. Here’s what you’re going to learn:

  • What the difference between demand generation and lead generation is
  • Key distinctions between the two practices
  • Where you should focus your investment based on the maturity of your industry and target audience
  • How to combine demand gen and lead gen for an effective full-funnel experience

Demand Generation vs Lead Generation: What’s The Difference? 

The main difference between these two approaches is that demand generation focuses on educating the 95% of potential customers who aren’t in the market to buy, while lead generation is concerned only with capturing the contact details of those customer who are (or might be) in the market.

Demand generation is a longer-term strategy that focuses on building brand identity and positive brand associations, largely through educational content such as videos, blogs, and social media interactions. 

Lead generation, on the other hand, is about targeting prospects already familiar with your brand or are in-market for your product or service for further nurturing and sales engagement.

Gartner illustrates this nicely and shows how the two practices are actually part of one larger process rather than alternatives.

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To help illustrate the difference, let's dive a little deeper into each practice.

What Is Demand Generation? 

Effective demand generation strategies achieve two primary goals:

  1. Educate the target market about a potential problem (converting them from unaware to problem-aware and eventually solution-aware)
  2. Establish the brand as a thought leader and trusted advisor, expanding brand capital and enhancing brand awareness 

The idea here is that when a given prospect reaches the end of the buying journey and comes to making a buying decision, your product or brand will be top of mind.

As Gartner reports, more than 60% of software buyers end up choosing the company they had in mind at the beginning of their search.

B2B demand generation tactics seek to capitalize on that fact by using thought leadership and educational content to get in front of potential buyers right at the start of that search.

Insightful social media posts, like this one on LinkedIn from our CEO, Max Greenwald is a great example of demand gen in action:

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What Is Lead Generation? 

In contrast to demand generation activities, lead generation tactics focus entirely on identifying prospective customers who are already in-market or have demonstrated some form of interest in your business.

Some companies adopt a very focused lead generation strategy and opt only to generate highly qualified leads (however they define that).

In most cases, however, lead gen efforts are measured purely by conversion rates and the number of new leads acquired. 

As such, B2B lead generation often becomes a numbers game, with lead generation strategies focused purely on acquiring more leads, regardless of the kind of intent they’ve demonstrated or how well they fit your ICP (ideal customer profile).

Down-funnel outbound sales emails or Ebooks that are offered in exchange for contact information, like this one from Pipedrive, are a classic example of lead generation marketing:


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3 Big Distinctions Between Demand Generation and Lead Generation 

Three key differences between demand generation marketing strategies and lead generation campaigns are

  1. The goals each seeks to achieve
  2. The marketing channels and tactics you use to find new customers
  3. What the experience looks like from the customer’s perspective.

1. Goals 

Successful demand generation is based on the goal of creating new audiences by generating awareness about a given problem and then nurturing prospects through the demand generation funnel.

To measure the success of a demand generation campaign, you might use metrics like:

  • Customer acquisition cost
  • Brand sentiment (via market research surveys)
  • Average deal size

The goal of lead generation marketing activities is to capture existing demand and turn that into leads at the top of a B2B sales funnel.

The most commonly used lead generation metrics include:

  • MQLs and SQLs
  • Conversion rate 
  • Click-through rate
  • Time to conversion 

2. Activities and Channels 

The activities and channels used in demand gen and lead generation efforts are naturally very different, given that they pursue different goals.

Lead generation content is exclusively conversion-based. You’ll see activities like lead gen forms, free trials, newsletter subscriptions and opt-ins, and other gated content like ebooks, guides, and webinars.

Your website is the primary channel where lead gen takes place. 

Social media ads can be conversion-focused, but they more commonly direct pain-point-aware prospects back to a landing page on your website to then fill in a lead capture form.

3. Customer Experience and Engagement 

The final difference between lead generation and demand generation efforts is what the experience looks like from the customer’s perspective.

The best demand generation examples are highly educational and help customers (most of whom are in the awareness stage and are therefore just discovering the extent of the problem at hand) solve critical problems.

The process is customer-led: the customer is seeking out the information, and the brand is simply there at the right time, in the right place, with the right information.

Lead generation efforts tend to be more product-forward, a little “salesy” (even aggressive), and are initiated by the brand.

The process is brand-led: the company finds ways to get in front of potential customers who are possibly in the market to buy and offers an exchange (our information for your email address).

Where Should You Focus Your Efforts: Demand Generation or Lead Generation? 

In an ideal world, you’ll invest in both demand generation and lead generation.

You’ll pour time, money, and effort into demand gen tactics that establish your brand as a thought leader and trusted advisor. You’ll then capitalize on the positive brand associations you’ve created with lead generation efforts. The two work perfectly together.

But we don’t live in that ideal world, and you’ve got a fixed budget for B2B marketing activities.

Should you invest it all in demand generation campaigns? Or focus only on generating quality leads? What about a mix between the two, with a few demand gen strategies mixed in with some lead gen content?

A good rule of thumb is to think about where your target audience is on the awareness scale. That is, are they:

  • Completely unaware of the problem your product solves (unaware)
  • Aware of the problem but don’t know how to solve it (problem aware)
  • Aware of how to solve it, but not sure about what products can help (solution aware)
  • Aware of the different products available, but not quite which one is best for them (product aware)
  • Completely aware of what the problem is, how to solve it, and which product to use for it (fully aware)

If your customers are toward the unaware side of the scale, focus on demand gen. If your customers are closer to the fully aware end of that spectrum, spend more on lead gen.

How To Combine Demand Gen and Lead Gen For Full-Funnel Engagement 

The most successful use case is to use a combination of demand generation and lead generation tactics.

You invest the majority of your budget in demand generation, establishing your brand as an industry leader, and positioning yourself as an expert. 

This targets the 95% of your TAM (total addressable market) who aren’t ready to buy, so your brand will be their first choice once they’re in-market.

Then, you build out lead generation tactics to capture the 5% of the market that are ready to buy right now.

Here’s how.

1. Commit To Building a Media Brand 

Building a media brand is about taking content marketing efforts to the next level.

You invest in producing and distributing content across a variety of media, including:

  • SEO (search engine optimization) focused blog content
  • Webinars and videos (freely accessible, not gated)
  • Social media posts 
  • Podcasts
  • Playbooks and courses 

For most organizations, the backbone of your media brand will be blog content designed to show up in search rankings and earn you some organic traffic.

P.S. We’ve got a whole series of articles showing you how to do just this. Dive in here: Building A Content Factory (Part 1 of 5).

We’d recommend going a few steps further than that. Customer collaboration platform Aligned presents a great example.

Their media page (named Streamligned) is a separate (but connected) brand, and it literally looks like a B2B Netflix.

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2. Use Brand Partnerships to Drive Awareness 

Partnering with other brands in your industry is the perfect way to expand your potential customer base and leverage the existing positive associations that similar brands have already captured.

The idea here is that you partner with brands who are in your broad industry but aren’t direct competitors.

For example, as an account-based orchestration solution, Warmly exists within the broad account-based marketing ecosystem.

So, while we might not partner with one of our competitors like Demandbase, we could still tap into the audience of brands that offer CRMs, marketing automation, content publishing, and email outreach solutions.

Which is exactly what we’re doing. 

For example, we partnered with Sendspark, a personalized video recording solution for sales teams, to produce this webinar: A New Way to Prospect with Sendspark, Warmly.ai, and The SD Lab.

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HockeyStack, a B2B GTM analytics suite, combines this with the previous step, using brand partnerships to expand its media offering.

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3. Switch From Passive to Active Engagement on Social 

For demand gen to be successful, social media marketing has to come from everyone in your organization who touches the customer experience, not just marketing teams.

That means that you, as the founder, sales leader, or head of marketing, need to get active on platforms like LinkedIn and X, rather than just being a passive observer and consumer of content.

For instance, our Head of Sales, Keegan Otter, is super active on LinkedIn.


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What you’ll note in the above post is that it's not promotional, and it's not trying to generate leads. It's focused on education and demand generation.

The post also directs traffic back to our media page, meaning it's synced with the first step (building a media brand) and helps create a cohesive omnichannel customer experience.

Learn how Keegan drives sales success for Warmly: 4 Powerful Omnichannel Sales & Marketing Examples.

4. Keep Working On Your Messaging 

Demand gen works best when you know how to connect with customer pain points.

This is an iterative process. It's not something you’ll nail right away. It is something you’ll continue working on right up until you achieve product-market fit and beyond. 

Engaging with potential prospects on social media in the context of learning and education (rather than promoting your product or services), will help you uncover what resonates.

HockeyStack’s series Do You Even Resonate? featuring Peep Laja of Wynter is a good resource to start with.

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If you’re engaging in category design, though, you’ll want to focus on differentiation. Using others’ messaging as a springboard will only get you so far. Consider engaging in some messaging testing (either manually or through a solution like Wynter).

5. Drop Spray-&-Pray Lead Generation in Favor of Targeted Demand Capture 

The astute here will have noticed that we’ve covered four out of five steps and are only just getting to the lead gen part.

That’s because if you invest heavily in demand gen, and only funnel leads through to the sales team when purchase intent is high, and the positive brand connection has been built, your lead gen process won’t need to be super complex.

You’ll capture all of that demand you’ve created and be pleased with a much higher conversion rate while you’re at it.

So, you’ll want to put aside the spray-and-pray lead gen efforts like ebooks and gated webinars and focus on capturing warm leads only.

Here’s a simple and effective framework for that:

  1. Deanonyomize site traffic to discover who is on your website and what content they’re engaging with 
  2. Enrich prospect data and sync it back to your CRM and sales engagement tools
  3. Integrate best-in-class third-party buying intent data to understand when prospects are ready to go
  4. Send personalized outbound email sequences based on firmographic and intent data
  5. Activate AI chat on your site to engage prospects 
  6. Notify reps via Slack integration when it is time to engage with high-intent prospects 

Sound like what your sales team needs to turn a solid demand-generating strategy into a revenue-building machine?

Warmly helps you execute all of the above and more. Book your custom demo to see how Warmly reveals who is on your website, how likely they are to buy & the best way to reach them.