SaaS: Demand vs. Lead Generation


Many SaaS companies have a demand generation function within marketing. I think the term “demand generation” is terribly misguided.

There is no such thing as generating demand. Demand either exists or does not.

If demand exists in the marketplace, it can be channeled to your company via lead generation mechanisms — such as cold calling, pay-per-click advertising, etc.

If demand does not exist, there is nothing you can do about it.

Sometimes, it’s easier to see an idea when it’s in another industry.

Let’s say you run a food company.

You’ve developed a product that’s loaded with fat and sugar… and tastes like crap.

You’ve had a difficult time generating sales (no duh…).

So, you decide to hire a director of demand generation. After all, you need to generate some demand, right?

There is not demand for food that’s bad for you and tastes terrible. It doesn’t exist. No amount of so-called “demand generation” is going to do any good.

Now… if prospective customers have a problem that’s annoying enough that they want to solve but they don’t know that your product is an option, you can channel pre-existing demand to become leads for your offering.

You can educate your target customer on why your approach is more advantageous than living with the problem or any other competitive option. You can even close a sale.

What you can’t do is make customers care about problems that they don’t perceive, don’t care about, and don’t want to pay money to solve.

Many of the clients I work with end up generating sales growth of 40% to 100%+ per year. I turn down the majority of prospects that want to work with me. One of the qualifying criteria when choosing clients is finding out whether market demand exists in the prospective client’s marketplace.

If there fundamentally isn’t any demand, there is nothing I nor anyone else can do to solve that problem. The founder should pick a different problem to solve for that target customer or perhaps pick a different target customer altogether. What they shouldn’t do is try the impossible.

There used to be an expression here in the United States that was used to describe someone’s sales skills. It’s not politically correct to use anymore, but I’ll use it to make a point.

“He’s so good at selling that he could sell ice to Eskimos.” (The better way to say it is: “He is so good at selling that he could sell ice to the Inuits.”)

The idea was that the person was so good that he could sell something to people who don’t need it.

I think this is a terrible idea.

A better approach would be a more strategic choice to try to sell portable space heaters to Eskimos/Inuits instead!

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  1. Pingback: Customer Lifetime Value (CLV) in SaaS Companies

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