The Demand Waterfall Evolves

Fred Isbell

(Queue the theme from Star Wars with rolling text)

It is a desperate time for the brave legion of modern marketers. Despite a professional focus and role that has never been more strategic, the growing importance of the sales and marketing alliance is shaking traditional thinking and practices. Insights-driven, account-based, and customer-focused marketing is gaining steady traction and a groundswell of support. The traditional marketing funnel, once the savior of marketers across the galaxy, has been pronounced obsolete and ineffective. A brave group of B2B marketers assembles at a conference in Las Vegas, the “Woodstock of B2B Marketing,” the leaders of a movement that promises to forever change marketing as we know it…

Episode 1: The Dawn of the Demand Waterfall

I first studied marketing in my MBA program nearly 35 years ago. When recently asked what has changed since then, my answer is “everything.” Thinking back to my early studies, I remember a concept called the “purchase funnel” that breaks the selling cycle into discrete steps: awareness, interest, desire, and action. I was reminded that this concept dates to the late 1800s, when Elias St. Elmo Lewis popularized it and succeed in advertising and with two of the first B2B technology enterprises, NCR and Burroughs.

For the next hundred years or so, the concept would evolve while many marketing students and professionals would learn about this model as the foundation of how marketing and sales operate within the customer journey. After I launched my own marketing career, I would go on to use these concepts in a variety of marketing roles in the high-tech industry.

In 2006, SiriusDecisions debuted its Demand Waterfall and changed how marketers viewed that funnel. It looks simpler than what we use today, but the foundation is there:

  • Inquirers and hand-raisers are at the top of the funnel – at best, suspects and not yet leads, but the start of the marketing and sales journey.
  • Marketing-qualified leads (MQLs) are based on the availability of budget, a particular need, a decision maker, and more. And as I have learned firsthand, the use of telemarketing and inside representatives are instrumental in guiding and qualifying leads and generating demand.
  • Sales-accepted leads (SALs) are identified by taking MQLs and using a process and technology, such as a customer relationship management (CRM) application and marketing automation, to pass the leads to sales with the intent of having a fully-baked opportunity ready for the sales pipeline.
  • Sales-qualified leads (SQLs) allow sales teams to participate along with marketing and have an active role in the qualification process.
  • Closed/won business is the action that the original “purchase funnel” described well over 100 years ago. Tom Cruise’s famously personified this concept years later in his role in Jerry Maguire with his catchphrase “Show me the money.”
  • Conversion rates move suspects to converted leads. As leads are further qualified, they eventually move through the sales pipeline, where at each level, we measure the conversion rate as a percentage of sales closed from the starting point.

This version of the Demand Waterfall coincides with my perspective on the principles and capabilities of marketing automation, CRM, and the need for consistent definitions and practices when marketing, governance, management, and reporting.

Episode II: The Demand Waterfall Strikes Back with New Enhancements

Change is inevitable – no matter the subject, practice, or process. So it’s not surprising that the SiriusDecisions Demand Waterfall would evolve, as the art and science of B2B marketing (and marketing, in general) accelerated the pace of change and evolution fueled by digital transformation.

Introduced in 2012, the rearchitected SiriusDecisions Demand Waterfall showcased the evolution of B2B marketing in as little as five years with several significant changes and enhancements:

  • The stage of inquiry includes a split between inbound and outbound marketing, recognizing that a marketing mix brings responders to us and that we engage in outbound programs and campaigns that yield responders. Albeit, inbound efforts often result in a higher level of interest, driving more qualified leads than an outbound response.
  • Marketing qualification is further broken down into automation and tele-qualified leads, recognizing the importance of marketing automation platforms (MAP), marketing technology, and the success of tele-based lead generation. This expansion allows firms to qualify leads from digital or MAP-based sources while engaging in traditional tele-qualification by qualifying prospects based on budget, authority, needs, and timeline (BANT) and other proven lead-generation techniques.
  • Sales qualification not only expands the way we pass leads to sales, but also includes a concept of direct to sales as well as multiple paths. During the dawn of CRM, we found that this approach was effective in driving expanded selling with very inexpensive leads.
  • Closed business recognizes these various routes and paths and brings it all together to offer complete and consistent measurement. This is where the handoff to sales is achieved and the ultimate success of the marketing-generated opportunity.

Similar to the first generation of the Demand Waterfall, this iteration served us well for approximately six years. In fact, we continue to evolve our lead and demand management practices based on this model. However, the traditional concept of the marketing and sales funnel continued to be scrutinized, given the emergence of account-based marketing and continued pressures for even greater sales and marketing alignment.

Episode III: The Return of the Demand Waterfall—Evolution

We are in an era in which B2B marketing has further evolved to embrace and extend key concepts – buyer-centric go-to-market frameworks; account-based marketing (ABM); and, the rise of insights-driven, data-driven marketing fueled by next-generation marketing automation and marketing technology. However, the concept of the “account” is increasing in importance, especially as the need for sales alignment intensifies.

To address this new dynamic, SiriusDecisions unveiled a new concept called the Demand Unit, which consists of an organized buying group to address the unique organizational needs and requirements. This includes personas, departments, and people. The Demand Unit Waterfall adds logical and timely definitions and stages to previous versions of the Demand Waterfall.

In response to the evolving needs of the marketplace, the Demand Unit Waterfall consists of:

  • Target demand stage: The overall target and total addressable universe for our products, solutions, and services force formalized market definition and congruent goals with all teams across product management, marketing, and sales.
  • Active demand stage: The prospect universe, which is a subset of the total addressable universe, encompass the demand units that show evidence of relevance and interest in a product, solution, or service. Marketers should focus on the specific needs, pain points, and attributes that engage and compel customers to act.
  • Engaged demand stage: Leads who show interest and respond to various levels of the marketing funnel and waterfall methodologies. They not only fit into a demand unit, but also complement personas with critical needs and who have opted to engage with a selling entity. This is where we bring in a mix of outbound and inbound inquiries, resulting from a marketing action.
  • Prioritized demand stage: Scoring models are used to ascertain lead interest and intent. Meanwhile, a combination of marketing automation can immediately generate a qualified opportunity at a low cost.
  • Qualified demand stage: Telemarketing, inside qualification, and sales reps determine a lead’s level of interest. However, this information should be aggregated at the account level and the qualified demand unit. This approach delivers a broader aggregation, rather than potentially disconnected and fragmented leads.
  • Pipeline stage: In this traditional and largely unchanged process, sales accepts the opportunity, places a value on it, and enters the qualified opportunity into a CRM application to pass through the pipeline stages – from initiation to ultimately close.
  • Closed or won stage: This model unites marketing funnel and waterfall models with the separate sales pipeline with full sales and marketing alignment and no implied handoff.

The evolving SiriusDecisions Demand Waterfall demonstrate an overlay of routes to market and the ability to pick and choose from sales, marketing, telemarketing, and, where appropriate, indirect channels to define an optimal go-to-market approach. As in the past, the Demand Unit Waterfall Model focuses on conversions as leads cascade from one stage to another. Although the fundamentals have not changed, marketers now start at the top of the funnel and work their way down – and every conversion is key to reporting. This logical and elegant evolution of a tried-and-proven model for a new era continues to evolve B2B marketing.

I encourage everyone to further examine the Demand Unit Waterfall Model and see how this can enhance your own organization’s B2B marketing. Please review my virtual trip report from SiriusDecisions Summit 2017 for some additional information and comments and observations from this year’s edition of SiriusDecisions’ “Woodstock of B2B Marketing.”

Fred is the senior marketing director of SAP HANA Enterprise Cloud and SAP Digital Business Services Marketing at SAP. Join Fred online:

About Fred Isbell

Fred Isbell worked at SAP for nearly 19 years in senior roles in SAP Marketing. He is an experienced, results- and goal-oriented senior marketing executive with broad and extensive experience & expertise in high technology and marketing spanning nearly 30 years. He has a BA from Yale and an MBA from the Duke Fuqua School of Business.