Demand gen Vs lead gen: What’s in it for SaaS enterprises?

There is a common adage among fellow SaaS marketers: Volume and ARR are everything for us!

I get that, but if you were given the opportunity to obtain 500 leads versus 50 well-qualified ones, which would you pick? Sure, there may be more chances to develop those 500 leads into something more than just ‘leads’ hatching eggs in your CRM, but this takes a significant amount of time.

And, when it comes to marketing and sales, we all know that time = money. If you use it wisely, the impact on the reward is significant and positive. So, how do companies use their time to convert their qualified leads? They find their audience and become a valuable resource.

Whether you are trying to connect with a single person or an entire platform, the truth is that people put up walls as soon as they feel like they are being sold to. This is the primary shortcoming of lead generation marketing.

While there is still a place and purpose for lead generation, it focuses too much on the seller. It may offer quantity and a quick collection of leads, but it lacks sustainability from a sales and marketing perspective.

After all, it costs a company much more money and resources to find new clients and customers than it does to cater to their current market.

However, demand generation focuses almost entirely on bringing something of value to the target audience. While you are operating within a smaller pond, you are surrounded by bigger fish to catch – which of course, refers to how likely these fish are to bite and be pulled further into your sales funnel.

With most mid-size enterprises contributing around 80-120 percent of their revenue to sales and marketing efforts in the first five years of their existence, it is crucial to allocate these budgets wisely and adequately.

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Why you need to stop confusing these strategies

It is easy to see why many sales and marketing teams confuse lead generation with demand generation – they use many of the same tools and resources to reach their goals. However, lead generation is almost always entirely focused on obtaining contact information.

In contrast, demand generation focuses on creating a relationship with the potential buyer by providing a clear sense of added value. Of course, this increases the demand.

While both strategies can significantly benefit from creating compelling content that converts, they use the targeting and content for different purposes.

The Achilles’ heel of lead generation

All companies, especially those working in the digital space, require leads to feed their streams. However, while on the hunt for as many as possible, qualifying these leads becomes an afterthought, which means your team is selling to those who do not need your service, or they cannot use it for one reason or another.

Currently, only about 56 percent of B2B companies qualify their leads before passing them to their sales teams.

Many of those companies likely spent an immeasurable amount of time, money, and resources collecting and chasing those contacts. Whether through email collection, ebook downloads, or some other form of collections-based outreach, the ball was dropped after the contacts were collected. You now have an entire team’s worth of a company’s employees dedicating their efforts to many leads that will never convert.

Refocusing with a demand gen approach

Ask any sales team what their perfect lead would look like, and they will almost all certainly reply that the best lead is the one that comes to them. When a buyer shows up in your inbox, visits your site, or calls your phone, you have already bypassed the most significant challenge related to sales and marketing – generating demand.

Creating the demand for a service is the greatest challenge as buyers do not act until they have a need, or demand, for something. Demand generation is a buyer-centric strategy that creates significant value for potential buyers through efforts to raise awareness and educate potential buyers that meet the proper qualifications.

While there are likely fewer leads, they are highly qualified, which is what is required to ensure a higher conversion rate. With 93 percent of B2B companies agreeing that content marketing generates more leads than other marketing strategies, it is hard to understand why more companies have not made the switch to a demand gen strategy.

Creating content that relates to your services/products and provides valuable information and resources to your target market is the most effective way to reach those who are already interested in what you have to offer.

These leads seek information on services and offerings that are similar to yours, so the new challenge is to ensure that you are allocating your efforts in a way that puts your content in front of these potential buyers in a space in which they are already looking for you.

There’s still a place for lead generation

Lead generation may produce high quantity, lower quality leads; however, it is not a useless strategy. Marketing and sales approaches require the proper mix of outreach and education strategies to truly remain effective.

Focusing too much on generating a vast number of leads requires a company to continually have to work to convince potential customers to become new customers, which is time-consuming and less effective. However, using lead generation as an additional, lesser strategy still encourages outreach and the chance to cast a wide net.

Using both to complete your funnel

The most effective way to produce quality leads and successfully convert them is to understand the buyer’s journey. What challenges and obstacles are your buyers facing as they consider purchasing your service or that of your competitors? What goes through their head as they consider the best option for their teams and their company?

Understanding the perspective and mindset of your buyer produces the opportunity to address their unique challenges and considerations. This is what makes a buyer-centric approach like demand generation such a crucial strategy for marketing teams.

While there is room for both lead gen and demand gen approaches in the same outreach and marketing plan, the emphasis and significant role should be applied to the later. What approach is your enterprise taking?