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