Product Qualified lead featured image

Beginner’s Guide to Product Qualified Lead (PQL).

Every B2B SaaS company’s backbone is customer acquisition. Qualifying leads and determine which prospects are most likely to convert into paying customers is difficult. Figuring out how to convert those leads by moving them through the funnel while generating a good user experience is even more difficult. This is where the concept of PQL (Product Qualified Lead) gains traction. 

SaaS firms have used MQLs (marketing qualified leads) and SQLs (sales qualified leads) to identify the quality and true buying intent of prospects for a long time. MQLs are leads who have interacted with specific marketing content (e.g., blog, webinar sign-ups, form submissions, page views, etc.), while SQLs are leads who are now engaged in active dialogues. 

MQL and SQL image

The issue is that these models rely on leads who are yet to use the product. The previous approach does not work for PLG (product-led-growth) SaaS enterprises that allow users to “try before they buy.” PLG’s business approach entices customers by giving genuine value before asking for anything in return. This is why PQLs, or product-qualified leads, are far more credible. 

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What is a Product Qualified Lead (PQL)?

A Product Qualified Lead (PQL) is a lead who has used/engaged with your product using the free trial or the freemium model. These users are familiar with your product and have gained value from the same. When you contact a PQL, they would seem to have had a positive experience with your product. This simplifies the sale because the user does not need to be convinced of the product’s worth. As an outcome, PQLs are more likely than other leads to become customers.

Because each company’s product is unique, the activities that individual users take while using it will vary, therefore determining key indicators is critical to defining a PQL. To identify how prospective clients should be groomed through the product activation funnel, examine the:

  • Overall customer profile, 
  • Product usage, and 
  • Purchase intent 

Why are Product qualified leads crucial for SaaS Customer Success?

PQLs have a significant advantage because of the new self-serve paradigm. This eliminates the need for users to go through a salesperson or engineer-led demonstration. To succeed with a product-led growth strategy, you must concentrate on increasing PQLs.

  • PQLs depict the ideal customer profile (ICP). 
  • After adopting a product, PQLs are less likely to churn.
  • Because the prospect has used the product, PQLs have a quicker sales cycle.
  • Customer acquisition costs (CAC) are lower for PQLs, and the annual contract value (ACV) is higher. 
  • PQLs are unbiased since they are dependent on product usage, unlike MQLs and SQLs. 
  • PQLs have a superior customer experience, which translates to more satisfied customers. The company spends less time and money on bringing these clients on board. 
  • Prospective consumers or freemium users have the greatest buying intent. So, they are more likely to become paying clients.
  • PQLs are the most successful consumers. 
  • There is more chance for upselling, cross-selling, and retention, as well as recurring revenue.
  • The product behaviors gathered through PQLs can subsequently be used by product teams to develop new important features and experiences.

Important PQL metrics to know

  • Raw/Fresh PQLs
  • PQL rate
  • Time to PQL
  • PQL to Paid conversion rate

Raw/Fresh PQLs 

These are the easiest thing to measure. This number measures:

  1. Existing PQLs 
  2. The number of PQLs you receive on a weekly or monthly basis.

Understanding the number of leads going through your “sales” process, as well as establishing short-term new revenue estimates, requires knowing how many PQLs are in your current pipeline. 

PQL Rate 

Along with counting the amount of PQLs you’ve recorded in a certain period, calculating a PQL rate is just as crucial (if not more!).

The percentage of new signups who reach PQL status in a specific time period is known as the PQL rate. This is an important indicator to track because it is unaffected by the number of signups you receive. A PQL rate, rather than raw PQL numbers, is a better indicator of your activation process.

Customer Onboarding Template

Time to PQL 

This is the time it takes for a new account to achieve PQL status. Obviously, you want to activate new accounts as soon as possible, so maybe you should keep track of how long it takes. If you offer a 2-week free trial, you obviously want new accounts to be activated during that time, preferably in the first half. It will be tough to get high conversion rates if accounts reach an initial value a day before a trial finishes.

PQL to Paid Conversion Rate

This metric/indicator can help you determine whether your service provides enough value to persuade consumers to pay for it. Simply divide the number of accounts that switched from PQL to Paid by the total number of PQLs in a period.

PQL to Paid Conversion Rate = Total number of PQLs that converted to paid / Total PQLs

How to generate Product Qualified Lead?

Once you’ve defined your PQL, you’ll need to set up the mechanisms so that everyone on your team may contribute to the creation of more PQLs. This is not a sport that can be played alone. You can start leveraging your team and data to promote growth after you have the exact product qualified leads (PQLs) strategy in place for your company. From product to customer success, marketing to sales, and everything in between, you’ll have distinct teams concentrating on each stage of the customer’s life cycle.

It’s practically impossible for a single team to run an effective PQL process by themselves. PQLs are frequently considered revenue-generating initiatives, with marketing and sales at the helm. You will, however, require crucial input from other teams, particularly engineering, in order to have access to the correct product usage statistics required to begin the PQL process.

Identify and Act on PQLs

Identify a PQL

Working backward and looking for similarities across clients is the best way to identify PQLs. Conversations with customer-facing teams like customer success, sales, marketing, and customer support are another way to accomplish this.

Another method is to examine specific customer behavior to see which acts are most closely related to the purchase process and specific activities:

  • What kind of consumer profile is ideal (ICP)?
  • Which characteristics do the most active customers share?
  • What are the most popular features among existing customers?
  • When does product utilization start to rise?
  • What element in our free tier is the most popular?
  • When do free-tier customers consider upgrading?
  • What causes a drop in product usage?

Act on a PQL

It’s pretty simple to start acting on data after a PQL has been defined and synchronized to the right SaaS tool. PQLs provide near-unlimited customization and help clients succeed. A workflow feature allows users to design certain activities or touchpoints that the user specifies.  From the perspective of lifecycle marketing, the same approach might work well.  Multiple touchpoints can be added to these workflows to help the customer progress through the funnel.

Customer Success and PQL

It’s a mistake to think of Customer Success in SaaS as being further “down the line” than the teams who worry about “lead” numbers. Customer Success teams should be aware of PQL data because 

  • They are frequently involved in the activation of trial accounts, both directly and indirectly, and 
  • PQLs are more likely into becoming long-term, highly involved customers. 

Customer Success teams have a significant impact on bringing accounts from sign-up to activation, as measured by the PQL rate. They are frequently involved in the documentation and onboarding processes that assist new accounts in achieving value. 

Customer Success is a service that connects users with customers. As a result, the team’s core metrics include assisting users in achieving a meaningful result in the product and increasing account size through upsells. A Customer Success platform, like CustomerSuccessBox, helps target PQLs effectively and helps the customer success team manage those leads. 

Final thoughts on Product Qualified Lead

A PQL-driven growth plan is a long-term, sustainable technique to increase conversions, grow, and generate income. PQL is what brings teams together to achieve product success. Product-led growth is an excellent approach to generating recurring revenue, converting clients, and keeping them engaged over time. After all, these clients are there because they enjoy the product. This is what keeps them loyal to the company. Customers can use trial accounts and free passes to see what’s in store for them. If they like what they see and feel, customers will more likely to stick with the brand. 

Content marketer at CustomerSuccessBox | An avid reader, a passionate writer and a life long learner | Writer @ Hacker Noon | B2B SaaS & Customer Success enthusiast |