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Mike Lieberman, CEO and Chief Revenue ScientistMon, Sep 18, 2017 13 min read

How To Balance Demand Generation And Inbound Marketing

The Secret Lies Buried In Your Own Expectations And Budget

demand generation agencyWe get asked this question often: “Do I need demand generation, inbound marketing or both?” It’s a great question for CEOs and VPs of marketing to be asking, but the answer almost always lies in the follow-up question we have to ask: “Well, that depends; what are your revenue goals for the company and what expectations do you have for this marketing over time?” In short, how quickly do you need leads?

If you’re thinking you need leads quickly and you have the budget to support it, you should consider a blended, double-stacked demand generation and inbound marketing program. The demand generation tactics will produce leads early in the process and the investment in inbound will sustain those leads, even allowing us to dial down the demand gen tactics over time.

If you have a more modest budget and a long-term view of marketing, you might be fine with only an inbound marketing program that requires a lower budget when compared to the double-stacked, fast-start approach discussed above.

Here’s how we assess whether to blend demand generation and inbound marketing together for clients.

What Are Your Short-Term And Long-Term Goals?

You must know this. I was in a client meeting recently and the client wasn’t clear on their goals. They didn’t know what their revenue goals were for the end of this year and all of next year. We are more than happy to help you create these, but it’s very difficult to create marketing that’s strategically designed to produce results when we don’t know what we’re going for. It’s like trying to get to somewhere without a map or GPS; you probably won’t make it.

A lot of you are going to have revenue goals. For example, you’re at $10 million this year and want to do $15 million next year. Great! The more aggressive your goals are and the more marketing you need to do to hit those goals, the more demand generation we typically recommend. Goals usually come with factors of time associated with them, such as $15 million by the end of 2018. If your goals are more modest and less aggressive in terms of timing, then a more inbound-weighted program might be better for your company.

What Is Your Budget For Marketing?

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This is also big. Every company should have a marketing budget that is around 1% of revenue every single month. If for the past three years you never spent a dime on marketing, and now you’re spending $12,500 on your marketing each month for your $1.25 million company, then your marketing budget is appropriate. Don’t keep lamenting about the amount of money you’re spending. You’re investing in your business like you’ve never invested before, and you’re actually trying to catch up considering you’ve underinvested for the past few years.

Companies should invest in their marketing every single month as a budgeted line item, no matter what. However, budgets do come in all shapes and sizes. Some people invest heavily, while others invest more modestly. We recently had a client double their budget with us from $9,000 a month to $18,000 a month to “get more aggressive” and really move the needle. This is sound thinking. The more you invest, the more you’ll get.

How Effective Is Your Sales Team?

We’ve already agreed that the ultimate goal here is new customers and revenue generation. This means the quality of your sales team (including your process and people) becomes an important variable.

If you have a top-notch team that is amazing at turning sales-qualified leads into high-quality sales opportunities and even better at converting sales ops into new customers, you should have an easy time driving revenue.

But if youre like most of our clients, 20% of your sales team is producing 80% of the revenue. All this means is you’ll need a lot more leads to get to the same revenue goal had all of your reps been killing it. If your sales team is average, you’ll need more money to invest in marketing to push more leads through, knowing a lower percentage will be converted into new customers. Now you can invest money into improving your entire sales effort. New sales processes, new technologies, new sales tools, new communications and new tactics like advocacy will cost you money, but they also will help to increase your close rates and shorten your sales cycle, so you ultimately produce more revenue sooner.

Again, this is going to come down to your appetite and budget for investing in these types of programs.

How Effective Is Your Current Marketing?

Infographic: Drive Better Results with Demand Generation And Inbound Marketing. Download It Now

This is important. If you’re already getting 100,000 visitors a month to your website, we won’t have to worry about driving visitors, only converting the current visitors. But if you only have 100 visitors, we have to drive new visitors and convert those visitors into leads. That means double the work because your current marketing is dramatically underperforming.

Maybe you only have 100 visitors but your site is so well done that it converts 50% of those visitors into leads. In this case, we can just focus on getting more new visitors to your site. The current performance of both marketing and sales at your company is the starting point. It’s one of the most important elements in deciding between inbound and demand gen.

How Competitive Is Your Industry?

This is also important, but a lot of other agencies skip over it. If you’re in a highly competitive space, you’re going to need a bigger budget and more patience when it comes to leads. That’s because your competitors are going to be matching your marketing tactics. When you rank for keywords, they’re going to be actively working to outrank you. When you get to the top on AdWords, they’re going to be actively working to outbid you. When you go to an event, they’re going to be actively working to outspend you and outshine you. We’ve all had competitors like this in the past.

There’s nothing to do except be aware of it and plan for it. Like police chief Brody said in the movie Jaws, you’re going to need a bigger boat. If you’re in a highly competitive industry, your budget should reflect that and you should have enough investment planned to stay competitive or, if you prefer, to outspend your competition to gain that awareness and market share. That’s a strategic decision you’ll have to make, and your marketing should match it.

What Other Factors Are In Play?

Other factors contribute to deciding how much demand generation (if any) is right in combination with an inbound marketing program. One of the other factors we look at is the prospect’s buyer journey. In particular, how long is it? If it’s a complex sales cycle, more inbound is going to be needed to nurture the prospect along the journey. If it’s a shorter sales cycle, less inbound and more upfront demand generation might be enough to drive purchase behavior.

How mature is the market? If the product or service is new and no one is aware of it, you’re going to need to lean heavily on demand generation to build that awareness and get the word out. As the market matures and people become more aware, now actively engaging in their own searches for those products or services, the program balance can shift more toward inbound marketing and away from demand generation. 

I think this is a good example of how you need to be constantly monitoring the situation and reassessing the balance and configuration of your program to make sure you shift it when (and if) that move becomes necessary.

If your budget and timeline can afford it, doing both is going to produce the best set of business outcomes with the most leads, sales opportunities and new customers. But we also understand that almost no one comes to us with an unlimited budget and an unlimited amount of patience to wait for results. This is why knowing how to configure, balance and create the right collection of tactics across both practices becomes the key to generating results with today’s marketing tools.

Also, please understand that “the right” configuration is relative to you. What’s right for Company A is likely going to be wrong for Company B and so on. This adds another dimension of complexity for the people working on creating that perfect configuration. Ultimately, what’s right for you should be all about your data, the performance of your program, your results and your expectations. Again, this means best practices, averages and comparisons are almost worthless. Keep that in mind as you do research and compare yourself to others.

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Mike Lieberman, CEO and Chief Revenue Scientist

Mike is the CEO and Chief Revenue Scientist at Square 2. He is passionate about helping people turn their ordinary businesses into businesses people talk about. For more than 25 years, Mike has been working hand-in-hand with CEOs and marketing and sales executives to help them create strategic revenue growth plans, compelling marketing strategies and remarkable sales processes that shorten the sales cycle and increase close rates.

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