Chapter 2 – Demand Capture vs Demand Generation

John and Alex feel they’re ready to conquer the ad world. They’ve nailed the prerequisites and know everything about ads-readiness. As they discussed their next steps, their CTO, Dharmesh, joined the conversation. 

Dharmesh, known for his insightful yet straightforward questions, asked, “We know we need to run ads, but what exactly are we running the ads for? Is it for the product we’ve built or for the brand we are building? Also, are we focusing on capturing existing demand or generating new demand?”

---

Simply having a great product isn’t enough. To ensure a steady growth trajectory, making the right marketing moves is crucial. 

So, should you focus on capturing existing demand, generating new demand, or both?

But before exploring the differences, an even more important question is: demand for what? 

What exactly are you generating or capturing demand for?

Demand for What?

Many companies fall into the trap of misinterpreting their demand. Some think it’s for the product, others for the brand, and some might believe it’s any demand that leads to customer engagement. 

Avoid this confusion by having a precise understanding of your target demand.

Categories and Sub-Categories

To make this concept clearer, let’s explore the concept of categories and subcategories using an example of Spear Growth. 

Spear Growth falls under all of the below categories and its sub-categories.

• Marketing Agencies: A broad category encompassing all types of agencies that provide marketing services.
• Ads Agencies: A sub-category focusing specifically on advertising services.
• B2B SaaS Marketing Agencies: A niche category focusing on marketing for B2B SaaS companies.
• SEO Agencies: Another sub-category specializing in search engine optimization.

The Venn diagrams below illustrate the overlaps and distinctions between these categories. Spear Growth sits at the intersection of these categories—indicating a specialized niche that combines elements from all these fields.

Understanding where your business fits within these categories helps clarify the specific demand you aim to generate or capture. 

For instance, Spear Growth could focus on the market for comprehensive marketing solutions combining ads and SEO for B2B SaaS companies rather than just general marketing services.

Finding the Right Balance

You need to decide whether to go broad or narrow with your focus. This approach ensures you are not just capturing random demand but strategically generating interest in a well-defined niche that leverages its strengths.

Here are some considerations:

1. Narrow Focus

Specializing in a specific niche (e.g., B2B SaaS SEO) can enhance lead quality and relevance but may limit the overall market size.

Pros

• Quality of Leads Increases: Narrowing the focus leads to higher quality leads who are more likely to convert.
• Reduced Competition: Fewer competitors in a specific niche.
• Increased Pricing Power: Your dominance in the niche enables you to charge premium prices.
• Higher Conversion Rates: Narrowing down your approach attracts high-intent leads, resulting in higher conversion rates.

Cons

• Impacts Market Size: Limiting the potential customer base.
• Ad Search Limitations: Many people in your audience won’t search for niche-specific terms, leading to missed opportunities. 

2. Broader Focus

Targeting a wide market (e.g., all marketing agencies) can increase the number of potential leads but may dilute the quality and specificity of those leads.

Pros

• Increased Market Size: Targeting a wider audience increases the potential customer base.
• Broader Search Terms: Capturing demand from general search terms used by both large enterprises and small businesses.

Cons

• Lower Lead Quality: A broader approach may attract less relevant leads or leads that are less likely to convert.
• Higher Competition: Competing in a larger market means facing more competitors, making it difficult to stand out.
• Resource Strain: Managing a larger, more diverse audience requires more resources and effort. This could stretch your team’s capacity thin.

💡Core Idea

Find a balance that aligns with your strategic goals. Too narrow, and you miss a larger audience. Too broad, and you attract leads that aren’t a good fit.

For instance, only a few people might search for “B2B SaaS SEO & Ads Agencies.” On the other hand, many people might search for “B2B Ads Agencies,” but this broader term could attract leads outside your ideal customer profile (ICP). Therefore, targeting “SaaS Ads Agencies” strikes a balance between narrow and broad. This approach has proven effective for Spear Growth, which exclusively serves B2B SaaS companies.

Testing Combinations vs. Separate Approaches

Should you target combinations of categories or focus on individual categories separately? Testing these approaches will help determine what works best for your business.

For example, a “B2B SaaS Ads Agency” might not work for Spear Growth, but a broader “SaaS Ads Agency” might yield better results. The only way they could know this is through testing. 

Note: When someone has a demand for something in a category, we say they’re “in-market” for that category of solutions. Identifying and targeting in-market audiences is crucial for both demand generation and capture strategies.

What is Demand Capture?

Demand capture means there when someone says “I want something in this category.”  You simply raise your hands and say, ‘Hey, we offer a solution in that category.”

Leverage existing demand with search ads and high-intent keywords. For example, use Google Ads to target search terms like “best contract management software.” Users searching these terms are already in the market for a solution, making them more likely to convert.

Side Note

You don’t win in demand capture by being creative with your messaging. You win by being a master of cost control, targeting like a pro, building killer funnels, and nailing your positioning.

Now when we move on to the next section to talk about generating the need, we also need to understand one major thing: Demand and need are NOT the same thing.

Demand vs. Need

The concept of “demand generation” is often misunderstood. Let’s understand the difference between generating demand and addressing a need, as the two related concepts are fundamentally distinct. 

Defining Need and Demand

A need is a basic requirement or problem a company must address. Demand is the desire for a specific product or service that can fulfill that need.

Example: An overweight person may not prioritize weight loss. The need exists, but there’s no demand. When a company highlights benefits like improved quality of life, it can shift priorities and create demand. The person might choose Company A or Company B, but the key point is that they are now in the market for weight loss solutions.

Generating Demand, Not Need

Marketing can create demand, but it cannot create need. Marketing shifts priorities and brings existing needs to the forefront of a potential customer’s mind. 

What is Demand Generation?

The demand generation process involves highlighting a problem and making that problem a priority for your audience. It’s about creating interest for a category among an audience that may not yet recognize they need it. 

Demand gen is more about education. This approach might involve content marketing, webinars, and social media campaigns that educate potential customers about particular challenges and how their product can solve them. 

Note: Always remember that you’re not generating demand for your product but generating demand for your category.

Example: Think about it. You probably have a lot of problems in your role. Maybe hiring for a key position is a headache, or some of your marketing tactics failed. Perhaps, marketing channels that used to work have suddenly stopped, or your website migration got delayed. At any point, a decision comes with a lot of problems. Usually, about ten of these issues are on the top of mind.

If you had a hundred years, you’d easily solve everything. But you don’t. So, you prioritize and focus on a few critical problems. This is where demand generation comes in. It’s a tactic where a company helps you experience something or provides information that influences your priorities in a way that benefits them. 

Spoiler Alert: In the following chapters, we’ll dive into how you can use demand generation to captivate your audience. After all, it’s the more exciting form of marketing between demand generation and demand capture.

Common Misconceptions Relating to Demand Capture & Demand Generation

There are several misconceptions about demand capture and demand generation. These can lead to ineffective marketing strategies if not understood properly.

1. Demand Generation ≠ Brand Awareness

A common misconception is that demand generation is synonymous with brand awareness. While they overlap, they are not the same. 

Brand awareness happens anytime there is a touchpoint with your brand. 

Demand generation, conversely, is about making your audience prioritize the problem you solve over other issues.

2. Google is for Demand Capture; LinkedIn is for Demand Generation

Another misconception is that specific platforms are exclusively suited for either demand generation or demand capture. 

For instance, while Google Ads are more suited to demand capture due to their search ad capabilities, they can also be utilized for demand generation. 

By targeting lower-intent keywords and using display ads, you can introduce your product to a broader audience who might not be actively searching for it but could benefit from it once they become aware of its capabilities. 

You Don’t Need to Generate Demand to Capture It

A lot of people think they should generate demand before you can capture it. In reality, allocate all your resources to demand capture—if you can. 

Generating demand isn’t always necessary. If that were the case, it would mean that unless I, Ishaan, ran demand generation ads for a B2B SaaS ads agency, no company would ever need a B2B SaaS ads agency. Clearly, that’s not the case.

Efficiently spend your money. Focus on strategies that work, not on what seems flashy or fun. Prioritize cost control, precise targeting, effective funnels, and strategic positioning.

TL;DR

Factor	Demand Capture	Demand Generation
Purpose	Capture existing demand from potential buyers actively seeking solutions	Generate new demand by changing priorities in your favor
How you win	Cost management, targeting, building funnels, and positioning	Great offers, problem-based messaging
Common channels	Google ads	LinkedIn ads
Order of running ads	Start with demand capture	Invest in demand generation if you still have the budget