Rachel Johnson / July 7, 2023 / 5 MIN READ

The Difference Between Lead Gen & Demand Gen

Rachel Johnson / / 5 MIN READ

The Difference Between Lead Gen & Demand Gen

Simply put, Lead Gen is about identifying and qualifying potential customers, while Demand Gen is about creating awareness and interest in your products or services:

Lead Gen identifies and qualifies potential customers interested in your products or services through various channels, such as website forms, email marketing, and social media advertising. Once you have identified potential leads, you can nurture them through a series of touchpoints, such as email campaigns, webinars, and demos, to move them closer to a sale.

Demand Gen creates awareness and interest in your products or services among a broader audience through various channels, such as content marketing, public relations, and events. Demand Gen aims to create a “buzz” around your brand and generate interest in your products or services so that potential customers will be more likely to reach out to you when they are ready to buy.

As an early-stage B2B software company, you must optimize your investments depending on your near-term and long-term needs. To that end, let’s look at the pros and cons of each approach.

Lead Gen Pros

  • Easier & Faster to Launch: For a fast cold outreach campaign, try ZoomInfo, Sales Navigator, or sales outreach software. You can also use direct-response ads with this approach.
  • Scalability: Lead Gen can be readily scaled by increasing the budget or hiring more SDRs.
  • Attribution: Lead Gen campaigns can be easily attributed to revenue in your analytics software, so they are more predictable.
  • Linear Funnel: The Lead Gen function is linear and easier to manage: ad/cold email → landing page → demo call → deal won/lost.
  • Outsourcing: You can quickly hire a Lead Gen agency or growth hacker to drive appointments without involving your team.

Lead Gen Cons

  • Poor ROI: Most buyers are not actively buying, so ads and outreach will be ignored, leading to poor ROI.
  • Budget Burn Out: You can quickly burn out your budget and market.
  • Prioritizes leads and not revenue: Lead Gen prioritizes leads (not revenue) as a core metric.
  • Audience: You are only marketing to a cold audience.
  • Non-Differentiated: Your product will always be compared to others, and your company will be perceived as “yet another vendor.”
  • Lack of Personalization: When you market in generalities, you market to NO ONE and don’t stand out from the competition.
  • High CAC: The non-differentiated marketing message and high volume of low-quality leads mean a high CAC.
💡 Lead Gen can have short-term gains but won’t provide you with the long-term sustainable marketing predictability and ROI on the marketing spend you’re looking to achieve. Lead Gen scales faster, but the Lead Gen performance significantly decreases in the long term.

By contrast, Demand Gen scales slower, but in the long term, it can significantly outperform Lead Gen. Let’s look at the pros and cons of Demand Gen:

Demand Gen Pros

  • Shorter Sales Cycle: Leads in Demand Gen programs are highly tuned to target the right ICP leading to shorter sales cycles.
  • Higher ACV: Attracting more qualified buyers who align more closely with the problem your business solves can result in higher average contract values and Customer LTV overall.
  • Higher Conversion Rate: Your solution is more compelling to those top-of-funnel prospects because you took the time to create targeted messages for your ICP leading to higher conversion rates.
  • Sales & Marketing Partnership: Demand Gen requires closer cooperation between marketing and sales to target and engage the ICP leading to a strong revenue team.

Demand Gen Cons

  • Slow Build: Demand Gen marketing activities create awareness requiring more customer insight and the right people with suitable skill sets and thought leadership messaging.
  • Attribution: Demand Gen campaigns require a mix of self-attribution, customer interviews, and digital tracking. Most B2B companies don’t have that tracking, making it difficult to measure and direct investment.
  • Difficult to Outsource: Demand Gen requires a more intimate knowledge of market positioning and is harder to outsource, requiring close collaboration with sales.

Best Approach for Early-Stage or Scaling Companies

The temptation is always to strive for “More Leads,” but you don’t need more leads to grow your B2B business. Instead, you need fewer accounts that are more qualified in two ways: they demonstrate a high intent to buy (through engagement or intent data) and are an ICP fit.

That doesn’t mean there isn’t a place for Lead Gen, you just need to do it differently. Stop focusing on cold outbound spamming and “one-size fits all” demand-capturing ads only. Go with a full-funnel marketing approach where the role of Lead Gen is to:

  • Connect and build relationships with target accounts
  • Start conversations about a potential collaboration with engaged accounts
  • Expand the business with existing customers by expanding, upselling or cross-selling
💡 Fewer LEADS, but more REVENUE is the capital-efficient outcome to aim for.

Lead Gen should be used to generate top-of-funnel (ToFu) interest, but it’s not the Full Funnel. You want to be a “show me the revenue” type organization instead of a “show me the leads” type organization. With Demand Gen, you can build sustainable, mature marketing motions that span the full funnel – ToFu, MoFu, and BoFu instead of just ToFu. Lead Gen will be fast to produce out of the gates, but Demand Gen will be your slow and steady sustainable player over time.

What matters most is the ROI of the campaigns and their ability to drive a sustainable business. One mistake early-stage founders or revenue leaders often make is pulling a Demand Gen campaign too early before ROI is recognized because they think it’s not working. Many of the same founders might keep a Lead Gen campaign running long after it runs its course just in case it might produce a few more leads.

Demand Gen is a lot more predictable in terms of CAC once it finds its groove and a lot easier to scale, so if you find something that works on the Demand Gen side of the house, be patient; the real ROI is recognized after the “point people want to give up” or stop the campaign.

The best advice on Demand Gen is don’t give up – test, iterate, repeat, but don’t turn off the campaign until you can tell that the campaign produced positive or negative results and proved or disproved your hypothesis.

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