Working Demand Geneneration and Lead Generation Channels for Startups in 2023
Your startup is poised for sales expansion, but how do you determine the ideal demand generation channel? Should you focus on marketing, establish a cold-calling SDR team, collaborate with channel partners, or pursue a combination of these strategies?
As with many go-to-market system design questions, the ideal demand generation channel hinges on your startup's unique situation. There are three primary contextual factors:
- Product (what you're selling)
- Market (your target audience)
- 3. Stage (your company's position on the maturity curve).
The matrix below is structured based on these factors. For a more in-depth analysis of the mentioned considerations, please refer to the main body of this article.
|Channel||Definition||Product Context||Market / Buyer Context||Other Notes|
|Outbound||Cold outreach to prospective customers via calls, emails, social messages, direct mailings, or other mediums. These prospective customers have not expressed an interest in the product.||Potential for high ACV and LTV to support high CAC Complex value propositions Complex buying and adoption requirements||Large enterprises Unique targeted buyer within organization Fortune 1000 CxOs, sales execs, low-tech buyers||Educational content increases effectiveness Consider lower CAC options first Once optimized, easier to scale predictably|
|ABM/ABS||A joint effort between Marketing and Sales to drive awareness and interest in an account across many contacts and using multiple channels (paid, outbound emails, outbound calls, etc.)||Same as Outbound plus: Multiple constituents to make product adoption successful Cross organization value propositions||Same as Outbound plus: Many constituents in the Decision Making Unit (DMU)||Same as Outbound plus: Sales and marketing teams often organized around buyer segments rather than function|
|Inbound||Creation of content (i.e. blogs, podcasts, eBooks, webinars, social posts) that attracts prospective customers to your business||Lower ACV or LTV required Categories with less content saturation Products requiring evangelism or business process transformation||SMBs or Mid-Market Many potential buyers Large TAM Conducts research online Product, engineering, marketers||Initially takes time to see results but then operates like an annuity or flywheel|
|Paid||Use of paid ads in search engines or social media platforms or compensation to influencers or affiliates to direct prospective customers to your website||Simple to message value proposition New categories with low paid competition Low cost or high price competitor in the market||Tight, targeted buyer segments Active in search and social||Good for initial testing of messaging and ICP but difficult to scale efficiently Easy for competition to outbid overnight|
|PLG||Allowing prospective customers to experience value from the product without paying or interacting with a human||Low time and effort to retainable value Simple to message value proposition Single player mode Viral potential||Tech savvy Large, horizontal market: Value primarily for end user||PLG as a sustainable moat Early Focus on PLG Increases the Likelihood of Product-Market-Fit PLG is Very Difficult to Implement After Scale|
|Partners||Selling products through another company, often referred to as a channel partner. The channel partner can generate demand, sell the demand, and/or service the customer post-sale||Easily bundled with other products Significant customization work required||Already buying through partners High strategic value for the channel partner in addition to the end customer||Most under-estimate the time and cost to enable a partner Often requires a tested direct playbook before attempting to enable partners Offers scale leverage|
Definition of outbound:
Outbound involves reaching out to potential customers via cold calls, emails, social messages, direct mailings, or other channels, despite these prospects not having shown interest in the product.
Product Contexts Suitable for Outbound:
- High ACV and LTV to offset high CAC: Outbound can be costly, typically requiring significant human resources to execute the necessary activities for setting appointments. Cold prospects may be unfamiliar with the business or even the industry, particularly in a startup context. Generating high Average Contract Value (ACV) and Lifetime Value (LTV) is crucial to balance the high Customer Acquisition Cost (CAC) and achieve favorable unit economics through this channel. Recent benchmarks indicate a minimum of $10K ACV for outbound to be feasible.
- Complex value propositions: Conveying intricate value propositions through low-touch channels like paid, inbound, or PLG can be challenging. The personalized, human-centric nature of outbound can be beneficial in this context.
- Complex buying and adoption requirements: Even if a product is straightforward to understand, the purchasing decision and adoption process might be difficult. Buyers may expect a high-touch, customized approach from the beginning, which can influence their choice of vendor. Product Context Examples: Enterprise HR Systems, Enterprise BI Systems, Finance Systems
Market/Buyer Contexts Suitable for Outbound:
- Distinct targeted buyer within an organization: If your product is aimed at a specific role within a company, such as VP of DEI or Director of Open Source Security, other mediums may struggle to target and attract these users.
- Fortune 1000 CxOs: These executives are continually deflecting and delegating tasks, making it challenging for them to conduct research or take exploratory meetings. Highly personalized outbound messages, backed by thorough outside-in analysis by salespeople, are necessary. Often, success entails securing a first meeting with a high-ranking lieutenant who can become your champion.
- Sales Execs: Sales teams serve as a bridge between their organization and the market. They tend to be more engaged with their email, social accounts, and phone activity compared to other functions.
- Low-Tech Buyers: If buyers don't spend much time online, other channel options may not be effective. Market/Buyer Examples: Personas - Plumbers, corporate development professionals, real estate asset managers, etc. Companies - Restaurants, yoga studios, government offices, etc.
Additional Notes for outbound:
- Educational content enhances effectiveness: Content such as blog articles, white papers, case studies, webinars, ROI studies, etc., enables salespeople to create frequent, engaging touchpoints with buyers. Cold prospects are often in the "Awareness" stage rather than the "Decision" stage of the buyer journey. Calls to action for product demos are suboptimal, while buyers respond better to content that helps them understand the problem, visualize the opportunity, or grasp the category. [Note: Be cautious when including attachments and links in initial outbound emails to prospects, as they can increase the likelihood of being marked as spam.]
- Evaluate lower CAC options first: Outbound can be difficult, and CAC is generally higher than with other channel options. Buyers consistently adopt tools to block outbound efforts. If you're unsure, try another channel first.
- Easier to scale predictably once optimized: If outbound starts working for a few Business Development Reps (BDRs) or Sales Development Reps (SDRs), scaling can be more predictable than other channels, assuming sufficient Total Addressable Market (TAM) to support the expansion. For instance, if a marketing team wrote a weekly blog article and generated 50 Marketing Qualified Leads (MQLs) per month in 2022, doubling the blog output wouldn't necessarily guarantee 100
Account-Based Marketing (ABM) / Account-Based Selling (ABS)
ABM/ABS Definition: A collaborative approach between Marketing and Sales to generate awareness and interest in an account by engaging numerous contacts through various channels (paid, outbound emails, outbound calls, etc.).
Suitable Product Contexts for ABM/ABS: Similar to outbound, plus the following:
- Multiple stakeholders for successful product adoption: Product adoption necessitates involvement from various functions (operations, security, IT, engineering). ABM/ABS ensures these resources are engaged at the right stage in the purchasing process and tailors the experience to address each function's specific concerns.
- Cross-organizational value propositions: Horizontal value propositions involving multiple department users demand a coordinated effort to customize messaging for each department and initiate an internal movement to prioritize the value proposition. Product Context Examples: Collaboration tools, recruiting software, corporate governance software
Suitable Market/Buyer Contexts for ABM/ABS: Similar to outbound, with the following additions:
- Numerous constituents in the Decision Making Unit (DMU): The purchase necessitates buy-in from multiple parties. The Decision Making Unit typically comprises an economic buyer, end user, business line owner, technical buyer, coach, and champion. The following provides a generic overview of these roles:
|Buyer Persona||Role in Decision-Making Unit||General Tendencies|
|Economic Buyer||Releases the funds Gives final approval Can over-ride opinions of other personas||Bases decision on price-performance Ultimately responsible for the decision internally Large prices, economic uncertainty, increased organizational impact, and lack of experience with seller's firm requires higher seniority|
|User Buyer||Evaluates impact of solution on their job Their personals success is tied to the success of the solution||Prioritizes ease of use, service/support, and history of successful implementation Concerned about required process changes|
|Technical Buyer||Determine whether solution aligns with company or industry standards Can't give final "yes" but can give final "no"||Evaluates alignment with budget, technical, security, integration, and legal constraints Wants to limit number of solutions being considered Uses time-consuming documentation requirements to fend of solution providers Claims to be decision maker but usually is not|
|Champion||Helps understand company challenges, opportunities, priorities, and politics Make introductions to key members of the DMU Coach on unique perspectives of each constituent and how to approach Significant influence over the decision or other constituents in the DMU||May align purchase with personal promotion or career path Often looking to instigate change by pursuing growth or mitigating a major risk Will partner with seller but needs deep trust Must be "willing" and "able" to be a true champion Understands the internal process to get a sale done|
|Coach||Similar to Champion, except minimal influence over the decision and other constituents in the DMU||Wants the solution for reasons unique to their personal responsibility but not high impact to the broader organization Lacks insight on the macro organizational needs and buying process|
Market/Buyer Examples: Hospitals, large financial services, franchisees
Additional Notes: Similar to outbound, along with the following points:
Organize sales and marketing teams around buyer segments instead of function: In complex buying scenarios, cross-functional attribution, goal setting, and accountability can be challenging. It's counterproductive for marketing to discontinue focusing on an account simply because an SDR has set an appointment and any revenue from that account will be credited to the outbound SDR function rather than marketing. In fact, once an SDR schedules a first appointment, marketing should intensify efforts with that account to maintain momentum, and vice versa. One solution to address this complexity is to organize cross-functional teams of SDRs, Account Executives (AEs), Account Managers (AMs), Customer Success Managers (CSMs), and a Demand Generation Marketer for a set of named accounts. This structure allows the organization to hold the cross-functional team responsible for pipeline generation, sales, renewals, and expansions, enabling the team to utilize all resources to achieve those goals.
Definition: Inbound marketing involves creating content (e.g., blogs, podcasts, eBooks, webinars, social posts) that attracts potential customers to your website and business.
Product Contexts Suitable for Inbound:
Low ACV or LTV constraints: If you plan to sell your product with a low ACV, you'll need a low CAC to maintain viable unit economics. Inbound marketing typically results in lower CAC as some stages of the buyer journey are completed using scalable educational content rather than personnel. Additionally, since salespeople interact only with prospects who have expressed interest and are further along the buyer journey, sales cycles tend to be shorter, and close rates higher, further reducing overall CAC. Categories with less online content saturation: In categories where existing online content is scarce, it's easier to stand out. Products needing evangelism or business process transformation: Educating a market can be time-consuming and costly. Utilizing scalable content helps reduce these expenses. Moreover, evangelizing a new concept usually implies ample whitespace for the content to make an impact. Product Context Examples: Conversational marketing, generative AI, SMB accounting software
Market/Buyer Contexts Suitable for Inbound:
SMBs or Mid-Market: Before the advent of inbound marketing, few vendors targeted the SMB market due to unworkable CAC math. Inbound marketing enables companies to lower CAC and offer their product at an ACV affordable for SMBs. Large number of potential buyers / Large TAM: More buyers in the market mean more potential engagement with each piece of content created. If there are only 1,000 potential buyers, the ROI on content marketing will be challenging. Conducts research online: As most content is digital, buyers who aren't active online are unlikely to encounter it. Exceptions exist, such as physical copies of studies sent via mail, but this approach lacks the advantages of SEO, low-cost distribution, content longevity, and clear attribution that digital mediums offer. Leaders in product, engineering, marketing: These individuals prefer doing their research, don't have phones, use tools other than email, are internally focused, and tend to be introverted. Thus, outbound and ABM/ABS tactics are difficult. Marketers often have large budgets and receive numerous cold calls, making it tough to break through the noise. Like product and engineering leaders, they prefer independent research rather than engaging in an end-to-end sales process. Market/Buyer Examples: Web design shops, IT consultants, security teams, small business owners
Additional Notes for Indound:
Initial time investment required, but operates like an annuity or flywheel: Few companies see significant results within the first month of inbound marketing efforts. However, after several months, the impact becomes substantial, sustainable, and continues to grow. Research shows that 90% of a company's new leads generated in a month come from content created over three months ago, sometimes even years earlier. Eliminating your outbound team means no more outbound appointments, but getting rid of your inbound team allows existing content to continue generating new leads.