Demand creation versus demand capture.
What does this even mean?
And when should you focus on one and not the other?
We’re going to talk about it in this episode of Closing Time.
Thanks for tuning in to Closing Time the show for Go to Market Leaders.
My name is Chip House.
I’m the CMO of Insightly CRM, and today. I’m joined by Chris Walker,
who’s the CEO of Refine Labs and also host of the Revenue Vitals Podcast.
Welcome to the show, Chris.
Chip, great to be here.. Thanks for having on the show.
Also been enjoying getting to know you in the comments of LinkedIn posts
here and again.. So looking forward to a live chat.
You bet.
Yeah, I think we sort of know of each other in LinkedIn comments anyway.
Right.
So it’s great to be talking to you in person.
So what I want to start with Chris.
So I’ve been in SaaS actually for like 25 years, right?
And I started out in B2B SaaS probably
2001 and focused very much on paid
search, outbound, and events were kind of my three main go to market motions.
And I’ve heard you talk about how the game has changed significantly,
especially in the past couple of years, and it’s kind of accelerated.
Can you talk more about that change and why you think it’s changed so much?
Gosh, Chip.
First off, you’re an OG 25 years, 2001.
I’m old.
Shoutout to that you’ve probably seen a lot of change going on here.
The thing that I want to start to highlight is that the
general B2B go to market motions while there’s more technology around it,
and companies are now thinking about quote unquote account based marketing
and blah, blah, blah, blah, blah.
The general go to market motions have not changed at all.
And given how much has changed in the world
and how buyers discover things,. I think that it
warrants at least a discussion or a challenge of how we do things.
First one, let’s go to events,
in 2008 or 2012 when your company would boot up and spend
60% of the marketing budget on tradeshows and events or sometimes even higher.
Why did you do that?
It’s because the Internet had barely matured.
You didn’t spend that much on your website and B2B buyers went to conferences
to discover new innovation and technology,
and they would carefully peruse the booths because that was the main way
to discover something.
It’s how you learned about new companies, right?
Yeah. Yeah.
And ten plus years later, a B2B
professional or buyer can learn about a company in a million different ways
that are so much more efficient for them than waiting until next
August to go to your trade show conference and show up at your booth.
So I just don’t think that events, specifically the booth expense.
I think that events are worthwhile for the networking and business
development and creating content and doing market research.
And there’s so many benefits of events, but buying the booth and spending 50%
or more of your variable marketing budget on events, trade show booths, that is.
I think is wildly misaligned with how the world works today.
When you think about outbound.
I’m not saying that you shouldn’t do outbound.
What I am saying is that when you know the predictable revenue model
was published in 2011 and piloted at Salesforce
and other companies in the mid 2000s, 2007,
the only way to get to people was to call them or send them mail
or see them at an event.. They weren’t using the Internet,
they weren’t looking for your company online.
And so what did you need to do?
You needed to find their
contact information because it wasn’t
readily available in a database like ZoomInfo or other ones today.
And so you had to find their contact info by scanning their booth,
their lead badge at a trade show booth by trying to get them to fill out
some gated content.
So they gave you their email address or to try and have them sign up for a webinar.
So there are all of the motions to drive outbound were around
how do we collect contact information so that we can do outbound, which
then drove the marketing strategy around how do we MQLs or lead volume,
or oftentimes just contact information, not even really a lead.
And then lastly, 2001 paid search must have been doing real, real nice.
But over the past 20 plus years, paid search has seen a dramatic decline
in overall performance.
And every single channel will go through this.
If you look at television and radio and even like social media ads like META
and Instagram, they go through the exact same adoption
curve where the ad prices are inexpensive at the beginning,
and the people using the platform don’t know that they’re ads yet broadly.
And so for those two reasons, the ads are a lot more effective
at the beginning
when you think about overall ROI and then over time, the channel more
people spend money on their the quality of how they spend the money goes down.
The effectiveness of how a buyer
would actually click on that ad and consume it goes down, therefore
leading to a much higher cost for the exact same result.
Over the past 3 to 5 years, I believe, and I’ve seen at more than 100 B2B
companies that I’ve analyzed myself, there is a dramatic degradation in overall
ROI of paid search generally to the point where a lot of companies
would be better off only buying their branded or company terms
and spending the rest of the money somewhere else.
Not even buying their category name potentially, just given the
the cost of the ads and the effectiveness of the ads and what the ROI is.
And so in B2B companies, we build a bunch of
what I would think about as bullshit reports to justify the things
that we’ve been doing for a long time
by connecting metrics and other things that typically the ad platforms
like Google or LinkedIn or the event, they supply you with these metrics,
which obviously are biased toward the thing that they sell you.
When I think about the number one challenge in B2B companies, it’s the idea
that the metrics that get set in a company
drive and allow the wrong behaviors
by both internal employees, agencies, freelancers and consultants to
appease those metrics when the real solution
is not to go find another agency or to go to like fire your consultant.
The real solution is to fix the metrics
so that those behaviors aren’t allowed to happen anymore.
And so that’s one of the core things that I’m focused on with my company
and for my own personal endeavors is that I think that
these types of things shouldn’t be happening anymore.
And I think that if we were able to change
how we score and measure marketing and go to market overall,
it would become very clear that these low performing programs should be stopped,
decreased, and the budget should be reallocated elsewhere.
Yeah, well let’s start there, because one of the things you had said
prior that I thought was super interesting is just defining
demand capture versus demand creation, demand generation.
And that really kind of was an aha moment for me.
When you first mentioned it in a podcast that I saw maybe a year ago, maybe
two years ago, I don’t know how long ago.
Chris, But part of the reason that that’s super effective is because,
as you point out, I think B2B SaaS, especially a lot of different
companies are focused on demand capture, such as paid search, right?
Where people are filling out form downloading,
you know, a white paper or something like that,
and then sending it over to the SDR team to call.
So but help me through this.
Why is that model broken?
And what is demand creation?
What’s the other path?
Yeah, so let’s go back in time.
So I think this is really interesting because when you go back in history,
you can see why these things were created and then you can look into the future
and say the assumptions of why we created this in the first place no longer exists.
We should change what we’re doing.
And so let’s think back to, you know,. I worked at a B2B company in 2012,
and besides doing a webinar every once in a while and building
some trade show booths the marketing team did nothing to drive actual demand,
and that’s what was happening for. B2B companies for the most part in 2012
and forward.
And so what happened and typically you didn’t have like an AE
and an SDR and a solutions consultant, and a customer success manager
and all that stuff. What did you have?
You had one person that was responsible for selling the deals, account
managing the deals, expanding the deals, and that was their overall role.
They were more like a territory manager than an AE.
And so in that specific situation, when the marketing team wasn’t
bringing any demand in, the salesperson was responsible for going out,
engaging with the people, educating them and creating demand,
then capturing the demand into a sales meeting,
then closing it, then having them be successful, then expanding it.
And so the sales rep was basically responsible for the entire cycle,
which is the mindset that a lot of people bring about why sales is so important.
And I think why sales gets commission the way that they do still,
which may not make sense anymore today.
And then what happened is,
oh, marketing needs to drive in the 2012 2015.
Marketing needs to be able to drive ROI, we’re not able to measure anything.
They need to be able to do these things.. So what happened?
Then instead of having the
sales resource have to actually go and source the contacts, then marketing
just took responsibility for getting the contacts so the SDR could
call them to try and book the meeting for the AE, which then created predictable
revenue and the demand waterfall, an assembly line approach to go to market.
assembly line, lead generation marketing does stuff to get leads.
SDR is low cost resources, then cold call those leads
to try and get them into a meeting.
And then once they get into a meeting, the sales rep is supposed to try
and close as many meetings as they can into revenue.
And each part of that assembly line marketing, SDR and sales
are all optimizing for their micro part of the process, not the overall system.
And so what does that happen?
That’s why marketing is able to get 100,000 MQLs in a year
and the sales team still misses quota by 40%
because marketing is optimizing for the MQL,
not for the sales team to hit their target.
And so what I think we need to get to is we need to transition from this assembly
line, lead generation system to an all-bound integrated revenue team
where you have three main things that you need to do to drive net new business.
You need to create demand.
You need to capture demand, and then you need to convert pipeline into revenue.
Those are the three different things.
And then recognizing that marketing,
the entire company for that matter, sales and SDRs can play a part
in all of those different parts of the process.
Smart salespeople are posting on LinkedIn to their target customer to drive
awareness, to get inbound DMs, to start conversations, to build a personal brand.
Smart sales reps are doing that.. That’s demand creation.
Smart marketing teams are hosting field marketing events for people
that are in stage four, accounts that are in stage
four pipeline to accelerate that pipeline and increase win rates.
That’s a great move.
But it’s not exactly what a marketing team
did in the assembly line lead generation system.
So you can see that
smart companies are already moving to this all-bound integrated revenue team.
The problem is that they still use the assembly line lead generation metrics.
And so it prevents,
it de-incentivizes a sales rep to post on LinkedIn
and it de-incentivizes a marketing team to post on LinkedIn or to create a podcast
or do other things because the metrics are incentivizing MQL volume.
And to be frank, it’s the number one reason that a customer of my company
would fail is because they cannot break away from,
We need to get as many MQLs as possible with direct attribution,
despite the fact that in their data it’s clear that the shit isn’t working.
Yeah.
But there’s an ingrained mindset For decades now that have been happening here.
There are adopted, quote unquote best practice
frameworks that drive these things.
And I’m very
focused on building a new framework for B2B companies to operate on,
because I just see over and over again
predictable revenue and demand Waterfall are now failing companies.
The main reason is because B2B buyers are much different in 2023
than they were in 2011 when these things were published.
Yeah, it’s fascinating because I felt the shift right.
And as you talked about,. I’ve been doing this for a long time.
I did a B2C banner in 1998 that had a 15% click through
and it was like a B2C e-commerce focus and so downloaded a ton of product
just from that one banner.
But I felt it shift over the past couple of years.
And this is something I want to drill into with you, Chris, though,
is, for example, demand creation for you
as a thought leader, for a person who’s sort of a practitioner
who’s selling your ideas,. I think is different
than it is for a brand when there’s when the alignment
between the spokesperson and the product is maybe less there.
Can you talk about that a little bit? You get what I’m saying.
I get what you’re saying, but I don’t agree.
Okay. I mean, let’s talk through why.
So I see basically three
different tiers of demand creation.
You have thought leadership, you have product marketing
and you have category marketing
and category marketing, you’re marketing the category,
your category, against the status quo, not you against your competitor.
In product marketing, it’s typically you against perceived competition
and in thought leadership, it has nothing to do with your product and
it’s much more broad than the little space that you play in for your product.
The problem in B2B companies is that they are basically only focused
on talking about themselves and their product
and their little small window that they play in,
which makes it very hard for them to be objective thought leaders.
And so the thought leadership strategy
falls down because they don’t act like a consultant.
They act like a vendor that’s trying to sell you their specific product.
So it’s not really leading thoughts.
And you can tell in their language and how they behave that it’s biased.
I think that B2B companies should do this and could do it
in the thought leadership category, you need to take the mindset that I’m
the best consultant for my target customer or my target account.
It’s a very hard mindset for a B2B company,
a technology vendor or otherwise to actually live.
That’s what’s hard about it.
Product marketing.
A lot of companies do it right.
We’re building case studies, we’re building use cases, pages.
We build all these different stuff
where I think companies fail in product marketing is in the distribution.
They think about distribution is how do we rank this in a search engine,
not how do we take this customer story, put it into seven different creatives
and then run it against all of our target customers on LinkedIn ads to educate them
on how a company like them in their industry
that’s noncompetitive or super successful using our product.
B2B companies just, I think, fall down in the distribution of this content
and then oftentimes B2B companies because they’re so focused
on the competition, like, oh, how are we going to beat blah blah,
blah competitor, that they don’t market the category at all.
They only market against whoever they think that they’re competing with.
And I think that marketing the category or the movement that you all are,
that you all are driving at
your company, then gets you perceived as the category leader.
When I think that if you’re marketing against a competitor like Switch from X
to Y, oftentimes what you’re doing is actually spending money
to advertise your competitor.
If you’re talking about your competitor and you’re paying to show them
that oftentimes the people that receive the advertising will perceive it
as an advertisement for your competitor, which is a very odd psychological thing.
And so to just bring the point home,. I think that every company, regardless
of what they sell, should be
operating a very similar content strategy, using those three core
pillars, leveraging both paid and organic distribution to distribute it,
not one or the other.
In order to be successful
in a thought leadership strategy, you need to take the mindset of
I am a consultant that helps my target customer
with everything in their world, not just the little space that I play in.
Yeah, makes good sense.
I mean, that’s the whole ideation behind the creation of this Closing Time
podcast is speaking to go to market leaders who often adopt CRM and that
but just that it’s like the pain points that they think about
that they focus on in their everyday jobs and how they can get better, right?
I mean, is that essentially what you’re focusing on?
How fucking boring would this podcast be if it was only about CRMs?
You know what I mean?
Yeah, exactly.
Hey, Chris, that’s all the time we have for this episode
and excited to talk to you next week for our next episode.
Cool. Let’s do it.
And thanks to all of you for joining us today on this episode of Closing Time.
And please join us next week for the second part of my discussion
with Chris.
