In the dawning years of this millennium, the B2B marketing industry knew that changes needed to be afoot, especially given the great potential of almost anything digital. But a long history of generally accepted and poorly defined marketing efforts, combined with an even more extended history of competing with Sales at their own companies, the question of what changes remained unrealized. Until 2006.
By then, marketing consultancies like Forrester and Gartner began focusing their research on twin questions: how to align marketing with sales better? And how to best understand from where the pipeline comes?
Those answers arrived with a pretty impactful outcome in the form of (now Forrester) Sirius Decisions’s first “Demand Waterfall.” It established the fundamental revenue stages that you hear every day now.
The First “Demand Waterfalls”
This model was significant for marketers. It helped establish a framework for evaluating activities, spending, and campaigns. It also highlighted the importance of handoffs in the lead management process and laid the basic foundation for sales and marketing alignment. It also established MQL as the key performance indicator of “Marketing getting their job done.”
A simple demand management process based on five core stages was designed for this original version. Marketers generate inquiries, and then a subset is designated marketing-qualified leads. The sales team accepts these leads, qualifies them to assess their buying readiness, and then closes the deal.
This first Waterfall was a touchstone event. Yet, at an even faster pace, marketing technology and B2B digital marketing advanced beyond what the first model could address effectively.
Released in 2012, the 2nd version of the Demand Waterfall increased its level of detail and granularity into the marketing qualification phase. The automation-qualified lead stage contained leads that met lead scoring thresholds, and the 2nd version first considered leads obtained from outside parties by digital or other means.
The 2nd Waterfall also first took fully into account:
- The rise of marketing automation
- The rise of inbound marketing
- The recognition of the importance of sales-generated demand
It wasn’t until the third version of the Waterfall that looking “upward in the funnel” (as well as down) was identified and embraced. It brought clarity, logic, and results to a process that was never clearly understood. ABM and “intent data” were recognized for their potent implications for B2B marketing.
Several fundamental shifts inspired changes to the new Waterfall in B2B marketing, one of which was the rise of the martech stack.
Marketing leaders use software solutions to support mission-critical business objectives and drive innovation within their organizations. Marketing automation is a subset of the martech stack.
The right technology is key to making your marketing and sales efforts more effective across and down the Waterfall.
And, in an ideal business situation, the right technology will identify which accounts are interested in your product before they raise their hand or were qualified or prioritized elsewhere. Version 3 of the Waterfall “goes there” and first acknowledges that “early demand exists.”
Version 3: The Demand Unit Waterfall™
Demand generation and management took on a new perspective with version three. This version considers more complex technologies and buying processes and starts sooner in the demand generation journey before direct contact is made with the potential buyer in the target demand and active demand stages. Again, it embraced go-to-market strategies based on buyer needs, predictive analytics, intent monitoring, and account-based marketing.
Apart from simplifying the marketing and sales process, the latest Waterfall skinnied its astounding number of acronyms and tailored itself for use with ABM.
The core building block in this model is the “demand unit.”
A demand unit is a buying group that 1) has active or latent needs that fit one of your offerings, and 2) has an urgency or should have an urgency for solving that need.
We know now that buying decisions in B2B are often made by teams (buying groups). The Demand Unit Waterfall empowers marketers to track buying groups via demand units.
Again, Version three introduces additional stages to track progression earlier in the process (via target and active demand stages). This means the importance of early engagement – before direct communication with a member of the prospective buying group is made.
Here are the seven stages of the Demand Unit Waterfall:
The last three stages relate more to sales activity, but together with the first four stages, it illustrates a truly aligned marketing and sales effort. Let’s look closer at the first four stages for B2B marketing’s first methodology to include “early demand”:
- Target Demand – At the Target Demand stage, you will identify the total addressable market in terms of the number of potential demand units. The primary objective is to determine the size and nature of the total addressable market, both overall and per campaign.
- Active Demand – The Active Demand stage measures the number of demand units currently in the market or needs to be in the market. The primary objective is to attract, identify, and nurture in-market accounts until you have determined they are interested in the product or service you are selling. This is the stage when you run or plan to run campaigns to generate demand.
- Engaged Demand – In the Engaged Demand stage, the account starts interacting with your company, or your company starts interacting with them. The key to success in this stage is to drive deeper levels of engagement with one or (ideally) more members of the Demand Unit.
- Prioritized Demand – The engagement of the demand unit has reached a scoring threshold that justifies additional interactions.
- Qualified Demand – Individuals within the demand unit have confirmed their fit, urgency, potential budget, and willingness to engage with sales.
- Pipeline Opportunity – Sales has created an opportunity with a dollar value and a close date (Note: This is the SQL stage.)
- Closed Opportunity – Revenue!
Early demand – the online behavior that precedes a form completion and is where the earliest demand signals begin – has its place in the Demand Waterfall. It has three places in the form of Target Demand, Active Demand, and Engaged Demand.
Granted, Version three was likely more about acknowledging and embracing intent data and its role in driving demand within account-based marketing strategies. And both intent data and ABM are focused on domain-level behaviors.
Within those accounts/domains were the humans making up the buying groups. These groups make up humans whose opaque behavior is generally understood and shared at a domain level.
Deeper within an ABM strategy, most marketing tends to focus less on who the actual humans are and more on assembling what they believe to be their Ideal Customer Profile. They’d then apply – and still do – said ICP (an informed estimate) to either purchase data for those engaging domains or supply said list to a 3rd party who would then match that ICP to contacts they may have within their database.
It’s undeniable that early demand signals are from a collection of specific, individual humans – not necessarily their ICPs. And the buying group is not the same for any two prospects.
And that is the point of this blog – a buying group’s demand journey begins long before a form completion, and it may never include a form completion. That identifiable demand can be leveraged in the present to start a nurture track – to continue and extend the unspoken dialogue – with the actual folks who engage, whether that’s a click or something sooner in the journey.
We call that Early Demand.