Demand generation vs. demand capture

I recently read somewhere: "Hiring sales people captures demand. It doesn’t generate it".

This advice was in response to a classic mistake many start-ups make after they raise their first capital: hiring a lot of sales people and not doing the maths on whether they’re commensurately scaling demand.

"Demand generation" tends to get used by different people to mean slightly different things. But, at its core, my understanding is that it’s about creating the need for your solution or product.

In my opinion, one of the most interesting types of demand generation comes via complementary products. An example is Stripe’s Atlas.

Stripe makes money by working with successful businesses who charge their customers for their product or service. In particular, Stripe has always had a strong land-and-expand motion, with their initial customers being other SMB and growth-stage startups.

One way to grow the number of business that exist—and therefore the number of startups you can land and expand-is to literally make it easier for someone to start a business! In the process you literally create more demand for your core product, in this case Stripe. The easier it is for someone to start a business, the more likely they are to try. Whilst most will fail, there will be breakout successes and those successes will make Stripe a lot of money over time. If you’re the company that’s helping them start a business simply and easily, then you will more than likely capture their payment processing business. Boom, you’ve got yourself a new customer.

Further, in the early days, Stripe could not directly service the majority of countries around the world. Atlas also helped expand their market internationally as it made it possible for a foreign company to set up a US subsidiary using a Delaware C Corp. This helped them expand their market to overseas customers before they could operate in those regulatory environments themselves.

It feels to me like this is exactly why Stripe launched Atlas: a clever demand generation play.

How to think about demand generation opportunities

Demand generation opportunities of the Stripe Atlas sort come from understanding what situation your customers have to be in in order to buy your product and then asking how you put more people in that position.

A little brainstorming here: if I was IKEA, for example, one way I could hypothetically increase demand is by ensuring there are more kids going to college in another state, needing to furnish their room or flat in the process.

For another, imagine you’re Netflix: your goal is to have more people with free time and nothing in particular todo. Partnering with a business like Uber Eats could be an effective way to do this: it frees up time that might otherwise be spent cooking. For many people, that is going to look like watching more TV.

Perhaps these are slightly creative, even exaggerated, examples. The IKEA example is very far upstream from IKEA’s core business. But that’s the part of the fun of demand generation strategy!

Some other examples that are more grounded and perhaps closer to the types of demand generation you’d usually think of.

Take HubSpot. They created the category of inbound marketing and then also executed on it themselves, flawlessly. In growing their own SEO footprint and blog, they proved that this was possible and, in doing so, generated demand for software that helped other companies do the same. On top of that, obviously, their efforts directly captured eyeballs and educated them in order to highlight this demand.

Another example is Block’s (née Square’s) acquisition of AfterPay. One way to increase payments is to make it easy for people to purchase something before they can fully pay for it, meaning that more transactions happen (once you’ve transacted then, ultimately, on the backend, the payments must go through). Fundamentally, if you want to increase demand for your payment service, lay by is a good strategy.

Making it work for your business

Most of my examples above are big, powerful plays that are not achievable for the majority of small, medium and even enterprise businesses.

As mentioned at the start of this article, people use "demand generation" to mean different things. There are typically four things people describe when using the term. Understanding these can help you brainstorm approaches that work for the scale at and industry in which you operate.

There are four categories.

1. Capturing more of existing demand. This is essentially the same thing as "marketing", but it is sometimes what’s meant when people use the term "demand generation" so I’m listing it here.

2. Creating category demand by investing in category creation and, as a result, increasing the available demand by making customers aware of your product as an option to solve a problem they didn’t know they had. HubSpot with Inbound and Salesforce with "No Software". Salesforce’s framing all of a sudden made classic, on-premise, software a problem that needed solving.

3. Expanding the product universe. Stripe Atlas is a clear example here. Many acquisitions are designed to explicitly increase the product universe. Often these opportunities come via acquisition but we’re not all in a position to acquire other businesses, so another way to achieve the same can be solid partnerships. In the case of our own business at Vero, we’ve always been really good partners with CDPs like Twilio Segment. These help popularise the idea of event tracking, and the more companies that were doing this to solve various other problems in their business, the more demand there was for an event-driven customer engagement platform like Vero. I would say this sort of partnership is a tenable and achievable version of demand generation.

4. Manufacturing growth loops. An example for Vero would be if someone unsubscribes from an email, they see on our unsubscribe page that the email they received is "Powered by Vero". This may, in some cases, lead them to sign up. This is a classic referral loop. A stronger example drove Mailchimp’s growth for many years: their free plan required the Mailchimp logo to be in the footer of every email sent. Another recent example is Intercom’s Fin chat product. Every message you send to Fin is branded and you can click the "Powered by Fin" link that takes you to Intercom’s site. This is a form of generating demand from within the product experience itself. Note that this approach only really works effectively if the users of your product are the same as the end users. Otherwise there’s no loop!

One mistake teams make is treating these four categories as interchangeable. They are not.

Capturing existing demand is about efficiency and conversion. Category creation is about narrative and education. Expanding the product universe is about market strategy and design. Product loops are about embedding distribution inside product usage.

Each requires different skills, different time horizons and different tolerance for time-to-return.

A demand generation manager who is only measured on quarterly pipeline will naturally default to capture. A company thinking five years ahead has to invest in the other three as well.

The real leverage often comes from layering them: capture today, create a narrative for tomorrow, expand the universe for the next decade.

Bringing it all together

What I find compelling about the Stripe Atlas example is that it starts from the question "what needs to be true for someone to ever become our customer?" rather than the question "how do we generate more pipeline?" For Stripe, the answer is: a person needs to start a business. If you can make it easier for more people to start businesses, you are not just competing for market share. You are quietly increasing the size of the market itself.

Not every company can launch something as structural as Atlas and not every demand generation idea needs to be this ambitious.

But it’s a useful exercise to think about what could work for you! What situation does a customer have to be in before they can buy from you? How many people are in that situation today? And is there anything you can do to increase that number?

Demand generation is bigger than campaigns. It is about shaping the conditions that make your growth possible in the first place.

Hopefully this article has given you a few ideas.