Demand Generation Funnel: 10 Metrics & KPIs to Measure Success

by Melissa Yap

9 Min Read

As more companies rethink their approach to marketing, the term “demand generation” has become a popular buzzword. Demand generation funnels have replaced sales and marketing funnels, and organizations once focused on finding leads have shifted toward building demand.

But what is demand generation, and how do you measure success?

What is a Demand Generation Funnel?

A demand generation funnel is a visual representation of how a company plans to generate interest in its products or services. It is similar to a sales or marketing funnel and incorporates both of these perspectives. However, a demand generation funnel strives to create a softer, more organic customer journey from awareness to purchase.

Creating a demand generation funnel marks a shift in a company’s strategy. Traditional marketing funnels focus on generating leads, while sales funnels focus on converting those leads into customers. Demand generation brings both of these funnels into alignment with a customer-centric strategy that focuses more on educating consumers than selling to them. It turns a cold sales pitch into a friendly conversation and advertising copy into a genuinely helpful resource.

A demand generation funnel might include the following steps:

Build awareness. This stage captures all of the visitors to your website. At this point, potential customers are anonymous or unknown visitors who have just become aware of your brand.
Drive interest. In this stage, site visitors demonstrate an interest in your product and become known leads. This could happen when they fill out a query form or sign up for your mailing list.
Identify intent. Customization is the key to this stage. You need to figure out what your known leads want and speak to that specific need. If you succeed, you will generate marketing-qualified leads (MQLs) who are primed for your sales team.
Capture demand. Once MQLs are handed over to your sales team, the goal is to prove that your product or service is the best solution to the consumer’s problem. Free trials and custom plan offers could be effective tools in this stage.
Win customers. If your attempt to capture the consumer’s demand was successful, an MQL turns into a sales-qualified lead (SQL). Now they are finally ready to make a purchase. This last step is when leads turn into customers and the goal shifts from conversion to retention.

In this funnel, the marketing team oversees the top three levels, and the sales team handles the bottom two.

Related: Demand Generation vs. Lead Generation

Demand Generation Strategies

A strong demand generation strategy is more than marketing tactics. It’s a holistic approach to optimizing interactions across the entire customer journey. The ultimate goal is to generate demand for your product or service by educating consumers about your product or service and the problem it solves.

Effective demand generation strategies focus on:

Establishing your brand as an authority. Consumers need to know they can trust your brand to provide accurate information. Releasing white papers, original research, case studies, and other in-depth content can help establish your company as an authority.
Creating high-quality content. Because of its focus on educating consumers, demand generation often relies on content marketing rather than traditional advertising. Focus on content that is informative rather than salesy. A robust blog is often a good place to start.
Connecting with customers. Demand generation is about building better long-term relationships with potential customers. As you build your content and marketing campaigns, always make sure that customers feel like people, not just potential sales. Identify your target audience and create content they will find useful.
Offering free tools and resources. Depending on the nature of your company, you could develop a free tool or some video tutorials that provide value to your audience. Avoid hiding your best content behind a paywall.
Choosing the right platforms and partners. Effective demand generation requires more than simply reaching the right people. For both owned and paid media, you need to carefully monitor the people, platforms, and content associated with your brand.
Evaluating your leads. Create a detailed demand generation funnel and provide clear guidance to your marketing and sales teams regarding what constitutes a qualified lead. Pushing customers through the funnel too quickly can undermine your attempts to build trust and form a relationship.

How Do You Measure Demand Generation?

You measure demand generation by tracking key performance indicators (KPIs) related to the number of leads generated, the cost of converting those leads to customers, how long it takes customers to move through the funnel, and how much those customers spend. You should also monitor the relative effectiveness of different content and marketing campaigns.

Popular demand generation KPIs include funnel conversion rates, customer lifetime value, cost per lead, cost per acquisition, and average deal size.

As with any type of marketing campaign, measuring the effectiveness of your demand generation efforts requires you to identify quantifiable goals, such as signing up a certain number of new users or increasing sales by a certain percentage. Then decide what steps you will take to reach those goals and how you will track your progress.

Critical Demand Generation Metrics & KPIs

Below are 10 key demand generation metrics. Understanding what each metric means will help you monitor the performance of your demand generation marketing and adjust your strategy accordingly.

Marketing Qualified Leads (MQLs)

A marketing qualified lead (MQL) is a lead that your marketing team believes is likely to make a purchase. When an MQL is identified, the sales team takes over to move them further down the funnel. Tracking MQL conversion can help you gauge whether you are reaching the right audience with your marketing efforts.

Sales Qualified Leads (SQLs)

A sales qualified lead (SQL) is a lead that your sales team believes is ready to make a purchase. Tracking SQL conversion can help you find any cracks in your sales funnel that customers slip through. You can track the percentage of MQLs that turn into SQLs as well as the number of SQLs that turn into customers.

Related: What Are SALs? Sales Accepted Leads Explained

Cost Per Lead (CPL)

To calculate cost per lead (CPL), divide the amount you spend on marketing by the number of leads generated. You can track the CPL for a specific campaign, time period, or marketing channel. Regular CPL calculations can help you decide if your marketing budget is being well spent.

A similar metric for performance TV or social media video ads is the cost per completed view (CPCV), which breaks down your spending by how many people view the entire ad.

Cost Per Acquisition (CPA)

Cost Per Acquisition (CPA) tells you how much it costs to acquire one new customer. CPA is similar to CPL, but instead of dividing by the number of leads generated, you divide by the number of new customers acquired.

Customer Lifetime Value (CLV)

Customer Lifetime Value (CLV) represents the amount you can expect a customer to spend on your business during their lifetime. In order for a marketing investment to be worthwhile, your CLV must be higher than your CPA. You must know two things to calculate CLV:

Average customer value (ACV). This is the average amount a customer spends during a specified period of time, typically a year. You can calculate this by multiplying the average order size by the average order frequency within that time period.
Average customer lifespan (ACL). This is the average amount of time between a customer’s very first and very last purchase from your business. This is typically measured in years.

CLV is calculated by multiplying the ACV by the ACL. It’s important that these two figures use the same measurement of time so that your calculations will be accurate. For instance, if you calculated ACV per year, then your ACL should also be measured in years.

Return On Investment (ROI)

Return on Investment (ROI) is a percentage that offers a big-picture assessment of how cost-effective your demand generation efforts have been. Calculating ROI is more complicated than other metrics because the exact formula will vary based on your goals and marketing investments. Another name for ROI, particularly in the context of connected TV advertising, is Return on Ad Spend (ROAS).

Close Rate Per Channel

The close rate per channel, or conversion rate (CVR) by channel, is the percentage of viewers, readers, visitors, or users who complete a certain action. What counts as a conversion can — and should — vary by marketing channel.

For instance, the goal of social media video ads might be to grow your online following. To calculate your CVR in this case, divide the number of new followers by the number of people who viewed the ad.

Marketing Cycle Length

The length of your marketing cycle shows how long it takes you to acquire a new customer. To calculate marketing cycle length, you must determine the average amount of time between your first contact with a potential customer and their first purchase—or whatever counts as a conversion for your purposes.

Average Deal Size

Average deal size is the average amount your customers spend per transaction. You can calculate this by dividing your total revenue over a certain period of time by the number of deals, or transactions, completed during that period.

Contribution to Total Revenue

Contribution to total revenue refers to the amount or percentage of revenue that can be attributed to a specific campaign or activity. This calculation will help you determine whether your demand generation efforts have a good ROI so that you can make adjustments as needed.

Related: MQL vs. SQL vs. SAL: What’s the Difference?

How Performance TV Dominates Demand Gen

If a picture is worth a thousand words, then a video is worth a thousand pictures—and Connected TV advertising is one of the best to get your video in front of potential customers.

Connected TV advertising delivers your videos via Connected TV apps and devices. This includes smart TVs, streaming apps, and gaming consoles. It can be fully integrated into Google Analytics and provides more precise and useful data than traditional, linear TV advertising. For instance, you can track ad performance across an entire household, which means a conversion will count even if the customer views the ad on one device and completes their purchase on another.

As a marketing channel, Connected TV makes it easier to reach your ideal audience. When you know who will see your video, you can deliver a memorable ad that speaks to them on a deeper level. You can make an emotional connection, provide useful information, and spark their interest without needing an overt sales pitch. In other words, you can create an ad that doesn’t feel like an ad.

Connected TV is a game changer, even for B2B operations. Trust us, we use it ourselves! We have more details in the articles we’ve written on B2B demand generation, B2B programmatic advertising, and B2B retargeting.

Final Thoughts on Key Demand Funnel Metrics

Remember that key demand funnel metrics will vary depending on your industry, product, marketing channels, and goals. The KPIs you track and how you calculate them should be tailored to your company’s definitions and demand generation funnel. Equally important is regularly evaluating and optimizing your demand generation efforts.

If your demand generation strategy seems to be underperforming, you may be missing your target audience. MNTN Performance TV can help you find your audience, drive measurable results, track attribution, and more.