Lead generation is not demand generation

One way I see marketers in the technology industry, among others, hurting themselves is by using the term demand generation when they really mean lead generation.  Lead generation is the practice of finding prospects out there in the world, ones that have a genuine chance of purchasing from you (or taking some other action you want them to take).  That means you identify and begin a relationship with a potential buyer who already has a certain level of demand for the product you offer.  If there is no demand, there is zero chance of purchase (unless you’re a con artist), and therefore there is no lead.  In other words, the demand already exists in the market.  The lead generation activity connects that demand to a product which can fill it to both parties’ advantage.  In short, lead generation is actually demand realization.

Demand generation is something entirely different.  Demand generation is activity that actually increases the potential that exists latently in the market, without regard for the efficiency with which your sales team fills this potential.  I use the term pretty broadly to cover any activity that increases awareness of the need among target prospects, preference for a solution of your type, or brand affinity for your solution in particular.

Let’s see it in practice.  Direct mail typically is 97% lead generation and 3% demand generation.  Online advertising is maybe 70% demand generation and 30% lead generation.  Most broadcast advertising is 100% demand generation, but there is a breed of direct-heavy advertising that is strongly oriented toward lead generation.  Infomercials and extended (several minute) commercials often try to generate a significant amount of demand and also convert you into a lead or even a sale all in a single throw.

This argument may seem like an academic and anal-retentive one that doesn’t matter in practice, but I don’t feel that’s the case.  I routinely watch the marketers and business managers responsible for the budget mix get themselves confused because of these terms.  Let’s say we have a mature product for which growth has gotten perilously close to zero or in fact is in decline.  What’s the marketing response?  More demand generation.  Of course.  After all, the problem is that there is not enough demand.  So by carpet bombing sufficiently many human beings with DM and shoving an incentive down their throats, we manage to stuff a bunch of names and e-mail addresses into a database.  Boom.  Lots of demand has been generated, clearly.

And yet, no more people are buying.  The business managers all get together and scratch their heads and say, “Now how come sales continue to falter even though we’ve generated all this new demand?”  You didn’t generate demand, folks, you generated names and phone numbers in your CRM system.  Not the same thing.

It’s difficult because it’s a standard term in the industry, but I try to train marketing and sales teams to stop using the term demand generation when they really mean lead generation.  It’s difficult.  Nonetheless, I recommend this practice if you’re interested in preserving clarity of thought as you seek to optimize marketing and sales performance.

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