What is Demand Generation and Where are We Today?
There are plenty of benefits associated with demand generation, from its ability to build more consistent pipelines to its faster deal velocity, higher customer LTV, and greater alignment between sales and marketing.
But before you can begin ramping up your demand-gen flywheel, it’s important that you understand what demand generation really is—as well as how it’s evolved and where we are today.
What is Demand Generation?
Demand generation—or ‘demand-gen’—is a newer concept in B2B marketing that’s been gaining traction over the last 7-8 years. Put simply, it’s a more holistic way of building the underlying infrastructure needed to scale up your marketing engine.
Demand generation represents the third of what I consider to be the three big evolutions of modern marketing. In its first iteration, marketing was predominantly brand-focused. It then moved into a lead generation phase that was inherently more siloed in its approach.
In contrast, demand generation is not just around lead gen; it's more about this holistic engine that encompasses multiple component parts across different channels. Think of demand-gen like constructing a house. When you build a house, you’ve got all of these different component parts and foundations, but you’re still adding new things all the time—and you recognise that the quality of these elements matters when it comes to your home’s long-term stability.
Demand-gen works the same way. Once you’ve got your initial engine up and running, your flywheel picks up speed and enables you to scale your commercial engine. In turn, this also solves problems around alignment—especially with customer success now being thrown into the mix as a core revenue driver as well.
Why Has Marketing Evolved?
If the idea behind demand generation involves building one commercial engine that holds sales, marketing, customer success, and other disciplines inside of it, what is it specifically that’s driven this transformation?
Let’s start by taking a closer look at the lead generation paradigm. In years past, lead-gen was the predominant marketing philosophy, largely because sales drove the funnel and marketing played only a supportive role at the top of the funnel. Since then, however, buying behaviours have changed—especially in B2B markets. This has forced a change in marketing’s role in both the funnel and in scaling pipeline, as depicted below:
These days, SaaS companies—especially those over $3-5M ARR—need to create an infrastructure that drives demand because buyers don’t typically want to engage with sales until they’ve done their own research. In fact‚ Gartner finds that “when B2B buyers are considering a purchase‚ they spend only 17% of that time meeting with potential suppliers.”
What this means is that, by the time buyers reach out as inbound leads, they aren’t new to your company or its services. They’ve done their research in advance, they’ve highlighted the 3-5 vendors they want to speak to, and they expect you to meet them where they’re at.
But then, combine this insight with research from Professor John Dawes from the Ehrenberg-Bass Institute for Marketing Science, which found that “up to 95% of business clients are not in the market for many goods and services at any one time.”
If only 5% of your potential clients are in buying mode at any given point—and if they’re only in buying mode for a very short period of time—how do you create a demand generation engine or go-to-market (GTM) engine that actually builds awareness and brand equity with the remaining 95% who aren’t currently in-market?
That’s why lead-gen doesn’t work with today’s B2B buyers—because the practice was only ever really focused on driving activity with the 5% of active buyers. Marketing now needs to think about driving demand in the other 95%, which, as many organisations have discovered, is a lot harder to do than reaching active buyers.
What Does Demand-Gen Look Like in Practice?
Taking all of that background into consideration, most organisations start with a funnel that looks something like this:
You may have seen something similar before; in fact, you may already have one in your business. But essentially, it's a straightforward, linear funnel where you've got prospects who become leads, marketing qualified leads (MQLs), sales qualified leads (SQLs), opportunities, and—eventually—closed-won accounts.
If you don't have a basic funnel like this in place, I would recommend creating one. Just be sure your team is in alignment in terms of how you define prospects, leads, MQLs, SQLs, and opportunities, as there can be some confusion around how each funnel stage should be measured.
That said, once you’ve mastered these basics, you’ll want to start moving towards a more nuanced understanding of your demand-gen funnel, which may look more like this:
If this diagram seems overwhelming, don’t worry. The key context here is that, you need to start with a top-line revenue number, and then they try to break it down to the activity level required across stages.
But really, funnels tend to operate more like big melting pots, where everything goes in one bucket - don’t do this. What’s actually helpful is to start by determining the specific channels you're deploying and then working out what numbers you need to drive from each of them.
As an example, if you know you’re trying to close 100K in a quarter, and you know you need six deals to do that, you might break it down that you expect to get two from your BDMs, two from inside sales, one from events, and one from inbound. From there, you can work out your leading indicators as to how you get to those metrics.
In this way, this graphic becomes a very useful reference for your teams to work off of on a weekly basis when it comes to setting up dashboards and making sure momentum is broken down holistically across your demand gen funnel.
One final concept I’ll leave you with is the ‘bowtie funnel’, popularised by the book The SaaS Sales Method: Sales As a Science.
In this model, the sales journey no longer just ends at the closed-won opportunity stage—you now have this other right side of the funnel that you can drive your customers through to generate revenue through upsells, cross-sells, and advocacy.
To me, this ties back to the macro situation today’s companies are facing: how can you drive more value from existing customers? This type of pipeline GTM funnel with its two-sided approach addresses important questions like how do we reduce churn? How do we drive value and revenue at all stages of the funnel, including post-close? It’s driving demand-gen teams towards two types of strategies—not just new business or new logo acquisition, but also about building a pipeline for customer growth and expansion.
The Bottom Line
Taken together, the net impact of these new ways of thinking about demand generation is that companies are seeing a need for new roles in their sales and marketing teams. Customer marketing, for example, wasn’t even around 4-5 years ago but has since become increasingly important for driving business KPIs around revenue, growth, and retention.
This, in turn, contributes to the need for systems thinking at an organisational level around the type of marketing machine you need to build. Good demand-gen systems aren’t built overnight—it can be a long and arduous process, especially if you’re still in a largely brand-focused or lead-gen GTM approach.
But you have to start thinking about it now. If you never start thinking about building the flywheel of your demand-gen engine, you’ll never be able to scale in the way you want to scale.
As an advisor, I help high-growth B2B SaaS scale-ups build scalable demand-gen machines that produce repeatable, consistent revenue. For more on how I can help transition your team to a modern, demand generation approach, learn more about my Advisory services or book a discovery call for customised guidance.