Demand Gen First Principles
Part 1/3 of the Demand Gen for your First Customers mini-series
Many times when founders talk about sales, they’re referring to the entire process from creating an outreach strategy to the final negotiation before the customer signs the contract.
While the entire process is important, let’s make a clear distinction between two separate steps: (1) Demand generation - which is every process leading up to the first meeting with a prospect, and (2) Sales - which includes the first meeting and everything that happens after.
The two are closely related, but they should be discussed separately because they have different success criteria.
Determining a scalable demand generation process is the first GTM problem you need to solve if you want to grow your business. You can refine your sales, up-sell, and cross-sell motions concurrently, but without a way to generate new business you won’t be able to scale.
This is the first article of my three part “demand gen for your first customers” mini-series. Here we’re only going to focus on demand gen first principles. Let’s dive in!
How to Generate Demand
If go-to-market strategy is new to you, I’ll give you a comforting fact: for any business, there are only three possible ways to acquire new customers. That’s it. Just three.
Each of these three channels have many sub-channels, but for now let’s categorize every possible demand gen attribution into one of three buckets:
You reach out to prospects (your “Outbound” channel, or sometimes referred to as “direct”)
Prospects come to you (your “Inbound” channel)
Someone introduces a prospect to you (your “Partnerships” channel, also includes channels like Referrals, Marketplaces, and VARs)
A number of variables will impact which channels and subchannels work best and are most capital-efficient for you. Just to name a few:
The ACV of your product or service
The industry of your buyer
Your buyer segment (i.e. SMB, mid-market, enterprise)
The function and seniorities of your champion, decision maker, product users, and other stakeholders involved in the buying process
Geographic location of you and your buyers
The saturation of each channel from competitors in your ecosystem
At scale, you’ll want to build capabilities in several channels to de-risk your revenue growth since new technology or regulations can make one channel less effective (such as the evolution of email marketing technology or GDPR). The effectiveness of each subchannel will also inevitably hit a point of diminishing returns for a given product or service within a specific market.
Here’s how I think about each of the three demand gen channels in terms of acquiring your first customers for a B2B business:
Outbound
You may hear things today like “outbound is dead”, or you shouldn’t attempt outbound until you have a marketing engine built.
While it would certainly be a nice luxury to only take meetings from a flood of highly qualified inbound or “nearbound” leads, the reality is that most companies will need to do outbound to acquire some of their first customers. There are exceptions, but most B2B founders don’t have an extensive enough network or enough time and money to build a well-oiled inbound marketing or partnerships engine to get enough traction from this alone.
Outreach framework to generate a meeting
I won’t get into specific tactics (since there are already plenty of great resources online) - but know that to get a meeting, you need to do six things correctly. If you fail to do any one of these correctly, you won’t get a meeting:
Identify the right company to reach out to
Identify the right persona within the company
Craft messaging the resonates with the prospect
Deliver the messaging through an appropriate channel for the prospect
Deliver the messaging at an appropriate time
Deliver the messaging in a manner that demonstrates trust and credibility
This is why outbound is hard, and especially hard when you’re just starting out.
Even at a mature company with a well-established sales playbook, if any one of six variables isn’t perfect, the outreach won’t result in a meeting.
To be clear - you can have a product that a prospect is willing to pay for, but if the outreach fails then you won’t get any meeting or generate business with the prospect. To highlight this point, here are some examples of how outreach from a company with product market fit still won’t result in a meeting:
Trust and credibility: A sales rep cold calls the champion at the right target company, but stutters and speaks so quickly that the prospect doesn’t trust the rep
Persona: A sales rep finds the right target company at a conference and perfectly articulates the pitch - to the company’s CFO, who has 20 higher priorities even though the product solves the VP of Engineering’s number 1 priority
Timing: A rep emails an appropriate decision maker with the right messaging while the decision maker is on vacation. Coming back, the decision maker has 600 unread emails and never opens the rep’s email
Outbound is even more challenging when you’re just starting out because you have to figure out and execute on each of these six (mostly) independent variables.
The only way to do this is to experiment with each of these variables and see what works. Once you’ve generated a number of meetings, look back and see what the commonalities are among each of the meetings you generated, and double down in those areas.
As you progress your sales process, you may find that you can consistently generate meetings with a specific persona, but the deals never go anywhere. Especially if you have an enterprise product, this may mean that this persona isn’t a good entry point into the account. Always multi-thread, and find a way to get meetings with folks above the line.
Outreach hierarchy
Before you begin true cold outreach, you should leverage connections that you and your team have with prospective companies because warm introductions de-risk the sixth variable (demonstrating trust and credibility).
I’d recommend creating a “hierarchy of outreach” approach for each account. This just means that for every account you want to sell to, prioritize the most likely ways an introduction with the prospective company could lead to a sale, and determine if there’s anyone you can ask for these types of introductions. This is particularly helpful if you’re initially working named accounts within your ICP, and you or a founder have strong industry connections.
For example, this is how one of my SaaS clients who wanted to begin outreach to a targeted list of enterprise accounts created a hierarchy of outreach:
My client then went through every target company and assigned each a number on the hierarchy of outreach before beginning any outbound. I’m product agnostic, but today tools like LinkedIn Sales Navigator or HiFive may be helpful for this exercise.
If you’re asking for an introduction, make sure you keep your audience in mind. The way you describe your product to a VC isn’t the same way you should describe your product to your customer. You’ll also want to make make it as easy as possible for your connector to make an introduction, so give them a blurb email that they can easily forward.
Outbound sub-channels
If you decide to approach an account via cold outbound, you’ll need to determine which channels to use. Most successful teams take an omni-channel approach. Here are some of the most common channels I see startups use today:
Email
Phone calls
LinkedIn
In-person events
Physical mail
Physical mail may seem dated, but don’t sleep on this - especially if you have a high ACV and need to reach senior executives. Plenty of CEOs won’t open your email or answer your call but open their physical mail every day. If you haven’t already, read Sam Blond’s story about Brex.
In your early days, it’s also worth spending some energy prospecting within existing communities of your ICP that already exist (e.g. Reddit threads, Facebook Groups, Twitter/X threads, Meetups, etc.). Though it might not be scalable, you may be able to find some quick wins.
Inbound
I won’t elaborate too much here because your inbound channel is generally driven by marketing activities rather than sales activities. Any OOH, event, or digital marketing channel will become more capital efficient once you’ve refined your messaging and ICP, which you likely won’t be able to do well until you have enough paying customers unless your business is a copycat of another business with established PMF.
What’s most important for inbound in your early days is that you have (1) a minimum level of assets to be trusted and credible, and (2) a process for handling inbound leads.
Minimum level of assets
The minimum level of assets to be trusted and credible can look different depending on your industry and who you sell to, but it might look like:
A professional website
A one-page overview describing your product or service
A case-study for the persona and company type you serve
Answers to FAQs
As this list suggests, it’s hard impossible to develop these assets if you don’t have any paying customers. If you’re still trying to figure out your ICP, you’ll waste a lot of time recreating these assets for different personas and company segments. I’d be hesitant to spend too much energy on creating assets until you have sufficient confidence that you’re creating it for the right people who are actually going to view it.
Handling inbound leads
Your process to handle inbound leads doesn’t need to be fully automated at first. A lead capture form may suffice if you or someone on your team can respond promptly. Many companies also link a way to book a call with their team directly through the website.
You’ll likely see many unqualified inbound leads initially since there are plenty “curious” folks out there who have no intention to buy. It’s a tough balancing act; on the one hand you want to talk to prospective customers and maintain a positive brand image, but on the other hand it’s a waste of time to talk to someone who isn’t ever going to buy.
I’d recommend creating some baseline level of qualification before hopping on a call, or else you may find yourself spending half of your day in unqualified meetings. In the past, if someone booked time on my calendar directly from the website, before the meeting I’d send an email saying something like:
“Hey {Name} - Thanks for reaching out, I saw you just booked time on my calendar. Just to make sure we’re a good fit to help you and this call isn’t a complete waste of your time, can you confirm that {insert basic qualifying question here}?”.
Ecosystem and community led growth
A newer trend that’s becoming more relevant is ecosystem led growth, or community led growth. This just means that you curate a community of your ICP and add value to that community as a means to acquire new customers. This is great if you can pull it off because (1) you’re seen as an “expert” in your field, and (2) your ICP is in a community you control - so you can easily make relationships with them and push product updates. (Pocus is a great example of this).
Partnerships
This channel can have a long cycle to get started initially before you see any results, but it’s an area where many founders under-invest. It probably won’t be the channel where you’ll acquire your very first paying customer, but it can still be impactful early on and if executed well can pay great dividends in the long run. At a minimum, I’d recommend carving out time early on to think through logical partners in your ecosystem and take advantage of any low hanging fruit.
The premise of this channel is that your buyers also buy from and interact with plenty of other companies, marketplaces, service providers, value-add resellers, etc. that have an offering complementary to yours. It’s a win-win-win scenario if your buyer can interact with one company and get a complete package of what they need to solve their problem.
The key is that these partners need to have a reason to want to work with you. It could be that your offering helps them win more deals against one of their competitors, you give them more brand awareness, or simply because they’ll get a financial incentive to offer your product or service.
For startups, I typically see three different levels of partnership collaboration:
1. Facilitating introductions
This first level is like a tic-for-tac relationship. In its simplest form, you and the partner share relevant leads with each other, and if a lead converts into revenue then you’ll pay a “finder’s fee”. Your counsel should be able to draft a revenue share agreement specific to your situation if you find a logical partner who can feed you leads. As of today, the most common revenue share level I see is 10% (though you can likely afford much higher and still maintain strong CAC metrics)
2. Co-marketing
Some examples of this are custom landing pages on each others’ websites, co-hosting events and sharing leads, or being listed on partner marketplaces with discounts to your current customers
3. Co-selling
The highest level of partnership from a sales lens is when a partner is actively selling your product or service. This can take a number of forms - from VARs to a fully built out integration with add-on services in-app. I’ve seen a number of bespoke deals that founders create in this category.
As you’re building out this channel with partners, it may be worth trying out a “crawl, walk, run” approach to ensure it’s going to be a mutually beneficial partnership before investing too much upfront capital and time.
Quick story on this - at one of my previous companies, we were on the cusp of spending significant engineering resources to develop a white labeled version of our product within a prospective partner’s native environment. Our CTO even had several calls with their engineers on how to build this. Fortunately, our CEO made the astute decision that before allocating resources here, we should get a sense of demand for our product among their customer base. The prospective partner CEO agreed - so he emailed every single one of his customers about our product. Of their entire customer base, only a few raised their hands to learn more, and none ended up being qualified buyers for our product. If we hadn’t first taken the “crawl” approach, we would have wasted precious engineering man-hours on a partnership that wouldn’t have yielded any results.
Final thoughts
Taking a first principles approach to your demand generation strategy by channel should help you prioritize which activities to spend energy on and frame how to measure success at your stage.
Some of the best leaders I’ve worked with set specific monthly goals by channel, which they review and revisit each month before setting the next month’s goals. Especially if you’re just starting out, this is a great cadence since early wins and experiments help you scale this steep learning curve.
Liked this article? Hated it? I’d be thrilled to hear your thoughts - dan@yourstartupsales.com
Visit yourstartupsales.com if you’d like to learn more about how I help startups scale beyond founder-led sales