Demand generation vs. lead generation: Why their differences matter

May 5th, 2021

Demand generation vs. lead generation: Why their differences matter

There's a stark difference and both strategies are equally important in nurturing leads and turning them into actual sales.

For B2B marketers, two strategies often come up when it comes to inbound sales and marketing to new customers to increase brand reputation. These are demand generation and lead generation, and while both are often used interchangeably, they have stark differences that need to be recognized as you try to improve your strategies to gain more customers and meet your return on investment.

As you understand the difference between both strategies, you'll have a better grasp of creating targeted campaigns that are effective and efficient.

What's the difference?

While it's easy to categorize both strategies as one and the same, there's actually a stark difference between the two. Demand generation is all about brand positioning, building trust, creating awareness and interest in a company’s products and services, and can also be used in penetrating new audiences. It's essentially at the top of your marketing funnel, focusing on the early stages of a buyer journey, as it tries to generate excitement for you as a brand. Activities for demand generation can be found in multiple channels like social media posts, videos, blogs, infographics, pay per click ads, among others.

Meanwhile, lead generation is a process by which you turn your potential prospects' attention into hot leads (otherwise known as those ready to become your actual customers). It's more concrete at the bottom of the marketing funnel--capturing contact information and nurturing those leads. Tools for lead generation can include more investment compared to general content for demand generation because you want to be more specific with attracting leads. Some efforts for attracting leads may include live or virtually-hosted events, webinars, ebooks, retargeting efforts, etc.

From the top to the bottom of the funnel

You wouldn't get to the lead generation stage if your demand generation is not in place. This is why demand generation is just as important as lead generation, although most strategies tend to focus on the latter. Think about it: if people don’t know your brand exists or what problems your solution can fix, there really isn't much prospect to convert into a hot lead.

When there's interest and trust developed at the top of the funnel during the demand generation stage, it's easy to expect an increase in your bottom line, at the lead generation stage.

Different metrics and KPI

While some aspects overlap, both approaches have slightly different metrics to focus on. Demand generation looks at more business-level numbers, while lead generation focuses more on specific campaign metrics. For demand generation, there's a need to monitor organic traffic, which are visitors who come out of your pure SEO efforts and not from paid sources; customer acquisition cost (CAC), which measures the cost of acquiring a single paying customer through a specific campaign; customer lifetime value (CLV), which is how much revenue will be generated; and close rate, which shows how many contacts are being converted into customers.

On the other hand, lead generation should keep track of the maximum cost per lead (MCPL), which is how much you can spend on a lead while generating enough profit; the number of marketing-qualified leads per campaign; as well as the conversion rates.

Both strategies are equally important in nurturing leads and turning them into actual sales. How do you apply demand generation and lead generation in your business marketing funnel?