Product-led Growth

Product Qualified Leads (PQLs) for SaaS companies in 3 minutes.

Aaron Kazah

Product

3-MIN READ

If you’re part of a SaaS company you’ve probably heard the term “Product Qualified Lead” thrown around quite a lot, and maybe you did some research into this topic, however, if you’re like me, then you’re pretty unhappy with the amount of filler content created around this topic.

So I decided to do a bit of research,  trim down the fat, and give you only the crucial bits of information you need to know about PQLs.

So let's get started. Here are Product Qualified Leads in 3 minutes.

What is a product qualified lead?

Product Qualified Leads (PQLs) are potential customers who are already using your product and using it in a way that suggests they are getting value from your product. PQLs can help you focus sales efforts by reaching people who are already interested in your product (and likely to be receptive to sales & marketing messages from you). This is especially helpful for Product-Led Growth companies, as these companies tend to have a lot of users within the free trial or free version of their product.

How to identify product-qualified leads?

Identifying product-qualified leads begins with behavioral triggers. These can be in-app actions such as creating a certain number of invoices in Xero, or specific actions like sending 2000 messages in your slack channel.

In Slack’s case, by the time a team reaches 2,000 messages, they have become familiar with Slack's core features and seen the product's potential impact on long-term productivity. At this point, retention rates for slack teams are 93%.

Your sales team can use these behavioral triggers to meet their quota by identifying engaged users from your product metrics and creating custom-tailored pitches depending on the users' activity.

When you’re a company that has thousands if not millions of trials per year, PQLs saves you time & money spent on engaging users who are not likely to convert and enables your sales team to close more deals faster.

A fool-proof way to identify a product-qualified lead is to leverage your product activation rate.

You can read more about why activation is perhaps the most important metric for your B2B SaaS companies here, but to summarise... your activation rate is the percentage of people who successfully complete a certain milestone in your onboarding process. Typically, these milestones are actions that result in users paying for your product.

So you can consider any user that successfully activates in your product to be a product qualified lead.

How to turn product-qualified leads into customers?

According to Accenture, product qualified leads have conversion rates that are 5x higher than those of marketing qualified leads, which makes sense because, as highlighted above, your sales team isn’t shooting in the dark anymore. By leveraging your product metrics your sales team can identify ‘high-intent’ users and craft data-driven pitches to sell to them.

Every company is different, however, all SaaS companies will follow the same basic framework below:

  • High Feature usage
    Identify users with high usage of a certain feature and show them how the extra functionality in your paid plan can deliver more value to them.
  • Free-trial Limitations
    Identify users who have hit their limitations on their free package, offer them a custom paid-plan that allows them to use your product with fewer limitations. This is especially useful for companies dealing in volume-based pricing.
  • Purgatory
    Identify users who haven’t fully activated but have taken some level of action towards using your product. This is where customer success comes in.

    You may have an issue in your onboarding process that’s stopping them from realizing the value of your product, so reaching out to them and understanding their problems can help you convert these users into paying customers.

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