“There are exactly 0 categories in software that have 0 demand”
Jason Lemkin recently posted this.
Dear startups looking for an excuse:
I know many categories of software that right now have weakened demand. It can be hard out there.
But … I know exactly 0 categories of software that have 0 demand
Just go sell something
It made me smile – here’s why.
Far too often, we’re just capturing demand rather than creating it. That’s OK when the market conditions are favorable, but you’ll be the first to get harmed when the market isn’t favorable.
That doesn’t have to be – as long as you recognize this: When demand weakens,…
- It is very often not about ‘the market.’
- It is very often also not about your product
- It is about your ability to refocus on the most valuable problem to solve
It might very well be that:
- Your ICP has shifted. The dynamics have shifted their aspirations
- The critical problem has shifted – what was hot last quarter doesn’t have to be today
- Their options have shifted – you used to be the go-to vendor, but new competition has stolen your edge
It is what makes running a SaaS business fascinating – there’s so much opportunity to create demand.
And that’s exactly why I wrote this essay. To dig into the question: How to fuel a dependable stream of demand for your SaaS product?
But before we start, think about this first:
Question for you to reflect upon:
Are you just capturing demand, or are you creating it? What if it was the latter?
The hidden demand problem many SaaS companies have
Recently I listened to The Revenue Formula Podcast by Toni Hoghlbein, CEO of Growblocks, where he talked about Aha moments in Go-To-Market.
This quote triggered me. It highlights a problem that’s challenging many B2B SaaS companies:
“I dove into the different marketing channels. Google ads for us were top of the list. Other channels didn’t work. So the conclusion was: Spend more on Google Ads. And my Marketing guy quickly came to me and said: I don’t know where to spend anymore. All campaigns are optimized. All landing pages are optimized. There’s nothing more we can do.
So, my question became: how am I supposed to scale this thing? If our current channels are exhausted, where to go next?
Then I bumped into The long and the Short of it. And the research question they were trying to solve was: How much money should you spend on brand versus how much money should you spend on sales?
And their conclusion was: that 60% should be leading brand, and 40% should be leading sales.
The brand is the long-term thing – a slow start but compounding over time.
Sales gives you spikes, but those spikes always stay the same height.
So the optimum is to combine them.
All of those spikes, no matter how much you’re spending on that, won’t go up unless for some magic reason. So you can spend whatever amount of money you want, but you will always cap out at the same thing.
The brand side, however, is for all the other people within your ICP who don’t know there’s a solution. They maybe aren’t even aware that they have a problem yet,
They will never go on Google search to try and find you because they have done this successfully for 25 years. They don’t realize they have a problem.
Demand generation, in essence, is: You need to sell the problem.
Or, as one of my investors said: in B2B, you spend 50% of your budget on selling the solution and 50% on a budget on selling the problem.
Key takeaway: Instead of only selling the product, you need to start selling the problem. Only capturing demand limits your growth. Creating demand will help you break the ceiling.
Question for you to reflect upon:
What % of your SaaS marketing budget do you spend on selling the problem vs. selling the product? Imagine what could happen if you’d create more balance.
What is demand creation?
Demand creation in the context of Software as a Service (SaaS) refers to the various strategies and tactics that companies use to stimulate interest in, and generate demand for, their software products or services.
The ultimate goal of demand creation is to drive revenue growth by converting this interest into actual sales or subscriptions.
As Gartner states: A strong demand creation program builds brand awareness and authority, and produces thoughtful, engaging content that drives interest and cultivates leads.
The key to successful demand creation in SaaS is understanding the unique needs and pain points of your target customers and then positioning your software solution as the ideal answer to those needs.
So the keywords are:
- Build awareness around the problem
- Take position and build authority
- Stimulate targeted interest
- Generate quality demand
What’s the difference between demand creation and demand capture?
Many B2B SaaS confuse demand capture for demand creation – simply because they believe they’re trying to generate interest for their product.
But there’s a core difference that is important to understand. Let me explain:
- Demand Creation is about
- Creating a new market or expanding an existing one.
- Focus: stimulating awareness and interest in your SaaS product among potential customers.
- Demand Capture is about
- Capitalizing on existing demand in the market
- Focus: harnessing interest to drive sales from buyers who already have a recognized need or desire for a particular product or service and are looking to purchase.
Demand Creation starts from something nonexistent. It’s about developing a need or desire in customers’ minds that can only be satisfied by your product or service. It’s, therefore, more of an educating effort
In other words:
- Demand creation is about selling the idea
- Demand capture is about selling the product
The difference is this:
We all remember when Steve Jobs announced a “revolutionary and magical product that is five years ahead of any other mobile phone.” He was mostly selling the idea of a lifestyle so cool and ahead of the times that it would change how people operate. When people lined up in droves for a new Apple product, they bought into this innovative lifestyle. The iPhone made good on its promise and still dominates the market years later.
No one was searching the market for the product or service that the iPhone generously delivered upon. Instead, Apple created demand that wasn’t there – and the rest is history.
But there are plenty of examples from the B2B SaaS space.
Just look at vendors like Drift. They didn’t focus on selling a chatbot or a conversational marketing platform. Instead, they sold you the idea that the traditional way of marketing is over. They sold us the idea of the ‘old way’ (before Drift) and the ‘new way’ (after Drift).
Slack did precisely the same. They don’t sell us a social collaboration tool. Instead, they made us imagine what we could accomplish together. It’s all about creating a big gap between ‘what is’ and ‘what can be.’
Take Evernote: They didn’t sell us a tool to collect notes. Instead, they sold us the idea of ‘feeling organized without effort.’ ‘So nothing falls through the cracks.’ That you will ‘remember everything important.’
Alternatively, Dropbox. They didn’t sell us just another better file storage tool. Instead, they sold us the idea of ‘Working better, safer, together.’
These are all examples of creating demand that wasn’t there. They all faired well by it.
Is Demand Creation harder than Demand Capture?
People often skip demand creation for what they think will be an easier win through demand capture. To an extent, that’s true because the results come faster and much more measurable.
But whether it’s harder or not is not the question. The right question to ask is: What’s investment will give us the biggest impact?
So let’s look at it from that perspective
Pros of Demand capture
- It’s faster due to the fact intent is there which can be captured
- it’s very measurable to calculate ROI.
- Attribution is relatively easy to follow.
Cons of Demand capture
- Limited potential since you’re competing with everyone else for the same intent (often <3% of the total market)
- More capital intensive – since it’s often ads /PPC driven
- The long-term effect is absent. If you stop the process, the capturing stops
Pros of Demand Creation
- Less capital-intensive since it’s about content
- The potential is unlimited – by sharing your big idea, you can own the audience (in an unexplored market (often +97%)
- Long-term effects are far greater – once the flywheel is in motion, it keeps going.
Cons of Demand Creation
- It’s harder to make people aware of a problem they don’t know they have or feel yet.
- Requires more time – it’s the long-game: a slow start but compounding over time.
- Less measurable to calculate ROI
It’s obviously not black and white.
Surely it depends on the context. Demand capture is hard in a saturated market but easier when less players are involved. Whereas demand creation can either be straightforward or challenging depending on the complexity of the education piece and receptiveness of your target market…
I, therefore, strongly believe that the power is in the mix. Only 3% of the market is ‘in the market’ at any point in time, so there’s an opportunity to become top of mind with 97%. That’s powerful.
How to get started with your demand gen strategy?
The most important ingredient to create demand in the market is your Value Proposition.
It’s the foundation of your business that explains how your product solves customers’ problems, improves their situation, and delivers unique benefits. It’s the primary reason a prospect should buy from you.
It’s crucial because it makes you attractive to your target market and makes you stand out from your competitors.
However – in order to create demand, your value proposition is not enough. That’s where Narrative Design comes in. And here’s why: the leverage of storytelling.
It’s a perfect framework to sell the idea, not the product (see chapter #9 in my book, The Remarkable Effect).
- It wakes people up by evoking an emotional response in your audience.
- It influences the perceptions and actions of your ideal customers.
- It makes them realize they’re on a dead-end road
- It inspires them to act
Let me illustrate this by sharing the 5-step narrative design from one of my customers: CISOteria, a patented platform for CISOs/CIOs who want to guarantee no business disruption.
Step 1: What’s the undeniable change in the market?
We believe that the current CyberSecurity industry is ridiculous.
Security spending has skyrocketed from 1% to 15% of IT budgets in less than ten years, and cyber risk is just getting worse.
Note: You want to open people’s eyes
Step 2: How is this negatively impacting your ideal audience (the old game)?
What’s happening here is what we call Operational CyberSecurity.
Security teams just buy more technology tools thinking that this will solve their problems and with that,
- budgets will never be high enough
- failure in executing effective cyber controls just increase
- resulting in more breaches, to the benefit of attackers
- security becoming an uncontrolled business risk
It’s a vicious cycle that feels impossible to break.
Note: You want to connect the dots for your audience
Step 3: What’s required to escape? Adapting to the new game
Getting out of this trap requires changing the game: Strategic CyberSecurity.
That’s about acknowledging that.
- Cyber security is, first and foremost, an executive management issue.
- It is about focusing on what matters and fixing the root cause, i.e., the lack of enforced cyber processes.
- And that cyber risk (not just cyber threat) should be tracked 24/7
Note: This is about changing perception
Step 4: Articulate why it is so hard to adapt.
Making this shift is hard for many Cybersecurity professionals
- It’s easier to fix the security symptoms and install new tech than to change people’s behavior in processes that cause security issues.
- Decisions are hard to make because there’s no data on how business risk is connected to tech threats.
- They haven’t been trained to speak the language of business executives who often don’t understand or even want to understand
Note: This is about showing empathy
Step 5: Explain what you’ve built to embrace the New Game
To play the new game, we’ve created a solution that enables our customers to pull three patented levers:
- Connect the business impact dots. The effect: Focus on what matters
- Establish a cyber strategy. The effect: take out the root cause and execute with precision
- Oversee your strategy 24/7: The effect: control & reduce risk
The result: Move from chaos to clarity, and make cybersecurity a non-issue
Note: This is about inspiring them to action
As you can see, the key to effective narrative design is authenticity. The best narrative is:
- rooted in truth
- focused on the needs, interests, and aspirations of your target audience.
Question for you to reflect upon:
How would you describe the old game in the market you’re addressing with your SaaS solution? How’s that holding your ideal customers back?
How can narrative design be applied as a business strategy?
What I love about narrative design is that we can apply it in all stages of a customer journey – but beyond that – it’s a fantastic instrument to align your whole SaaS business.
As illustrated above, it gives everybody inside the company the story about the change in the world that you’re addressing, why it’s so hard for your ideal customers to embrace that (showcasing empathy), what challenges that provide them, and what you’re doing to make them succeed: The new game.
Narrative design unites your team. It gets everyone rowing in the same direction. Applying it well will give you vector alignment.
It gives you a framework to communicate your unique point of view on the market and grounds how your SaaS product will help people achieve it.
And this makes it the perfect instrument to leverage across all different parts of your funnel – simply because it gets people in the right mindset:
- Top of the funnel: here, you can leverage it to talk about the undeniable change in the world. This creates awareness about a problem they didn’t realize they had
- High/Middle of the funnel: here, you can leverage it to talk about the winners and losers of the new game created by the undeniable change in the world. This creates interest.
- Middle of the funnel: here, you can fuel a flywheel for evangelism, bringing fans of your game who aren’t users of your product into the process. This fuels desire.
- Sales Process: helping your sales force empathize with how hard it is to do – addressing the pains – and leveraging that moment to optimally position you how you can make the most significant difference for your prospect. This creates urgency and action.
Here’s where the value proposition takes over.
Getting deals flowing again in your sales funnel is about making people realize doing nothing is not an option. Very often we don’t even realize we have a problem, because we’re just living it. Our eyes need to be opened. Narrative Design is perfect for that.
It helps you get under people’s skin, and hit the right nerve to make them realize it’s ridiculous they’re in this situation – and something needs to happen.
Key takeaway: Stories captivate, open eyes, and spark action. Leverage that.
Beyond that, Narrative Design is not a stand-alone thing. It fuels different kinds of storytelling – at every stage of the customer journey – both externally, and internally.
- Brand Storytelling: Crafting a compelling narrative around your SaaS company’s brand.
- Product Storytelling: In this case, a narrative is created around specific products or services, making your product more relatable and memorable to potential customers.
- Customer Journey Mapping: Taking your prospects from their first interaction with you to the point of purchase and beyond. It will help you optimize the customer’s experience at each journey stage.
- Internal Storytelling: To help convey company values, inspire employees, facilitate change, and reinforce the company culture.
- Content Marketing: to inspire the creation of engaging, story-driven content that resonates with the target audience.
Question for you to reflect upon:
What problems could you solve inside your SaaS business if you’d leverage Narrative Design?
In Summary: switching from demand capture to a demand generation strategy
I wrote this essay intending to answer the question: How to fuel a dependable stream of demand for your SaaS product?
As Jason Lemkin recently wisely stated: “It can be hard out there. But I know exactly 0 categories in software that have 0 demand.”
Far too often, we’re just capturing demand rather than creating it. That’s OK when the market conditions are favorable, but you’ll be the first to get harmed when the market isn’t favorable. That doesn’t have to be. Often we have to step away from the problem to see what needs to be done – as the case of Growblocks showed. Only capturing demand limits your growth.
Creating demand will help you break the ceiling. Demand Creation starts from something nonexistent. It’s about developing a need or desire in customers’ minds that can only be satisfied by your product or service. It’s, therefore, more of an educating effort.
As Gartner states: A strong demand creation program builds brand awareness and authority and produces thoughtful, engaging content that drives interest and cultivates leads. In essence: Demand capture is about selling the product. Demand creation is about selling the idea.
And we all know (conscious or not) the effects this can create. Just look at companies like Drift, Slack, Evernote, and Dropbox – they all achieved their success by creating demand – by selling an idea that was valuable and desirable. Then the question comes: Is demand creation harder than demand capture?
My opinion: It’s the wrong question to raise. The better question is: what investment will give us the biggest impact? And then the answer is simple: It’s in the mix: Only 3% of the market is ‘in the market’ at any point in time, so there’s an opportunity to become top of mind with 97%. That’s powerful.
The next question is then: So how to get started with Demand Creation? And here’s where I’d recommend embracing the 5 steps of Narrative Design to get you going.
- Step 1: What’s the undeniable change in the market?
- Step 2: How is this negatively impacting your ideal audience (the old game)?
- Step 3: What’s required to escape? Adapting to the new game
- Step 4: Articulate why it is so hard to adapt.
- Step 5: Explain what you’ve built to embrace the New Game
Remember: the key to effective narrative design is authenticity. The best narrative are: rooted in truth, customer-centric, and focused on the needs, interests, and aspirations of your target audience.
Once you’ve started on that step, the opportunities are endless since you can apply Narrative Design everywhere. Narrative design unites your team. It gets everyone rowing in the same direction. It’s the perfect instrument to leverage across all different parts of your funnel – simply because it gets people in the right mindset:
- Awareness – Top of the funnel: here, you can leverage it to talk about the undeniable change in the world.
- Interest – High/Middle of the funnel: here, you can leverage it to talk about the winners and losers of the new game created by the undeniable change in the world.
- Desire – Middle of the funnel: here, you can fuel a flywheel for evangelism, bringing fans of your game who aren’t users of your product into the process.
- Action – Sales Process: helping your sales force empathize with how hard it is to do – addressing the pains – and leveraging that moment to optimally position you on how you can make the most significant difference for your prospect.
As you can see – It’s not just about capturing existing demand; it’s about igniting a need and desire in customers’ minds that only your product can satisfy.
Too many SaaS companies fail to differentiate between demand creation and demand capture, and it’s costing them. Too many take shortcuts, bet on capture – and throw millions at ads to realize at some point, that they’ve milked the market, squeezed it 3x over – and not enough is coming out. Don’t be that kind of company.
Be the company that chooses to sell an idea and make people want it.
- You’ll own the audience.
- You’ll unlock the money.
- You’ll create a scale advantage.
- You’ll create a magnetical effect.
Additional resources to help you build the strongest foundation for remarkable SaaS traction
The easiest way. Book a free call to explore if there’s a fit to do this together.
Otherwise – here are three other options
- Read my essays to create remarkable traction.
- Read my book, The Remarkable Effect
- Alternatively, subscribe to my daily email that’s laser-focused on helping B2B SaaS CEOs master remarkable traction.