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Account-based marketing vs lead generation

by Oren Greenberg on

Account-based marketing (ABM) and lead generation - two popular marketing strategies, but to be honest, the comparison isn’t really there. Lead generation, for example, tends to focus on volume, whereas ABM requires a targeted accounts list. The comparison might come from the idea that ABM is a refined form of lead generation, specifically tailored to B2B, but that doesn’t make the question any easier to answer.

A better comparison might be lead generation vs demand generation and we’ll get to that towards the end of the article. What we’ll do first, though, is define Account-based marketing and lead generation individually, before comparing their outcomes to better point out the differences.

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What is account-based marketing?

Account-Based Marketing is a collaborative, B2B-focused effort between Sales and Marketing, shifting the focus away from individuals and onto best-fit customer accounts. To identify these best-fit accounts, marketing teams leverage their sales counterparts’ knowledge and expertise of the customers, while sales relies on marketing to then locate and engage those high-value accounts.

The “end product” is usually a bespoke campaign (with bespoke messaging) targeting key decision-makers within those best-fit accounts, and yielding a much higher ROI and close rate than “conventional” lead generation.

ABM increased deal size by 26% and grew close rate by an impressive 75% ( Demandbase)
Table listing the requirements for account-based marketing

What is lead generation?

Unlike ABM, lead generation is much more focused on individuals. As such, it can target a variety of elements such as job title, age group, gender, interests, and so on, with the aim of generating a higher ratio of lifetime customer value (LTV) to cost per acquired customer (CAC) - LTV:CAC - and developing a sales pipeline. This makes it useful for both B2B and B2C and allows companies to nurture prospects until they are ready to buy.

To nurture these leads, lead generation often requires a range of types of content, such as blog articles, social media posts, webinars, videos, email newsletters, etc. Two key considerations here are having both the right kind of content and enough of it to nurture along the full length of the sales cycle.

This is, again, because of the focus on self-directed buyers. With the knowledge that 96% of people visiting a website aren’t ready to buy yet, the hand-off between marketing and sales can become complex: too soon, and buyers can feel “sold to” and put off; too long and executives will start questioning the quality of the leads.

53% of marketers spend at least half of their budget on lead generation ( BrightTALK)
Table listing the requirements for lead generation

Deciding between Account-based marketing and lead generation

While there is some overlap, these two definitions will hopefully have shown how different the two strategies are from one another. Here, however, we’ll take it a step further and consider the differences in their outcomes:

Better leads vs more leads

By virtue of being more targeted, ABM tends to generate higher-qualified leads than lead generation.

Process also plays a part in this difference. While both approaches may consider intent data and measure engagement, account-based marketing involves the sales team quickly developing a relationship with those accounts, thereby increasing the odds of conversion.

But as we mentioned earlier, lead generation targets more self-directed buyers. As such, the sales team has to more careful in their timing and approach. This wider net and looser sales cycle can make lead quality less certain.

Big deals vs small deals

Account-based marketing is geared toward delivering targeted messaging and content to best-fit accounts, with the view of converting into long-term customers.

On the other hand, larger organisations can be more challenging to attract through lead generation because of the greater number of decision-makers and/or the industry-specific those organisations may face. Again, lead generation is usually more efficient across wider audiences. This simply means that lead generation is much more efficient for products with a wider appeal and lower cost of entry. Online channels like Facebook or Google Ads can prove cheaper to run than account-based marketing schemes, delivering a higher ROI.

another way to think of this is: the higher the cost of the product, the higher the quality of leads should be.

Alignment vs silos

The two strategies differ in company structure, too. Account-based marketing requires complete alignment between sales and marketing. Conversion rates improve when these departments share ownership and nurture and incubate leads. Account managers will need to understand their prospects' goals to drive the right conversations with them, so that other teams can meet company-wide objectives throughout the campaigns.

And while lead generation certainly benefits from - and performs better for - a similar alignment between teams, the reality is that the two tend to exist as silos. This separation can be due to the size of the organisation and/or the length of the nurture and sales cycle, among other factors.

Vanity metrics vs target account influence

Vanity metrics and target account influence are two very different measurements, but each come with their benefits.

Lead generation can often focus on vanity metrics like impressions, clicks, or conversion rates to determine performance. And while exercises like A/B testing demonstrate the value of vanity metrics (towards improving assets and campaigns) they don't measure income – and that's a problem.

Account-based marketing uses a matrix system to identify businesses and people of influence. These accounts of influence could be partners or decision-makers, industry specialists, and businesses respected for their expertise. This "influence matrix" allows account-based marketing teams to better understand the buying and decision-making processes within the account, decreasing the sales cycle by as much as 50%.

Demand generation: a better comparison

Because of the closer connection between lead generation and demand generation, a comparison there might be more appropriate. It bears mentioning right away, though, that it’s not a case of “either/or” but of understanding the distinction between the two.

While we’ve already established that lead generation is the practice generating and “netting” prospects who have shown an interest in your business, service, or product, demand generation is the interest-generation element of that practice. In other words, demand generation is the process of creating attention to the need for a product or service.

And while this might sound like a chicken or the egg kind of riddle, lead generation is considered to be a subset of demand generation by virtue of harvesting the fruits of the awareness and demand the latter has created.

In 2021, 78% of marketers say their demand-gen budget will grow or remain the same ( Activate, 2020)

Another way to look at it is that demand generation grows an audience (does not prioritise capturing contact details), while lead generation converts it (prioritises capturing contact details).

Account-based marketing vs lead generation: finding the right fit

In 2020, Hubspot found that the top priority for marketers is generating leads. But, how should B2B marketers decide between account-based marketing or lead generation?

The answer, we believe, depends on several factors, to include the market, the product, the product’s pricing, and more. We also believe it comes from a firm understanding the the two are not comparable - ABM doesn’t try to capture lead information, it seeks to generate interest and awareness within a pre-defined list of accounts. The relationship between those buyers and providers is therefore much tighter and more personal. The process is also more likely to be more expensive.

Lead generation, on the other hand, seeks to capture leads from a broader demand generation campaign. As such, it doesn’t cost as much as ABM, making it more flexible and allowing businesses to run multiple campaigns at once to lower their Cost per Lead (CPL) and maximise their ROI.

And so the answer might just come down to cost, business size, or business goals. It’s not unusual for us to suggest - or at least discuss - hybrid approaches with our clients, and the point here is that there is no “one size fits all” considering the difference in strategies.

And here comes the plug: if you’re a SaaS entrepreneur or marketer looking for advice on the right marketing strategy for you and your business, we can help. We’re a team of senior consultants and specialists, so get in touch and let’s get the conversation started.