The demand generation equation
At Kalungi, I took a lot of discovery calls with prospects. The questions came up more than others. A common one was: “How do you approach demand generation?”
A bit nebulous. How do you summarize that?
Demand patterns are nuanced, and my explanation would change based on how much foundational knowledge the other person has—which was always different.
But we got the question so often that I decided it was worth dissecting the core components and assembling them as a visual framework so they could be understood quickly—regardless of how much (or little) knowledge the viewer had about the tangential topics.
Before we get to the demand gen concepts, we need to acknowledge that the majority of prospects in any given B2B market are not currently in-market—or actively searching—for a solution.
John Dawes named this phenomenon the 95-5 rule, which was officially published by the Ehrenberg-Bass Institute for Marketing Science. Marketing Week also expanded on the idea and its implications.
Other people have articulated those ideas far better than I can, so I’d recommend reading their articles for a more precise understanding. The gist is this: for most B2B products, only about 20% of business buyers actively seek products in a given year—that translates to ~5% per quarter.
Then, it follows, that 95% of your market is not actively exploring solutions in any quarter.
It makes sense when you think about it—especially for complex products where success relies on significant business transformation or adoption from multiple organizational teams.
For heavier products like those, companies try to make a decision once and stick to it until they grow out of it. Maybe once every 2–5 years.
For example, changing a CRM is painful. When a company decides on one, it’s unlikely they’ll return to the CRM market until their current one fails them.
Let’s put some names on these ideas. We’ve split the market into two segments: in-market (5%) and out-of-market (95%).
Both segments can be reached, but the mechanisms for reaching each are very different:
"Create" demand: build trust and awareness for the 95% of out-of-market companies. I think of this as being “mentally available.”
"Capture" demand: meet the 5% of in-market hand-raisers in their existing search for a solution. I think of this as being “physically available.”
Demand "creation” is often about long-term, sustainable, compounding efforts.
Analogy: Planting seeds and cultivating them to harvest later- Goal: Create mental availability and trust for out-of-market prospects so you’re top-of-mind when a business challenge moves them in-market.- Content programs (podcast, newsletter, instructional video series, etc.), POV thought leadership, building user groups and communities, hosting industry events, R&D investments in positioning/messaging
Demand "capture"- Short-term, quick wins, zero-sum- Analogy: Finding mature groves where people already go to pick ripe fruit- Goal: Identify in-market prospects who are actively searching for and comparing solutions, then find ways to get included in their consideration process.- Paid search advertising, booting at industry events, Pay-per-lead (PPL) programs (G2, Software Advice, etc.), Intent-signal-based ABM, win commercial SEO keywords, partner referral programs.
Unless you play in a very mature market, you're unlikely to win in the long term by only capturing demand. It's also unlikely you'll survive very long if you can't turn existing market demand into paying clients today.
The ideal scenario is a blend of demand "capture" and "creation" activities. The proper mix depends on your team's resources, your product, and the maturity of your category.
Also, while the term "demand creation" is accepted in the marketing industry, "create" is misleading. There's plenty of debate on LinkedIn about the philosophy of this nomenclature, and I'll (mostly) stay out of it.
I believe it's easiest to think about demand "creation" as an exercise in building brand awareness and salience—building trust and staying relevant so prospects think of you when they move into the market.