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

July 7, 2023
Contributor: Amita Jain

Learn the key differences between lead generation and demand generation and find out your ideal B2B marketing approach.

Generating leads and creating demand are two distinct inbound marketing tactics often confused as one. Demand generation establishes brand identity and reputation for long-term success, while lead generation captures contact information of potential buyers to drive sales in the short term.

As a marketing leader in the software industry, you may be tempted to prioritize leads to prove value to stakeholders. But here’s the thing: more than 60% of software buyers eventually choose the brand they had in mind at the start of their search. Neglecting brand building is shortsighted and compromises future sales.

To maximize your marketing budget, you need to strike a delicate balance between immediate results and long-term brand value. This means weighing the advantages of lead generation versus demand generation and understanding their differences. Let’s dive deeper into these nuances to help you find the right balance.

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.

Pro tip

Grow your circle of influence on software comparison sites such as Capterra, GetApp and Software Advice to boost your brand awareness and generate quality leads simultaneously. Software buyers consider these third-party information resources reliable and often spend up to 50% of their buying journey consulting them.

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.

Pro tip

If you feel overwhelmed by the number of metrics out there, start by identifying a handful of key performance indicators (KPIs) that provide direct insights into your marketing campaigns and help you optimize them. Moreover, create a routine to regularly review your current metrics and edit KPIs in your list on the go.

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.

Check where your audience stands on the awareness scale

To determine whether to aim for lead or demand generation, an easy way is to gauge your audience's awareness level. It involves asking questions such as: 

  • Do your target buyers acknowledge a potential business problem?
  • Are they aware of possible solutions to those problems?
  • Do they know how your product solves those problems?

If your audience is unaware of the problem you solve, or they are just beginning to grasp the situation and possible solutions to it, start with demand generation tactics to ignite their interest. On the other hand, if your audience is generally aware of the business problem and probable solutions for it, but unaware of how your software product solves it, this is a prime opportunity for lead generation.

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?

On-demand Webinar

Driving Demand Gen Efficiency: Strategies For Lean Growth

Amita Jain

Amita Jain covers B2B content creation and strategy to help businesses reach their marketing goals. She received her master’s degree from King’s College London, U.K. Exploring the world of art and reading fiction are some of her usual happy distractions outside of work. Connect with Amita on LinkedIn.

Get the Gartner Digital Markets Newsletter

We value your privacy. By submitting this form, you agree we may use your information in accordance with the terms of the Gartner Digital Markets Privacy Policy.

Connect. Convert. Thrive.

Connect to millions of in-market software buyers around the globe with our all-encompassing suite of marketing services.