The Importance of Understanding the Marketing Funnel

Introduction

Speaking with several founders and entrepreneurs, I realized that there is widespread confusion with terminology and actions taken when hiring marketing personnel or using those skills. I am neither a CMO nor a marketing expert but wanted to pen down some thoughts here based on several years of experience in General Management, CEO, and as an entrepreneur while taking two SaaS businesses through to their exits.

Lead generation and demand generation are two distinct marketing strategies often confused with each other. They are different and must be put in the context of the funnel, the stage of the company, and your product.

Funnel Theory (ToFu, MoFu, and BoFu)

ToFu (top of the funnel) is aimed at awareness of the buyer’s journey when prospects are starting to discover, learn and understand the product. MoFu (middle of the funnel) is the consideration stage when prospects start to compare different options. BoFu (bottom of the funnel) is geared for the decision stage when prospects are ready to buy.

ToFu strategies raise awareness of your product. MoFu strategies aim to generate leads and qualify prospects. BoFu strategies execute deal closure.

Demand Generation

Demand generation is the process of creating product awareness with the ultimate goal to generate leads and convert them to customers, but this is a journey. Demand generation activities are typically focused on top-of-the-funnel (TOFU) marketing e.g., content marketing, social media marketing, and public relations (PR).

Lead Generation

Lead generation is converting brand-aware, product-aware prospects into customers through gaining contact information and intent qualification. Lead generation typically focuses on the middle-of-the-funnel (MOFU) and bottom-of-the-funnel (BOFU) marketing e.g., email marketing, webinars, gated content, etc.

They are both important tactics within a marketing strategy, although they serve different purposes and should be used in tandem where applicable. By generating demand for your product or service, you can generate more leads more likely to convert into customers.

Examples

The context of the product does matter, if you are a category-creating product, more emphasis must be given to demand generation up front. Lead generation comes much later of products in a new category, new markets, new products, and enterprise GTM motions. If you are in a mature market, a PLG product, or a consumer product then there must be a healthy balance between demand generation and lead generation (depending on the stage of your company).

Demand generation activities

• Create blog posts and infographics that educate your target audience about your industry and the problems your product or service solves.
• Run social media campaigns that promote your content and generate engagement.
• Write guest blog posts on other relevant websites.
• Go to industry events and speak at conferences.

Lead generation activities

• Offer gated content, such as white papers or webinars, in exchange for contact information.
• Run email marketing campaigns that nurture leads and promote your products or services.
• Host webinars or online events where you can interact with potential customers.
• Offer free trials or demos of your product or service.

Risks of the Knowledge Gap

There are consequences of not understanding these differences, own expectations, hiring decisions, and sales frustrations can all become challenges:

• A new B2B SaaS company and an unknown startup cannot go out there and expect to generate leads, new categories of products must also spend enough time and energy on demand generation.
• High-velocity consumer SaaS products, PLG, etc. must use demand gen and lead gen in tandem with each other.
• Misguided and inexperienced sales leaders get impatient with marketing without understanding these strategies, the context of the product, or the stage of the company. They expect marketing to produce leads ASAP for them to go and sell, this phenomenon always creates an “us versus them” culture between sales and marketing.
• Some products have a higher gestation period to be effective with lead generation than others, understand these differences and act accordingly. For example, a low-touch PLG product can (and must) get to lead gen quickly while a top-down enterprise product will take a while to move through the funnel.
• Founders and CEOs must understand these differences to ensure go-to-market effectiveness, and conflict avoidance to ensure the right culture sets in.
• The right content must be aligned with each strategy and executed in the right channels.

Concluding Thoughts

Founders must understand these differences and put things in the context of the funnel, the stage of the company, and the product. Getting these wrong or intermixed can result in wrong expectations, wrong hires, and result in a lot of cash burn. They are powerful when used in tandem and eventually one must get to conversion and retention of customers, it is the question of when to do what and how much.?

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