What Is Demand Gen? The Value & Supply Chain Interpretation
Before the technological revolution of the late 20th century, businesses stored records and data in physical files, Rolodexes, and ledgers. In many ways, business actually “felt” more tangible.
As computers entered the picture, business records became intangible. Businesses stored data in databases, on floppy drives, and on servers.
Today, instead of a heavy Rolodex or a satisfying fat ledger on a shelf, business data is now stored in the “cloud”, a symbol of something that you can see but not really touch.
Businesses started digitizing data about things that were easy to count, like inventory, prices, hours. Software vendors continue to innovate and create ways to capture data around intangible mission-critical business activities. Customer Relationship Management, via CRM implementation and demand gen, is central to many of these products.
Let’s explore the background of this process and look at a helpful analogy to understand better where business and demand gen is headed.
Value, Supply & Demand Chain
In the late 70s, computers and software revolutionized inventory management by digitizing inventory supply and tracking. In 1985, Harvard Business School professor Michael Porter introduced the value chain concept to explain the relationship between the company’s processes in converting raw materials into a finished sold product.
The value chain includes the concept of the supply chain. Digitizing the supply chain increases efficiencies between purchasing, manufacturing, and distribution.
Supply and demand are fundamental concepts in economics. What has been missing up until now is a fully realized concept of the demand chain.
The Rise of the ERP
In the early 1990s, vendors began to introduce tools for ERP - Enterprise Resource Planning - to organize business activities beyond simple inventory control. They needed to capture more data about the supply chain and quantifiable elements of the demand chain.
Most of the initial focus with ERP has been on the supply chain. This is for the simple reason that tangible objects are easier to measure and count. The demand chain incorporates qualitative data. It also tries to quantify elements of human customer relationships, not widgets.
In the manufacturing world, a robust, updated ERP is essential. We all know that if we cannot connect the information from purchasing or logistics to manufacturing and distribution, we will have problems with product inventory.
The same goes for distribution. If you are not aware of what's going on with manufacturing, then you can run into problems with inventory and fulfillment.
It would be unthinkable for a mature company with an extensive supply chain to not rely on the ERP hub in today's marketplace.
Origin of the CRM for Lead Gen
Software companies created CRM systems to increase performance in sales and lead generation. CRMs are evolving to reflect the customer journey with a company, from lead awareness to satisfied clients and all points in between. Traditionally, the CRM was folded into the ERP.
The rise of the internet created unprecedented opportunities to gather data about leads and user behavior online.
The CRM is the primary driver in the emerging concept of the demand chain. The demand chain includes marketing, service, and sales, with the CRM at the center.
Because the demand chain includes both quantitative and qualitative data, it did not develop as quickly as the supply chain.
To better understand demand gen and where it's going, we can picture the supply chain and demand chain as two interrelated flywheels.
Supply and Demand Chain Flywheel
The flywheel concept is helpful because it captures the relationship between the different departments in the supply and demand chains. We also see how friction or overheating in one chain can affect the other as flywheels that interconnect.
The supply chain flywheel has the ERP at the hub. Spinning around that hub are purchasing, manufacturing, and distribution. The demand chain flywheel has the CRM at the center, anchoring marketing, sales, and service. The CRM can also include data to help the supply chain too. Data such as buying patterns, location preferences, product demand, and purchasing patterns influence the supply chain.
The interlocking relationship between the two wheels is that if the demand chain is not spinning well, there's no reason for the supply chain to exist. On the other hand, if the supply chain has weak points and the demand wheel keeps driving sales, the company will have low customer satisfaction.
For the value chain to work correctly, both wheels need to be in communication and spinning efficiently.
Even though most business planning and spending focus have been on the supply chain, prioritizing the demand chain is becoming more critical. The flywheel analogy clarifies that the demand chain is responsible for causing the supply chain to spin faster.
The Demand Side
Before talking about the specifics, it's essential to understand what demand generation is?
Demand generation combines marketing and sales programs using inbound and lead generation to move prospects through the funnel. Building trust is vital to generating high-quality leads for the sales team.
The process requires alignment between the demand chain players. Marketing builds brand awareness and collects ongoing data about prospect pain points. Sales refine the customer conversation. The sales process can provide data to help refine product positioning.
Customer success should move beyond being the complaint department. Follow-up after the sale helps brands know what is working well or uncover unreported problems.
Demand Gen Strategy
Demand generation differs from traditional lead generation in that it takes a relationship-building view.
Demand generation leverages long-term engagement to build brand-to-customer relationships. The three main drivers of demand generations are lead generation, demand capture, and pipeline acceleration.
Lead generation generates brand awareness among potential customers and converts them to your database. Demand capture capitalizes on existing demand in the market. Brands utilize lower-funnel content and organic awareness tools, such as SEO.
Once you’ve succeeded at generating or capturing demand as opportunities, you can speed up the sales process using pipeline acceleration techniques. Pipeline accelerating is any activity that increases the intensity of lead engagement to convert leads to sales more quickly.
Demand generation is a crucial component linking marketing strategy with sales. Demand generation strategy includes:
- Aligning with overall marketing goals and budget
- Setting goals for specific outcomes
- Identifying and nurturing a target audience
- Produce content for each stage of the marketing sales funnel
- Choose appropriate channels and distribute the content
- Measure performance
Challenges to Implementing an Effective Demand Strategy
We can think about how the CRM is supposed to fulfill the same function for the demand chain on the demand side. Ideally, the CRM occupies a central role between sales, marketing, and service.
In reality, many companies are not there yet. They may still maintain silos of information where marketing, sales, and customer success have unshared data or even duplicate data.
This does more than create inefficiencies in the sales funnel. It also creates challenges for the clients because different departments only have part of the picture of their accounts.
If marketing is working with the prospect or the client, they have one experience. If they're working with sales, they get a different experience. With customer service, they may have to repeat basic information that sales did not share. All of this gives the impression that the company and brand don’t really “know” them. Inconsistency undermines trust.
How do you close the circle? The answer is putting the CRM at the center of the demand chain wheel. The CRM connects all the information and makes it accessible to sales, marketing, and service.
A robust CRM is a requirement for successful demand gen. If you don't have that foundation, aligning the three processes in the demand chain portion will be very hard.
Marketing, Sales, and Service in the Demand Chain
Purchasing, production, and distribution need to be aligned 100% on the supply chain side. If not, companies have problems with inventory, the production line, shortages, or excess inventory for different products.
Something similar can happen on the demand chain side too. You might have marketing initiatives targeting specific buyer personas. At the same time, sales might be reaching high close rates with a different niche. If sales and marketing are not aligned, it causes friction in the flywheel, and growth slows.
Questions that the demand gen team works to help align among all three departments include:
- Who is our ideal prospect?
- What kind of products are we trying to sell?
- What features make you different?
- What industries are important or relevant?
The service component needs to be integrated as well. It is inefficient and damaging to have sales and marketing in sync if the customer has a bad experience after the sale. Equally important, and generally underreported, is to know what is going well for the customer after the sale.
There is also the opportunity cost of not having a system to capture testimonials, customer, and industry case studies that prove we are delivering the value we promised during the marketing and sales process.
In the supply chain model, no one questions the need for alignment between purchasing, production, and distribution, because the impact of those mistakes on lost revenue is straightforward.
The same can happen on the demand chain side. An interconnected CRM across sales, marketing, and service can reveal weaknesses, as well as what’s working, in the demand chain. If data is kept in silos, it's harder to identify relationships and trends.
The Role of the Demand Gen Manager
We can also extend the analogy of the supply chain by talking about the people involved. In supply chain management, there are managers overseeing purchasing and logistics.
They maintain efficiencies by looking at the whole picture, from purchasing to distribution. For example, improving vendor relationships and inventory alignment requires visibility into distribution.
The Supply Chain Manager uses the ERP to access information across the supply chain to define goals and make decisions that impact the overall company. A top priority is to maintain and increase efficiency by reducing friction between departments. This makes the flywheel spin faster.
The Demand Gen Manager has a similar role. Here is the simplified comparison:
Supply Chain Manager - ERP - purchasing, manufacturing, and distribution
Demand Gen Manager - CRM - marketing, sales, service
With the help of the CRM and the company’s strategic goals, it is possible to increase efficiencies in marketing, sales, and service. The CRM can help companies close the demand chain loop.
Looking at the supply chain and demand chain flywheels is a clear way for CEOs to see the value of the CRM as an analogy for the ERP in aligning marketing, sales, and service. The key to reducing friction is to document and improve the data feeding the CRM.
What’s Next for Demand Gen?
Because it involves both data and people, demand gen is an art and a science. With the rise of Big Data, wearable devices, and the IoT, companies are facing exciting opportunities. The challenge is managing and extracting value from Big Data.
To stay competitive, companies need to create demand chain strategies that reflect their importance in the value chain. Good demand gen specialists see the demand chain in context with the company’s overall value chain.
One thing is certain. The days of manila folders and Rolodex files are long gone. The Big Data stored in the Cloud is the future.
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