Diving into the new SiriusDecisions Demand Unit Waterfall
Columnist John Steinert discusses the new SiriusDecisions Demand Waterfall, which helps align sales and marketing on what B2B demand really is and how to find it through the concept of the "Demand Unit."
I’ve been a fan and an avid collaborator with SiriusDecisions since around the time when Rich Eldh and John Neeson gave birth to the company. I’ve found their frameworks especially useful in helping focus my teams’ actions and report on the value of our contributions. Perhaps you’ve found the same.
For many years, the SiriusDecisions Demand Waterfall has been used as the standard framework for managing demand generation processes. The beauty of the original Demand Waterfall was its clarity and simplicity. Built as a useful guide, it was never meant to become “the law.”
Yet over the past few years, many marketers have found themselves ensnared by a rigid, faithful type of application. From helpful leading indicators, we’ve created rigid sets of KPIs that lock us into a way of doing things and shape how we “see” our world. A host of short-sighted KPIs are now constraining our ability to innovate. At worst, they’re locking us into counterproductive behaviors that actually hurt our ROI. I’m talking here about KPIs that drive up volumes even as they drive down quality; about filters that ignore tangible evidence of demand in favor of titles and contacts at accounts that aren’t in the market at all.
The newly announced SiriusDecisions Demand Unit Waterfall concept contains major insights that could open the door to a new wave of progress. These observations should help keep many of us from going over the falls in a barrel crafted of our own short-sightedness.
Why a ‘lead’ just isn’t enough
It doesn’t matter how smart they are or how capable their stacks — until B2B marketers truly grasp how deals take shape at a prospect company, there is no way they can understand how to best help sales. Without an accurate picture of the buying team, it is impossible to target precisely, create relevant content or report truly meaningful progress. And so long as sales is only provided with “leads” as single individuals, there is far too much work remaining for sales to place much credence in what marketing keeps sending them.
Let’s be honest: before a salesperson (an intelligent human being) is willing to enter an opportunity into the pipeline (which is a very personal commitment based on their own ability to close a deal), there’s a whole lot more that they need to know than marketing has typically provided. What would you do if you were asked to compare the expected return from accounts that you know and are working to the “leads” marketing has passed over — individual prospects about which you understand very little? It’s no wonder so much tension still exists between even very good marketing and sales capabilities!
Clarity about the actual unit of demand
Now SiriusDecisions is clearing away more of the mist from its original waterfall to help us better distinguish between real demand signals and value-robbing noise. At the root of marketing and sales incompatibility, there’s long been an unbreachable chasm between how sales and marketing view the world. While I exaggerate a bit for effect, it’s not inaccurate to state that most sales organizations see accounts as the unit to activate on, whereas marketing teams concentrate on individuals and personas.
Building on CEB’s ground-breaking “Challenger Customer” buying process research on B2B, SiriusDecisions has synthesized this with their own studies to define the “Demand Unit” for B2B. They’ve now crystallized a concept that marketing and sales can both rally around.
Bridging the gap between the idea of unconnected individuals whose actions can’t accurately predict an opportunity and overly broad account definitions that can easily mask the potential for multiple opportunities, the “Demand Unit” clarifies how we should think about identifying and actioning real demand. It grows out of the already common understanding that in B2B, the Buyer is a group, and the much less recognized fact that there are potentially several such groups within a target account.
The codification of the “Demand Unit” now enables further conceptual progress in multiple directions — it’s good for targeting, nurturing, coverage strategy, cross-selling and upselling and much more. But what’s far and away the most exciting thing here to me is that for the first time, marketing and sales can be conceptually unified around what’s real, and therefore, what matters. For me, the bottom line is that with a demand unit articulated, sales can identify what they need help with, and marketing now understands more comprehensively what to go after. And with demand units clearly identified in a unified and agreed fashion, sales and marketing can finally align on how they really should invest and how well they are really doing, together.
Clarity about what’s actually out there
There’s another element to all of this. It’s an area that to me is even more obvious, but that somehow has often taken a back seat in various departments’ understanding of how they should proceed. In the earlier years of the SiriusDecisions Demand Waterfall, their rubric started with an “inquiry,” which has eventually come to mean a “hand raise” of practically any kind. One obvious shortcoming here was that, over time, we’ve lost the original thoughtfulness: that there’s a major difference between useful hand raises and those that are essentially meaningless.
With the updated framework, SiriusDecisions has added in two critical process steps at the top of the waterfall. Now it begins with Targeted Demand at the very top. I believe this will help drive out a couple of the wasteful behaviors that have become all too common. Too often, marketers come to me looking to spend good money on “leads” that will never, ever produce business. They do this because they have been sent in search of unrealistic volumes without reference to the true dynamics of their market. They don’t understand their total addressable market well enough.
Combining this new step with the Demand Unit idea ensures that we keep both our real potential, and the necessary strategies for pursuing it, top of mind. We’ll be less likely to try to take the “easy” but ineffective ways out.
Now, instead of inspiring marketers to stuff their funnels, business people and strategists will take a thoughtful step back to carefully assess whether there’s a problem at the top of the funnel at all. I’m confident that many more will start acknowledging the need to better diagnose what’s actually going wrong farther down in their processes. The work is hard, but real leaders are getting it done.
Clarity about what’s real
Yet Targeted Demand (a subtle but powerful improvement on Total Addressable Market because it uses demand units instead of accounts) is only part of the picture. It’s the second new section that gets me really excited. Calling it “Active Demand,” SiriusDecisions has now brought to life an idea that I wrote about a few months ago, when I said we needed to get our heads out of our funnels. Beyond the total addressable market, when given the chance, smart marketers all recognize that replacement cycles are real. They know that only a finite percentage of Ideal Customer Profiles (ICPs) are in the market at any given time.
Until recently, though, there’s been a fly in the ointment: it was hard to know which companies were truly active, and harder still to identify the demand units available within them. Sure, you could be reasonably confident that what you had coming inbound was pretty good — but you still had to resolve the contact information. And if you are good at marketing automation, you’re at least able to evaluate and score good signals on the “leads” you have in your systems. But in either case, you’re still only looking at leads in the traditional sense. Because you don’t know anything about the rest of the demand unit (since they haven’t yet identified themselves to you), you can’t easily evaluate which leads to hold back for nurture, and which to discard or to implore sales to engage with.
Third-party data comes of age
According to Senior Research Director Kerry Cunningham, SiriusDecisions has now evaluated a whole host of techniques — from overlays to modeling and entirely new sources — and specifically, they’re seeing real proof of the value that’s out there in new types of exogenous data. They’re finding that the right kinds of purchase intent information can provide a much better view into truly active demand — the kind that you should be going after if you want to grow faster than your competition.
They’ve found that exogenous (third-party) purchase intent insight can be critical to your effectiveness efforts for two reasons: First, because it can provide a more accurate read on the real demand available in the marketplace at any given time that you could be accessing. And second, because it can give you a more accurate read on what you’re already seeing so that you can better focus on the demand units that are likely to bear fruit.
In summary, by clearly defining the proper B2B Demand Unit once and for all, SiriusDecisions has given us a unifying definition that can finally remove the stubborn barriers to effective partnership between sales and marketing. And by adding refinement to our understanding of the proper market definition (Target Demand: the sum of all demand units potentially available; and Active Demand: the demand units in market at a specific time), SiriusDecisions has given us a way to all row in the same direction. I’ve already seen TechTarget clients moving forward this way, and I’m super confident that putting these concepts into practice will bring a new level of marketing contribution to most businesses as well.