Demand Generation vs Demand Capture: Which Matters More?

A fundamental question we work to answer with our clients is “How much should I spend on Facebook vs Google?”

And while we have broad brush % splits to generally get us in the right direction, it’s important to first understand two different concepts around demand: Demand Capture vs Demand Generation.

This is how I define each of these terms:

Demand Capture: Capturing pre-existing intent to purchase your product OR a product in your category.

Demand Generation: Generating interest & intent to purchase your product that  did not exist prior to your marketing activities.

Let’s look at each of these a little closer.

Demand Capture and Pickleball Sunglasses

Imagine with me that while playing pickleball, your favorite pair of sunglasses fell of your hat and shattered on the ground… you’re distraught, and the fact that you just lost the match only adds insult to injury.

Prior to the instant where your sunglasses fell on the ground, you had next to 0 demand for new sunglasses. You were content & satisfied with your current favorite sunglasses. But now, there is instant demand for new sunglasses. You may even begin to look as soon as you get in the car to make sure you have sunglasses before the next crucial Pickleball match.

So you get in the car, pull out your phone, and search for “black polarized sunglasses” on Google.

No brand prompted you (at least directly) to make that search. You didn’t notice a billboard or a facebook ad. You simply had a reason that you were in the market for that product, and as a result, this is what you saw in the search results:

All of these brands are now competing for your purchase in the realm of demand capture. They didn’t generate the need for the purchase, but they’re going to fight like hell to be the one to get the purchase through Google PLA’s (mostly via Performance Max campaigns these days).

Demand Generation From Your Couch

Now let's imagine that you're sitting at home on your couch, watching Pickleball on the TV.

When a commercial comes on, you pick up your phone and check your Instagram feed, and that's when you see them.

The most beautiful, black, polarized, perfect Roka sunglasses you've ever seen scroll across your screen.

The way the model in the video is wearing them just makes you feel like you HAVE to have them, and you have to have them now. You look over at your sunglasses sitting on the table, decide they're no longer good enough, and you head over to roka.com to find your new pair of sunglasses.

Is there usually many more layers to that decision than how I just described it? Absolutely.

But nevertheless, it helps illustrate the point that sometimes we are competing to capture demand that already exists, and sometimes we are generating demand to customers who didn't even know they wanted or needed our product in the first place.

So Which Matters More? 

Now that we've established these definitions, we can attempt to answer the question, and as always, it depends, so here's a few principles to understand: 

1. If you can figure out how to profitably run demand generation campaigns for your business, it will produce the best long-term outcomes. It will make you differentiable, build your brand, and introduce you to more net new audiences and customers than demand capture will.
2. If you are a new brand competing in a highly competitive or even commoditized space, it will be extremely expensive to rely on demand generation.
3. As you mature as a brand and build authority in your space, demand capture becomes a larger and more profitable avenue to drive revenue. Non-brand loyal customers that are searching for your category of products tend to go with the more well known, respected, and reviewed brands. It's hard to capture demand with 2 reviews on your product page.

Because of the above principles, generally, demand generation is more important for a new or scaling brand than demand capture.

Should demand capture be ignored? Of course not. These two principles work hand in hand and are not mutually exclusive.

However, if you're hoping to use this line of thinking to drive behaivor within your creative team or organization, a growing brand will almost always experience higher return on their invested time by optimizing and building creative angles, media, and offers for demand gen campaigns instead of optimizing the levers to gain impression share in demand capture realms.

How to Allocate Your Budgets

If a brand is just starting to advertise and has no historical data whatsoever, we'll often start with a 70/30 split with 70% going to demand generation and 30% going to demand capture. But this will quickly be adjusted based on actual experienced results related to traffic, conversion rate, and order values.

The bottom line is it's imperative to understand the type of customer you're acquiring on the different channels you choose to advertise on. The message, offer, landing pages, imagery, and copy will likely all change by platform and whether you are capturing or generating demand for your product.