Lead Generation vs. Demand Generation: Know the Difference and Achieve the Perfect Mix

What is demand generation?

Demand generation is about gaining the attention of potential customers and nurturing their interest in your products and services. It’s a long-term strategy, but it has a compound impact on all marketing efforts. Over time, quality demand generation efforts result in more brand mentions, high-quality leads and revenue.

What is lead generation?

Lead generation, on the other hand, is about identifying prospects that express interest in your products and services and capturing their contact information. It’s a short-term marketing strategy with the goal of initiating sales conversations.

Both demand and lead generation are interconnected strategies and work together in moving prospects down the sales funnel. Demand generation is higher up in the funnel and builds the foundation for lead generation activities commencing in the middle of the funnel.

Three considerations when prioritizing between lead generation and demand generation

As a software marketer, you’ll need to utilize tactics to generate both demand and leads at different times. However, balancing between these efforts is a matter of prioritization dependant on multiple factors. To find the right balance between lead gen and demand gen, consider these three dimensions: 

I. Goals and timing

Understand the goals you want to achieve and the time you have to realize them.

• Lead generation transforms existing demand into actual leads by targeting in-market buyers who are ready to purchase your products or services. So, if you’re looking to acquire quick leads for an already-popular software solution, or want conversions for your newly launched offerings, lead generation will be a suitable choice.
• Contrastingly, demand gen creates a new audience by raising awareness about your solutions. If you’re a startup trying to get on people’s radars or an established company launching an innovative solution that people haven’t yet heard of, demand gen will be a better option.  

II. Content focus and channels

Know how the content focus and channels you’ll need will differ with different goals.

• Lead generation typically produces conversion-focused content aimed at capturing the attention of potential buyers and enticing them to take a specific action, such as filling out a form, email opt-ins or subscribing to a newsletter. Leverage content that shows social proof of your customer success and use paid ad channels such as search engine marketing to reach in-market buyers. Above all, make sure your copy is persuasive and contains strong calls to action.
• Demand generation content focuses on the broader relationship-building goal by subtly placing your brand in prospects’ memory and establishing you as a trusted authority in the industry. It relies on organic reach, social sharing, word-of-mouth referrals and thought leadership content to attract new prospects.

Suppose you offer cybersecurity software. In this instance, for lead generation, you could create a targeted landing page that emphasizes the importance of protecting sensitive data and offer a limited-time discount or free trial of your solution. For demand generation, publish a blog post on emerging cybersecurity threats among small businesses or host a webinar on combating cybersecurity breaches with robust solutions.

Also read: The Software Marketer’s Guide to Paid Media

III. Metrics and measurement

Metrics to measure the effectiveness of lead generation versus demand generation programs look slightly different, given their different goals.

• For lead generation, success is often measured by the quantity and quality of leads generated. Cost per lead is a key metric to track. Others include the number of form submissions, free-trial sign-ups and conversion rates.
• For demand generation, metrics shift towards brand visibility and engagement. Indicators such as website traffic, social media reach, content downloads, customer loyalty and prospect engagement levels provide insights into your campaign’s overall impact and effectiveness.

What should be your marketing priority? Lead generation or demand generation

Both these marketing strategies serve different purposes and combining the two is often more effective than relying on one alone. 

Selling your product or service directly to an audience without building brand awareness first can lead to distrust and skepticism. By running awareness campaigns, you earn “compound interest” with your prospects. It prepares your prospects for lead generation activities requiring higher commitment, such as filling up a form, talking to a sales rep or booking a free trial or a demo. 

In a crowded space like the software industry, demand generation is the key to staying in prospects’ minds (even for established brands). If you’re still wondering whether you’re ready for lead generation activities, take an awareness-scale check before jumping in.

Key takeaways

• Demand generation builds brand identity and reputation, while lead generation captures prospective customers’ contact information for immediate sales.
• Prioritize demand-gen activities before lead generation to reduce overall customer acquisition costs, maximize the quality of leads acquired and balance immediate gains with long-term value creation. 
• When considering which strategy to choose, address three key questions: What are your goals and desired timelines to achieve them? What would be the primary focus of your content? Which metrics will you use to measure your progress?