Demand generation. It’s what everyone wants, but few know how to do well. It’s “black box-y”, ill-defined, and hard to understand. Yet when you trace every successful SaaS company back to its origins, you will find they got their demand generation strategy right early on in their life.
The ability to acquire customers is paramount as an early-stage startup. Lots of great products have gone to the graveyard because no one knew they existed. On the flipside, many terrible products persist (and ultimately improve) because the team figured out how to generate and convert demand.
As I’ve discussed often at High Alpha, customer feedback provides many of the important answers a new SaaS company is looking for. Acquire customers, get feedback, improve the product, repeat.
This is the way.
So, what is demand generation? How should you think about it as a brand new software company? We’ll discuss this and more below.
What is B2B Demand Generation?
Google “what is demand generation” and you will likely find competing answers. For B2B companies and to us at High Alpha, demand generation is defined by two things:
- Sourcing new qualified prospects
- Converting those prospects to customers in the form of annual recurring revenue (ARR)
Said another way, demand generation tactics generate sales opportunities and then move prospects through your pipeline.
While this concept applies broadly to any go-to-market (GTM) motion, this post will focus on sales-led companies. We will also focus on the first bullet (sourcing new qualified potential customers). More to come on product-led companies and converting prospects in future posts.
Three broad categories of demand generation
New startups have a tendency to overcomplicate things. I myself have certainly been guilty of it (more than once). For early stage demand generation, a simple approach works the best.
Startup founders need to understand that it’s a “walk before you run” type of situation. And while that’s generally good policy for most company building activities, it’s especially important within the realm of demand generation. Why? It’s very easy to waste a lot of time and money really fast.
Before we go further, let’s first discuss the three categories of demand generation. Rather than breaking out by channel, platform, internal resources, etc., we find it useful to group categories by the size of the total addressable audience. Let me explain.
One-to-one demand strategies
One-to-one demand strategies are the most targeted. It’s literally a matter of a single communication going out to a single prospect. The “big three” examples of one-to-one demand generation are:
- Founder networking
- Strategic prospecting (by founder, sales, or sales development)
- Investor, employee, or customer referrals
One-to-one demand generation is highly personalized. In most cases, it relies on warm intros or ultra-targeted outreach. One-to-one strategies are engineered with inherent credibility. It’s intentional, thoughtful, and totally bespoke. In the early days of company building, elite one-to-one demand generation is quarterbacked by the CEO (or whichever founder is most responsible for sales).
As the name suggests, these tactics do not scale well. They rely heavily on manual labor, often led by an executive, and generally restrict the total reach.
One-to-few demand strategies
One-to-few demand strategies expand the total audience size by a touch, but still are characterized by focused resources going after a defined set of prospects.
I hesitate to assign a number or “cap” to this, but in general one to few strategies should target no more than 100 prospects over a set period of time.
And for brand new startups, less is most definitely more.
Examples of one-to-few demand generation strategies include:
- Tier 1 account based marketing (ABM)
- Account executive (AE) prospecting
- Sales development
- Field marketing (small events like dinners and meetups)
- Certain focused partnerships or co-marketing opportunities
- Small direct mail sends
- Email marketing
Many of the above strategies can and should be used in conjunction with one another. The key distinction here is that you operate from a defined list of target accounts. Instead of working each prospect individually, we are targeting the list more or less at the same time.
Focusing on a small list allows you to be tight with your resources. Most startups have the budget and resources to activate more than one channel when the list size is small. This gives the startup the ability to look bigger and more credible to a small group of prospects.
The goals are to find a little more scale than you might achieve from a one-to-one approach, focus resources, and create discreet and clear learnings. For example, if you target 100 similar accounts and it doesn’t work, it’s easier to understand what went wrong vs targeting 5,000 accounts.
One-to-many demand generation strategies are used to target either a larger defined list of accounts, or to target a more generalized audience. One-to-many tactics include:
- Content marketing
- Conferences and large events
- Large scale sales development (10+ reps)
- Digital media
- Public relations
- Out-of-home advertising
- Radio advertising
- TV advertising
We won’t get into the nuances between “brand” and “demand” strategies in this post, but all of the above can be used to generate new pipeline.
These strategies afford the opportunity to maximize reach. While you can get more targeted with some than others (e.g., digital media targeting is more specific than out-of-home advertising), the major advantages of these tactics are reach, scale, and compounding gains over time.
One-to-many demand generation strategies allow brands to exert the most influence and leverage on the market as a whole. They are also time consuming, expensive, and require a deep understanding of who your customer is and what they care about.
How to properly sequence the different demand generation categories
Ultimately, SaaS companies should be striving for a healthy balance of all three demand generation categories.
- One-to-one should be used for highly-strategic prospecting.
- One-to-few should evolve to target various groups of high value and/or best fit accounts.
- One-to-many should develop into the workhorse of your demand generation function.
But new startups don’t have the resources, customer knowledge, headcount, and process to launch all three at the same time. Sequencing is very important, and the fastest growers approach this methodically.
At this point, it likely won’t surprise you that the proper sequencing is to work from one-to-one to one-to-few to one-to-many. Like I said at the beginning, walk before you run.
One-to-one demand generation is perfect for new startups. Most (probably all) of your credibility is rooted in either the founding team personally, or warm intros from investors and employees. Cold prospecting can work, but it should be from a company executive and it should be very personalized.
It’s not uncommon to see startups source their first $100k-1M in ARR purely from one-to-one strategies. Stay focused. Don’t get distracted. This is some of the most important work you need to do.
Once you have some customers in the door, the real learning starts. Companies develop a clearer picture of their ideal customer profile (ICP). You surface key customer pain points. The messaging gets crispy. You build a small but influential roster of referenceable customers and social proof. These learnings prepare you for the next phase of demand generation.
As you launch the first one-to-few campaigns, similar learnings start to occur. Except this time, the learnings are bigger and more meaningful. You test more channels and more messaging.
You start to learn what is working and what’s not. The true ICP becomes even more clear as the customer roster grows. Meanwhile, the product is improving and your unknown brand is starting to become a bit more recognizable.
Finally, you activate one or more one-to-many channels. It’s common to start with content, paid media, or events, but there is no set playbook. Learnings and market knowledge should be at a point where you feel comfortable making bigger bets. It’s likely the team has grown. The infrastructure to measure and analyze campaign performance is in place, and marketing and sales operations are wired up to support new levels of demand.
What too many companies get wrong
Far too often, companies glaze over the one-to-one and one-to-few phases. They may do some networking or source a few deals from friends. They might even build a target list and fire off some emails. The reality is, these phases require time and work.
Jumping too quickly to one-to-many channels can set a business back indefinitely. You are effectively doing the hardest, most resource intensive work without a clear definition of what you are selling and who you are selling to.
Another major risk is that these channels take a long time to assess. For example, it takes 4-6 months for an SEO strategy to bear fruit. Well if you haven’t keyed into the correct search markets, you may not even know you missed the mark for half a year. Add up the real and opportunity costs, and that miss costs you a small fortune.
A more methodical approach, though more steps, will actually get you to the promised land (predictable and scalable demand generation capabilities) much more quickly.
Walk first, then jog, then run.
Timeline and conclusion
Of course it’s not quite as easy as the idyllic sequencing I painted earlier, and it doesn’t always have to be in perfect order.
One good example of this is content marketing. I actually think most businesses should start publishing some content as soon as possible. But the early versions should be in support of direct selling, ABM campaigns, etc,. The true content machine will not kick in until later.
With that in mind, timing varies by company. As a general rule of thumb, I would focus on one-to-one demand generation strategies until you have 10 customers, one-to-few demand generation strategies until you have 25 customers, and only start thinking about one-to-many strategies after that.
As always, use this as a framework and not a playbook.