What Is Demand Generation and How Does It Work?

What Is Demand Generation and How Does It Work?

12 Min Read

If you work in marketing, you’ve probably heard the phrase “demand generation.” But what does demand generation mean, and why is it important? How do you use demand generation successfully?

Read on to discover everything you need to know about this critical element for the success of your marketing strategy.

What Is Demand Generation?

Demand generation is the strategic process of creating authority and awareness for your brand, and the ensuing desire in the hearts and minds of consumers for your products.

The end goal of demand generation is the creation of reliable, high-quality leads, but its function is to alert your prospects to an issue they may be facing but are unaware of. If you were selling supplements, you might start by talking about proper nutrition’s importance for mental and physical health and how very few Americans get everything they need from a run-of-the-mill diet. 

Once you’ve successfully captured your audience’s attention and made them consider what they can do to improve the standing of their nutritional profile, you’ve successfully generated demand for the answers your product can offer and can start to get more targeted in your strategy.

Demand Generation vs. Lead Generation

What’s the difference between demand generation and lead generation?

  • Demand generation is the bigger-picture start of the process, involving the creation of awareness and excitement around your brand. It involves exciting your existing audience base and also potentially reaching out to new ones.
  • Lead generation is the ultimate and likely more concrete act of converting prospects’ attention to actionable leads.

To word this distinction another way, demand generation happens at the very top of the marketing funnel, and is akin to the very first stage of getting your prospects’ attention, whereas lead generation is for prospects who have already started to show some interest in your product — in which case, congrats are in order, as it means your demand generation process is working!

How Does Demand Generation Work?

We know that demand generation is a multifaceted, data-driven marketing strategy designed to create awareness and interest in a company’s products or services. Its main goal is to build and nurture key prospect and customer relationships for the long term. But how does it work?

The entire demand gen process can be broken down into five easy steps.

Step 1: Identifying the Target Audience

The first step is to determine who your ideal customers are and what they need. This involves segmenting the audience based on various characteristics, like demographics, behaviors, and needs.

Step 2: Creating Engaging Content

Once the target audience is identified, marketers create and distribute content tailored to their needs and interests. This could range from blog posts and whitepapers to webinars and events, with the aim to educate and engage potential customers.

Step 3: Generating and Nurturing Leads

The next step involves using marketing campaigns to generate leads and then nurture them through the sales funnel. Effective lead nurturing strategies ensure that potential customers remain interested and engaged until they’re ready to make a purchase.

Step 4: Qualifying and Scoring Leads

Not all leads are created equal, so marketers use lead scoring and qualification methods to prioritize those most likely to convert. This step helps sales teams focus their efforts on the highest-value prospects.

Step 5: Measuring and Analyzing Results

Finally, marketers use various metrics and tools to measure the success of their demand generation campaign. This step is essential to understand what’s working, and what’s not, and make data-driven decisions for future strategies.

Benefits of Demand Generation Marketing

Demand generation marketing is very important for a business looking to grow its customer base and increase its footprint. Some of its key benefits include:

  • Lead Quality: Demand generation focuses on attracting high-quality leads that are more likely to convert. It’s not about sheer quantity, but about reaching prospects who genuinely need your product or service.
  • Brand Awareness: Through varied marketing tactics, demand generation can significantly boost brand visibility and recognition, making it more likely that potential customers think of your business when they’re ready to buy.
  • Customer Retention: By continuing to provide value post-sale, demand generation nurtures existing customer relationships, increasing the chances of upsells, cross-sells, and referrals.
  • Revenue Growth: A successful demand generation strategy ultimately drives more sales by moving prospects through the funnel more effectively, contributing to bottom-line growth.
  • Marketing and Sales Alignment: Demand generation fosters collaboration between sales and marketing teams, ensuring they work together towards the same goal of driving revenue.
  • Sales Cycle Acceleration: By educating and nurturing potential customers, demand generation marketing can shorten the sales cycle, as prospects are already primed about your product or service.
  • Data Collection: Demand generation strategies often involve forms, surveys, and other methods of capturing prospect data, providing valuable insights about your target market.
  • Predictable Revenue Stream: With a well-planned demand generation strategy, businesses can create a more predictable and steady stream of leads, aiding in business planning and forecasting.
  • Cost Effectiveness: While there is an upfront cost, the focus on targeted, high-quality leads often results in a lower cost per acquisition, making demand generation a cost-effective strategy.
  • Market Expansion: Demand generation campaigns can be easily scaled or adapted to reach new markets, supporting business growth and expansion efforts.

B2C vs. B2B Demand Gen: How Are They Different?

One of the foremost differences between appealing to consumers as distinct from businesses is that consumers are individuals or families whereas businesses are larger entities.

At the very minimum, when appealing to businesses, you’ll need to get the attention of an entire team. That may seem more challenging than reaching one consumer idly browsing social media, but ultimately there’s more than one CMO whose attention has been caught that way, and every marketing team aims to stay current by keeping tabs on streaming services and socials.

Consumers tend to browse the internet or watch TV, open to being captivated by a new product or service that may enhance their lives. That is, indeed, the foundation of traditional advertising.

By contrast, businesses have plans and goals they need to hit. So any product — say, a marketing service or some tech to aid their production and distribution — will have to be congruent with their sales or productivity goals. 

Businesses will consider offerings if they’re in line with their longer-term goals, whereas consumers — especially if it’s to do with a small purchase that can be justified at the moment, as a pick-me-up — are more likely to just get something in the spur of the moment if it aligns with their general goals, such as feeling better, looking better, and so on. 

Given the clear differences between the priorities of consumers and businesses, your messaging will probably be different, too. Businesses are apt to respond to professional-looking materials full of stats, charts, and jargon.

Consumers, on the other hand, will prize such qualities as authenticity and reliability, which you can emphasize with such techniques as user-generated content (UGC).

Where Does Inbound Marketing Fit In?

Inbound marketing is an approach to marketing that emphasizes welcoming your customers and creating experiences that delight them and keep them engaged, as opposed to taking a more generalized crop-dusting sort of approach to marketing, which could lead to plenty of people getting information or offers they don’t want. 

The simple idea behind inbound marketing is that once you attract the right customers for your business, you can keep them engaged and informed on how your business’s products can help ease their pain points, and make them ongoing stakeholders in your business’s success. Making them feel like valued partners is a constant goal of inbound marketing, which aims to increase trust between customer and business, and lead to ongoing, meaningful relationships.

Inbound marketing is a component of demand generation, although not its only aspect.

Proven Demand Generation Strategies

Okay, so demand generation is key. But what are the actual demand generation strategies that work? As noted above, there will be some differences in your approach depending on whether your orientation is B2C or B2B. But there are similarities, too.

1. Master Inbound Marketing

One notable component of a demand generation strategy, as noted above, is an inbound marketing approach — which involves above all a sense of respect for the customer.

Start by modeling your ideal customer so you can then strategize how to target them. That can involve using social media to craft a profile of the kinds of sites they would visit and the sorts of material they would show an interest in.

2. Demonstrate Authority in Your Space

As the aim of demand generation is to establish your brand as a market leader, the best strategies involve establishing authority and promoting trust. Creating alliances with companies that complement your own is one way of establishing yourself as a peer worth considering in your field. That could be via co-sponsorship opportunities of conferences or panels.

Creating quality content like thoughtful essays on your areas of expertise — or white papers, if they’re for a more professional or academically-minded audience — relating to issues your business deals with is another easy and proven way to establish your bona fides in your field. That could extend to the sponsorship of seminars or podcasts related to your field of expertise. You can probably name the half dozen companies that are mainstays as podcast advertisers. It’s a powerful way of allying your brand with the right company.

3. Provide Useful Resources (For Free)

Giving away materials or creating an app resource that demonstrates your business’s prowess is another excellent demand gen strategy for marketers. Note that you should give them away for free, to reduce as much friction as possible and make it easy for your potential customers to find you. That might take some getting used to, but remember that you need to establish yourself with your potential customer base and take steps that will lead to their reaching out and consulting you as an authority.

4. Utilize Competitions

Competitions, too, may be a winning demand gen strategy. Your aim here is good word-of-mouth and positive awareness of your brand, as well as to create a desire for your goods. Many consumers may not win the competition, but you want them to stick around your site and explore content, sign up for further emails, and make a purchase or two.

5. Request Customer Testimonials

Giving away products and content doesn’t have to be a one-way street. You can request positive online reviews from real people who have used your products. Testimonials can be a powerful incentive to other possible consumers. 

The aim here is to position yourself as the go-to in your field. Think of how “Kleenex” stands for the world of facial tissues, “Xerox” is synonymous with copiers, or more recently, how “Netflix” stands for the world of streaming services.

Demand Gen Metrics & KPIs to Measure Success

Although you might think demand generation involves somewhat amorphous concepts such as goodwill and interest, your success can still (and must) be measured.

It’s important to set key performance indicators (KPIs), and other benchmarks to make sure your efforts are paying off. Some of these demand generation metrics include:

  • Marketing Qualified Leads (MQLs): These are potential customers who have shown enough interest in your product or service that they are considered more likely to become a customer than other leads.
  • Sales Qualified Leads (SQLs): These are leads that have been vetted by both the marketing and sales teams and are deemed ready for the next stage in the sales process.
  • Cost Per Lead (CPL): This is the total cost of your marketing campaign divided by the number of leads generated.
  • Cost Per Acquisition (CPA): This measures how much your business spends to acquire a new customer.
  • Customer Lifetime Value (CLV): This is a prediction of the net profit attributed to the entire future relationship with a customer.
  • Return On Investment (ROI): This is a measurement of the efficiency or profitability of an investment, calculated by dividing net profit by the cost of the investment.
  • Close Rate Per Channel: This measures the percentage of leads from a specific marketing channel that convert to a sale.
  • Marketing Cycle Length: This is the average amount of time it takes for a lead to become a customer after initial engagement.
  • Average Deal Size: This measures the average revenue your company makes from each closed deal.
  • Contribution to Total Revenue: This metric shows how much revenue can be attributed directly to marketing efforts.

In the age of big data, you can track not just how many visitors come to your site, but what content they read and find useful, so you can keep iterating and making improvements to your strategy. Stay on top of your demand generation strategy and keep it nimble and flexible.

Performance TV Changes Everything

Performance TV transforms your connected TV (CTV) — the device that allows you to stream video and other content — into a performance marketing powerhouse. It allows you to reach engaged, curious viewers where they are but also allows you to use data to tailor your offerings to them.

When it comes to demand generation, that’s incredibly good news. Streaming is where viewers’ attention is, providing more diverse content and more niche content. It’s a perfect place, with the right expertise, to find viewers and, by helping them identify their pain points, turn them into your consumers.

CTV has become the new way to find and target engaged consumers, as web marketing becomes old-fashioned, thanks to changes in digital tech like the deprecation of the third-party cookie on sites like Google and changes to data privacy laws.

By contrast, Performance TV allows markets to build profiles of their ideal consumers, and then target them with precision, while also allowing for continual improvement in the process to keep them engaged and in your company’s flywheel.

TV advertising has always been a great way of creating demand for products and letting consumers know your company exists. But in the old model, you were simply buying expensive TV real estate and hoping that a small percentage of viewers would spark to your product and later remember their interest in it. 

With Performance TV, demand generation is easier, as you can target audiences and then drive new and highly-qualified traffic to your site immediately, minimizing friction. By establishing firm goals and KPIs for your campaign, you can optimize your demand gen campaign via programmatic media buying technology. You can decide what you want the end goal of the campaign to be, and make sure it’s effective.

Essentially, when it comes to demand generation, Performance TV brings together the best of digital advertising and the best of TV advertising, to give you a sparklingly effective marketing B2B tool. Omnichannel capability means you continue to reach your audience whether they switch to their phone, tablet, or laptop.

Demand Generation: Final Thoughts

If you’re serious about demand generation, you owe it to your business to get in touch with MNTN today. MNTN is the market leader in Performance TV and the hardest working software in TV. They won’t rest until you have a demand generation strategy you’re getting real results from!