68. The truth about demand creation? It’s a lie.

PLEASE NOTE: This transcript has been created using fireflies.ai – a transcription service. It has not been edited by a human and therefore may contain mistakes. 

 
00:00 
Dom Hawes 
Demand creation is a myth. It's not possible to create demand. Demand creation and demand generation are examples of jargon based justification of marketing's existence. They're clumsy translations of what are actually an essential process for every business. But it's been misnamed to make it sound more important and more essential to the CEO and the CFO. That's the vibe of what today's guest told me when we met to talk Turkey over today's show topics. According to our expert witness for today, there’s a cult of marketer called demand creationists who are essentially living a lie. They’re trying to do the impossible. They’re fighting against the very nature of business itself. Because demand cannot be created, he says, demand can only be captured. Todays guest is Dale W. Harrison.  

 
00:49 
Dom Hawes 
Im going to let him introduce himself at the start of the show, but you definitely 100% all in need to listen to Dale. You're listening to Unicorny, and I'm your host, Dom Hawes. Did you already shout at me? Or maybe tut? Or maybe just sigh with resigned weariness? Well, hold onto your hats. This conversation is definitely going to invoke emotion. I suspect half of you will go, yes, thank you. Finally, while the other half will want to tar us, feather us and run us out of town, I certainly promise you today is not going to be boring. Listen closely and you're going to hear how well constructed, how well thought through, and how well researched Dale's arguments are. He's going to talk about a lot today.  

 
01:38 
Dom Hawes 
He's going to talk about the iPhone, the Apple Newton consumer behaviour patterns, the 95 five rule, strategic branding, stealing from adjacent markets, cannibalization, and so much more. Dale meticulously dissects these topics, offering insights that might just shift your perspective on marketing and the iPhone's market entry is a focal point in Dale's argument. He explains how Apple didn't create new demand, but rather captured existing demand from competitors like BlackBerry. This process, which we recognize as market cannibalization, is a key strategy Dale believes more companies should adopt. He contrasts this with the failed attempt to the Apple Newton, which tried to create demand without a ready market. Highlighting the risks involved in such a strategy, Dale also delves into consumer behaviour patterns, emphasizing how consumers are not looking for new products but solutions to problems. Strategic branding is another critical area Dale explores.  

 
02:36 
Dom Hawes 
He underscores the importance of building a strong brand that supports both short term and long term marketing efforts. A strong brand, he argues, can significantly impact a product's success by building consumer trust and loyalty, making it easier to capture existing demand when the opportunity arises. Now, Dale's own success on LinkedIn, where he's grown his following from the low thousands to mid teen thousands in just a few months, showcases his ability to engage and influence a wide audience. His followers are treated to an engineering level deconstruction of some of the rules and laws published by institutions like Ehrenberg, Bass and others, I should say, and he provides his followers with deep, actionable insights. Now, Dale's views are thought provoking, and they're definitely challenging to those who hold more conventional marketing views. Now this episode is packed full of insights. It's sure to spark debate.  

 
03:29 
Dom Hawes 
It might inspire change. Let's go and meet Dale. Hi Dale. Welcome to Unicorny. Let's start today with a lightning tour of the experience that brings you to our podcast today.  

 
03:41 
Dale Harrison 
Hi, so I'm Dale Harrison. I work as a consultant in marketing b two b around strategic marketing issues. I came into marketing somewhat later in my career, so I've had a number of other careers before coming into marketing. Originally I was an experimental physicist, so I did super connectivity work long ago. A few careers ago, ran a company for many years that was doing technology development projects for primarily Fortune 100 companies. So companies like Texas Instruments, HP, Exxon shell, prudential, compact computer back in the day. And then mid career, I got pulled into biotech. And on the technology engineering side, wow. So originally I came into biotech as a robot designer. So I was designing robotic DNA synthesizers and then high throughput production platforms for sample processing. From there, did a stand in finance.  

 
04:34 
Dale Harrison 
So I was doing valuation analysis for M and A's and restructuring and recapitalization for turnarounds. In that process, I ended up falling into marketing. So it's been a complex path. One of the advantages is that I've seen a lot of different sides of the business. So I've done a deep dive on the technical side, I've done a deep dive on the finance side. I've run companies and I've had years of experience in senior leadership roles. So I think of myself more as a broad based business expert rather than a narrow marketing expert. Although again, I've run a lot of very tactical, hands on performance marketing campaigns, a lot of brand marketing work. So I'm very hands on with that world and with those processes.  

 
05:24 
Dom Hawes 
So I've been following a lot of your content on LinkedIn, and that's how I first came across you. You have a very analytical approach to dealing with a lot of the statistics and myths that are out there and that's brought us onto what we're going to talk about today, I think. But I think it's really interesting when people come from outside the sector and they bring all that experience with them. My view of marketing is that it's not particularly narrow. It should be quite broad based, and it should be mainly strategy led. A lot of the narrow side is actually communication, not necessarily marketing. But I'm looking forward today to talking to you specifically about the demand creationist myth, which I think you titled that when we had our meet pre show in there, you said demand creation is an intentional lie.  

 
06:06 
Dom Hawes 
Talk to me about your view on demand creation. Is it possible?  

 
06:10 
Dale Harrison 
I mean, the short answer is no. And again, if you look at the people who claim they can create demand, there's a lot of kind of hand wavy narrative that gets pushed out there. But when you start to ask hard questions about what exactly do you mean by these words, how do you translate this into actual action? And you go into companies and you look at, for instance, what's the day to day activities of people that have the word demandgen in their title. For the most part, it's going out and capturing a bunch of leads. You're not creating demand, you're just capturing leads. A lot of this terminology grew up 1015 years ago in an era where were flooded with data, because we're really moving into the digital era.  

 
06:53 
Dale Harrison 
But the problem is that the data that you can gather, the simple data you can gather, is really only about those sorts of touch points that are tied to people who are already in marketing. And so what you saw was this deprecation of the idea of spending any effort on brand marketing or brand management, pouring all your effort into lead gen. And so what you ended up seeing was basically new language develop that, quite frankly, much of it is entirely fraudulent to avoid talking about doing brand marketing, to elevate the importance and significance of the stuff that you are doing, which is basically just lead gen stuff. So you have people that started calling themselves performance marketers. We do performance marketing, not like all those other marketers who do non performing marketing, like those brand people, which is just fraudulent.  

 
07:42 
Dale Harrison 
And then the other thing was you started having, well, we do, you know, we generate demand. We do demand general, and, you know, and it went from we do demandgen to we create demand, you know, which is sort of the next step in that path. But if you actually ask people who are kind of the biggest vocal proponents of demand creation, they typically fall into three categories. And the first and the largest category is that you ask them, do you really get people that have no underlying need to buy your stuff? I mean, yep, because that's what the words literally mean. You're creating demand rather than allowing demand to emerge from the emergence of an internal need within the organization. And again, most of the language here is around b two B.  

 
08:25 
Dale Harrison 
They'll come back and they say, well of course we don't create demand. Nobody can create demand out of thin air. What we do is we try to do things to make people aware of our brand so that they're interested in buying it. So I say, so what you're saying is demand creation is really making people aware of the brand. But for more than a century we've had a term for that. It was called brand awareness. So why do we need a term that implies you're doing something that you're clearly that even you will tell me you're not doing when you're really doing is something that we've had a term for since the 18 hundreds. And why don't we just call it what it is, which is brand awareness marketing?  

 
09:12 
Dale Harrison 
Well, because if we say the word brand, the CFO wants to know how we're going to measure, you know, CFO wants to know what's the ROI of the brand. And you know, I can't give them answer. And so let's just not have the conversation and let's instead have another conversation built around this completely fraudulent narrative that we're going to go out and we're just going to magically create demand for you. So the second category of demand creationist is the people who say, well of course you can't create demand out of thin air. What we're doing is we're doing things to create more demand for our product, which is legitimate. I mean that is legitimate market. And in fact that's so legitimate, that is the very core reason that marketing exists.  

 
09:53 
Dale Harrison 
The sole purpose that you exist in the company is to get people to buy more your stuff than the other guys stuff. That's called marketing. So why are you using this made up term? That's clearly not what you're doing. The third and much smaller category are really bonkers people that will try to explain to me, well, you know, there are all of these problem unaware prospects and what we're doing is we're making them aware of this problem that don't exist. And so I always ask two questions. I say, in your own family, with your spouse, how often do you inform a family member or a spouse or a partner about a problem? That they didn't know existed that they need to fix. How did that work for you?  

 
10:40 
Dom Hawes 
Good luck with that, right?  

 
10:41 
Dale Harrison 
Yeah, yeah, good luck with that. And the second question is, inside your own company, how often does the company make a major purchase to solve a problem that not a single person in the entire organization had any conscious awareness of until they saw a piece of spam email or a random ad on Facebook or some BDR cold calling them? Does this happen?  

 
11:05 
Dom Hawes 
Bonkers.  

 
11:06 
Dale Harrison 
Once a month, once a week? Ten times a week? How many purchases look like this? And the answer is they can't name one.  

 
11:13 
Dom Hawes 
Never. It never happens.  

 
11:14 
Dale Harrison 
Right. The reality is that, yeah, there probably are people who have problems that they're not aware of. You're not going to fix that with a random cold call. There was an entire profession called psychotherapy where they work with people for decades on exactly that problem, helping them to see problems that they don't know they have. You're not going to fix this with a marketing ad. But the fact is, most people know what the problems are. They know what the solutions are. They may not know what your solution is. Which takes us back to the second point, which was marketing is about getting people to buy more of our stuff than the other guys. Stuff that's a legitimate function of marketing.  

 
11:53 
Dale Harrison 
But the deal is that the people who are going to be receptive to that are people who already know about the problem, already know about lots of solutions. And now you're going to add one more solution to the mix, and hopefully with sufficient, compelling reasons that they will move you toward the top of the pile when it comes time to buy. The problem is that nobody can really give me a bottoms up explanation for how they're magically creating demand with an ad on Facebook or a cold call or a podcast.  

 
12:30 
Dom Hawes 
You've probably heard of the flat earth system, an impossibly large number of people who believe the earth is still flat despite the curved existence beneath their very feet. I actually find it quite comforting that they're out there because it helps explain why so many in our industry still adhere to things that on examination appear to be myths. Because they've got no factual basis. And it doesn't stop them behaving as though the myth is true. Flat earthers still fly around the globe to go on holiday, and marketers still make great careers out of demand creation. You could say, does it matter what we believe? Does it matter what we call something, provided we get leads? Like who cares? But I think it matters massively. It all goes back to a recurring theme on this pod, the dominance of measurement in our business.  

 
13:19 
Dom Hawes 
So many of our guests have warned against focusing just on numbers. The KPI's, the metrics, the so called proofs of ROI. As one of our contributors described it, metrics are not the game, they're just how we keep score. I feel a bit more passionately about it. For me, it's like worshipping at the altar of false gods. The 95 five rule means it's basically impossible to create or generate demand. We're going to hear more about that in part two of the pod instead. As Dale points out, what we're really doing is getting people to take notice of our brand. We can take leads from our competition that's 100% legit, but we can't magic them up. And the danger of thinking that we can, or using terms that imply we can, is that has a big effect on our tactics. In fact, on our whole approach.  

 
14:11 
Dom Hawes 
If we become obsessed by watching that dashboard, then we're going to get too short termist, we're going to run too many promotions, and that's either going to impact revenue, steal sales from the future, or damage the ability of our brand to run premium pricing. If you think I'm just ranting, well, okay, I am having a bit of a rant, but don't take my word for it. Let's hear what a rational thinker has to say about the real impact of all of this. Let's get back to Dale. Okay, Dale. So in the first half of this part of our episode, we looked at the problem of the demand creationist and what were calling faith based marketing. I think it's time to move on now to look at why it matters, what marketers should be doing.  

 
14:51 
Dom Hawes 
But we've got a couple of really good examples of things that often get cited as demand creation, which basically just aren't. Why don't we now talk about some real case studies? When you and I chatted before online, you had a specific point that new products often steal from adjacent markets or substitute markets that don't necessarily create new value. What's the poster child for that?  

 
15:15 
Dale Harrison 
I think absolutely. The iPhone. It's the example that gets brought up repeatedly. In fact, I think it's a great example for how you cannot create demand. The iPhone was certainly a very significant innovative leap from the competitors at the time. But Apple was very late into that market because the smartphone market was already a multibillion dollar market. There was already a billion dollar player in BlackBerry. You already had a dozen major competitors. This was a highly established market well before Apple ever stepped foot in it. What they did, especially if you look in the early years of the iPhone, certainly the first decade of the iPhone, they grew almost entirely by cannibalizing demand that was otherwise going to their competitors and that was primarily BlackBerry. And they just completely drained BlackBerry of customers.  

 
16:06 
Dale Harrison 
Again, what happened was people looked at this, you know, the new innovations that was in this product, but the problems that the product was solving for were things that other products were also solving for long before the iPhone came along. And people are buying solutions, they're not buying products. They're buying a solution to a problem, a solution to a need. And so what iPhone was brilliantly able to do was to basically divert that demand from adjacent competitors in products that, yes, the BlackBerry wasn't identical to the iPhone. That's the whole point of innovation, is that it's not identical. But the BlackBerry was solving all of the unique problems that the iPhone was solving. Better. What they did was they just basically drained the pond of from all of their adjacent competitors.  

 
16:54 
Dale Harrison 
And the counterexample of that is if you go back 15 years earlier in Apple's history, without a doubt, Apple is probably the best marketing company on the planet. They just have performed brilliantly for decades. So it's not just the innovation, but their ability to market and to make a case for their products. The biggest failure in Apple's history was the Apple Newton. It was in many ways what the early BlackBerry copied. The early BlackBerry that came out a decade after the Newton was a was, had all of that core functionality plus the ability to make a call, which the Newton didn't. John Scully specifically stood up and told people, we're going to create a market for this. And they spent $1.2 billion and managed to get 200,000 units sold over a decade.  

 
17:44 
Dale Harrison 
And by comparison, the iPhone sells 200,000 units between breakfast and lunch one day.  

 
17:51 
Dom Hawes 
Yeah.  

 
17:53 
Dale Harrison 
And after a decade, they basically just wrote the whole thing off and abandoned the effort. But this was a good example of an explicitly announced attempt to create demand in a market when the market wasn't ready, when there wasn't already significant demand for a certain set of solutions to known problems. So the question I would ask is, if the biggest company in the world with the greatest ability to do marketing is not able to create demand after pouring over a billion dollars into the effort, why does anybody else think they can? And again, you look at what BlackBerry did. BlackBerry has a very interesting history there, too, because their breakthrough product was basically taking a pager putting a bigger screen on it and a keyboard. And this was the RM 900.  

 
18:43 
Dale Harrison 
And so you had basically a cell phone enabled pager with a multi line display and a keyboard. I used to carry one. They were absolutely fabulous. This was coming out right toward the end of the Newton period. But it was solving a problem, because before then, all the pager could show you was just a phone number, ten digits. The ability to actually send a message was transformative. And so they completely killed the pager market with their device because it was so much better. So again, it's an example of capturing demand from competitors that already exist. And then what they did was they expanded that product into what was something closer to the Newton, which still had the texting capability, but now had a bigger screen and the ability to store information. So now you could take notes, that sort of thing.  

 
19:30 
Dale Harrison 
And then the next step was to then add in the ability to make a cellular phone call on the same device. So it was a very iterative step, and at every step of the way, they were basically cannibalizing market share from adjacent categories and near competitors. And this had gone on for a decade before Apple ever entered the picture. And so Apple comes in very late with a really significant innovation step and basically just takes all that market, which is important.  

 
19:56 
Dom Hawes 
It's not just a semantic thing, actually. So what we're saying is demand creation doesn't exist, but demand capture does. That's not a semantic distinction, because if you are going to capture demand, you need to understand, I think, what behavioral changes you're asking your customers to make and what sacrifices they're prepared to make in order to take on, or what the benefits are to them in order to take on your new product. And that informs then how you're going to market it yourself.  

 
20:21 
Dale Harrison 
Right, right. Because you're capturing demand from somewhere.  

 
20:23 
Dom Hawes 
Exactly. Yeah, exactly.  

 
20:25 
Dale Harrison 
There's some inflow of demand, active demand, into the market that you're trying to capture. Where is. Where is that demand otherwise going if you don't exist? That's where you start to look.  

 
20:38 
Dom Hawes 
And then we're talking about how much you will inconvenience your customer to adopt your new product. Cause some of those are very light. Right. And I think you gave me an example when we spoke before about Colgate in the twenties, but this is another.  

 
20:49 
Dale Harrison 
Example that often gets tossed out, largely by people who don't know history, is that Colgate invented brushing your teeth. And, no, Colgate didn't. By the time Colgate introduced toothpaste, which was their innovation, brushing your teeth was essentially universal. There were probably some, you know, narrow pockets in rural areas where it wasn't as popular, but it was universal. And in fact, it had been a human practice going back, you know, close to 5000 years. Yeah. And brushing your teeth with product is something that goes back to the roman era. Yeah. So, you know, these are practices that have existed for thousands of years. And at the time that Colgate introduced toothpaste, the standard product was what was called tooth powder, which was a small metal can with powder in it.  

 
21:36 
Dale Harrison 
And you would sprinkle the powder on your toothbrush, you know, you dampen the toothbrush, sprinkle powder on the toothbrush. You had toothbrushes, you had toothbrushing, you know, and you had a product to do it with, but it was messy because the powder would go everywhere. And what they did was they took that powder and they compounded it into a paste and they put it in a flexible tube. And so now all of the things that were nuisances and inconveniences about the prior embodiment of the product is now fixed. So it was a huge innovative leap. And so this was introduced in the early 1920s, but even then, it was not until well into the 1970s that tooth powder went off the market. It took 50 years, a half a century to make that conversion. You know, so these are very long cycle processes.  

 
22:21 
Dale Harrison 
And if you grew up at a certain time and you were very poor, all you knew was tooth powder because it was so much cheaper than toothpaste and so it was all you could afford. And so, you know, I grew up, you know, in a very poor family. That was, what I grew up with was tooth powder. And it was just a complete mess because it was so much cheaper than toothpaste that was what we could afford. And so were using this, you know, into the seventies before finally switching, you know, when toothpaste finally got cheap enough and tooth powder was hard enough to find. Again, this is another example of you are introducing an innovation into a market that already has preexisting demand and you're diverting that demand from adjacent categories. And so, yes, they did category invention.  

 
23:04 
Dale Harrison 
They were the first company to have something called toothpaste and they were the only competitor in that newly created category. But new categories only work if there are adjacent categories that you can still demand from.  

 
23:22 
Dom Hawes 
The big point coming out of this for me is how our mentality shapes our efforts. In other words, if I believe I can create demand, then I'm going to treat customers like targets and market to them with a very numbers based set of tactics. Whereas if, on the other hand, I believe that I'm capturing demand or building brand awareness, then I'm going to approach customers very differently. And the marketing I put in place around them is going to reflect that. And therefore, the brand I build will reflect that, too. So even if we let the semantics and the terminology go, I think it's still absolutely vital that we're crystal clear about our objective. And that brings us to the end of part one.  

 
24:04 
Dom Hawes 
I'm so grateful we had this opportunity to talk to Dow, because he's managed to debunk some big myths that have been bothering me for a long time, and he's done it with the incisive calmness of a surgeon. In part two, Dale will be taking his scalpel to another of our industry's monsters under the bed. Yup, our old friend ROI is next up on Dale's Gurney, and I cannot wait to see what he reveals. So keep your ears peeled for part two. Or better yet, just subscribe to the show and it's going to appear like magic in your pod feed. Maybe demand creation does exist after all. You have been listening to Unicorny. I'm your host, Dom Hawes. Nichola Fairley is the series producer, Laura Taylor McAllister is the production assistant, Pete Allen is the editor, and Peter Powell is our scriptwriter.