PQLs are prospective customers who have used a freemium or trial version of your product and whose actions show a strong interest in purchasing it.
But how do you begin to identify leads with buying intent?
Read our ultimate guide to find out what a PQL is, why they’re important, and how to qualify leads with a few industry benchmarks for comparison.
Then, we’ll discuss how to turn these leads into customers, other key metrics, and the difference between PQLs, MQLs, and SQLs.
This Article Contains:
- What Is a PQL?
- Why Do PQLs Matter?
- How to Qualify PQLs
- SaaS Benchmarks for Product Qualified Leads
- How to Increase PQLs Conversions
- Product-led Metrics and KPIs all Departments Need to Know
- Product Qualified Lead FAQs
- Spot Qualified Leads Lightning-Fast with Product Data
What Is a PQL?
PQLs are ‘product qualified’ because they’ve actually used your product and experienced meaningful value from it. They are more likely to become a paying customer based on their product engagement.
Typically, you identify a qualified lead by tracking their in-product actions.
These actions can be anything from signing up for a freemium plan or free trial, completing certain tasks, or frequent product usage (more on that later).
But you may be wondering, what’s the benefit of tracking PQLs?
Why Do PQLs Matter?
By using product usage data for lead qualification, you can drastically reduce the length and cost of your sales cycle.
You don’t have to squander your sales and marketing team budget to acquire and qualify leads. Instead, your priority is quality assurance because the product experience is your main selling point.
With a PQL strategy, you can:
- Gain insight into who a potential customer is via product usage.
- Pinpoint the right moments to reach out to them, e.g. if they’ve frequently used a key feature or hit a usage limit.
- Improve collaboration between departments like marketing, sales, customer success, and the product team, as everyone has a role in driving PQLs.
- Spot upselling and cross-selling opportunities by understanding what draws a prospect to your offering.
Additionally, unlike SQLs, you don’t have to depend too heavily on the sales team to turn PQLs into customers (more on that later).
Overall, PQLs lead to shorter sales cycles, reduced churn rates, and reduced customer acquisition costs.
But let’s not get ahead of ourselves.
Let’s first discuss how you can identify a qualified lead by monitoring product usage.
How to Qualify PQLs
You can define a lead as ‘qualified’ once they’ve reached their ‘aha moment’.
The ‘aha moment’ is when users move past their skepticism and discover the promised initial value of your SaaS product.
But what makes a lead product-qualified?
Generally, your qualification criteria boils down to three major factors:
- In-app usage patterns: Regular logins, lengthy or repeated sessions on the price page, or clicking on premium features can reveal buying intent.
- Assistance requests: A lead that has queries for more information is a good indicator of interest in your SaaS product.
- Adoption velocity: The speed at which a prospect begins to engage in product usage could indicate that they see meaningful value in your offering. Slow adoption rates can highlight which leads may need more nurturing.
Still unsure what data you can count toward an ‘aha moment’?
Let’s look at some examples of how other PLG companies define PQLs.
SaaS Benchmarks for Product Qualified Leads
Industry standards for identifying PQLs include:
- Slack: When an account reaches the 2,000 message limit
- Salesforce: Once someone creates a custom object
- Facebook: When a user adds 10 friends in seven days
- Intercom: When someone has a certain number of conversations
Of course, there’s no one-size-fits-all approach.
The makeup of your analytical methods depends entirely on what product data you consider to have the most value to your SaaS company.
Another way to gauge how you measure up to your rivals is by measuring your conversion rate. Conversion rates are a helpful metric to show if your offering is delivering enough value to justify the price.
Suppose you gained 1,000 PQLs in a month and 400 converted to paid accounts. Your calculation is:
Conversion rate = (400) / (1,000) * 100 = 40%
In the SaaS industry, the benchmark for conversion rates is around 30-60%.
The big question is:
How do you boost this percentage?
How to Increase PQLs Conversions
To push PQLs into becoming a paying customer, consider the following steps to a winning PQL strategy:
1. Leverage Email Marketing
Emails can be a helpful PQL strategy to get users to log in and continue using your services.
Sometimes people simply forget to use the product they’ve signed up for, and need a quick reminder.
Since you know that your PQLs care about your offering, capitalize on this via tailored, relevant emails. Send them reminder emails, product feature updates, walkthrough videos…anything to get them back to your product.
And when done right, email marketing is one of the most effective conversion tools.
For each $1 spent on email campaigns, the average ROI is $38.
However, remember, consumers are constantly bombarded with emails. To avoid ending up in the spam folder, you must reach out to leads with personalized messages. Make sure each email is tailored to each unique lead and where they are in their buyer’s journey.
Get this right and you could be looking at a median ROI of 122%!
2. Intuitive User Onboarding
Users can derive value from free trials but may still have some queries.
A lack of guidance at this stage could result in a lost opportunity.
Onboarding involves familiarizing PQLs with your offering to help users unlock the full potential of your services.
The process may include the following:
- Interactive walkthroughs
- Video guides
- In-app messages
- Customer feedback forms
Skeptical about the value of this step?
Around 97% of SaaS companies believe this process is necessary for product led growth.
By providing real-time assistance, you can resolve any issues preventing users from converting into customers. In fact, it could almost triple your conversion rate from 30% to 80-90%.
3. Timely Interactions
It’s not just about how you reach out to leads but when.
In-app notifications and automated emails are great conversion tactics.
They’re even better if you send them at the right time.
Watch out for suitable conversion opportunities, such as:
- When a user hits a paywall.
- When users encounter issues during their trial and appear to be stuck.
- When product usage data indicates they may gain more value via trying additional products, services, or upgrades.
Any of these may be signs that it’s time to begin actual sales discussions.
Ultimately, conversions are driven by having a good understanding of your target audience.
Many PLG companies view product data as a great KPI (key performance indicator) because of the user information PQLs provide.
But how do you know if the cost of acquiring, nurturing, and converting PQLs is worth it?
Some metrics can give you insight into how well your PQL model works:
Product-led Metrics and KPIs all Departments Need to Know
For a window into the success of your entire organization, you’ll need to track metrics that measure the pulse of your business.
Critical PQL-related metrics include:
- CAC (Customer Acquisition Cost): This measures the total cost of winning a paying customer. Product-focused lead generation results in significantly lower customer acquisition costs.
- Activation Rate: This is the number of users who reach a certain threshold in the product experience and become a qualified lead.
- Daily and Monthly Active users (DAU/MAU): This demonstrates the level of your users’ product engagement by indicating whether or not they use the product regularly.
- ARPU (Average Revenue Per User): This shows how much income each of your subscribers generates, so you can gauge how successful your leads are on an individual basis.
- Revenue Churn: This tracks the earnings you’ve lost from cancellations and downgrades.
- MRR (Monthly Recurring Revenue): This tracks your monthly subscription earnings.
- ARR (Annual Recurring Revenue): This tracks your yearly subscription earnings.
Which metrics can you use as a PQL-related KPI?
It depends on your goals, for example:
- Activation: To improve your activation process, you should track your activation rate, as these numbers can reflect the quality of a prospect’s product experience.
- Growth rate: Tracking NRR (net revenue retention), MRR, or ARR can keep you in touch with your business’s health and forecast the momentum of your product led growth.
- Revenue growth: Conversion rates are crucial if you’re focusing on monetization. Ideally, your conversions should be high, but low rates can reveal whether the product experience isn’t delivering enough initial value, if the product team needs to improve any features, or if you need to lower pricing.
But one question remains.
What makes PQLs different from MQLs and SQLs?
Product Qualified Lead FAQs
Let’s look closer at what makes PQLs stand out from the crowd.
1. What’s the Difference Between PQL Vs. MQL?
PQLs show interest in your product by using it directly.
Marketing qualified leads (MQLs) show interest via engagement with your marketing materials.
The main two characteristics of PQLs are:
- Buying intent.
- Direct product engagement.
In contrast to a product qualified lead, a marketing qualified lead doesn’t directly interact with products or show intent to buy — yet.
Instead, a SaaS company with an MQL model uses alternative analytical methods to assess which leads are marketing qualified. For example, subscribing to newsletters, interacting on social media, or repeating site visits.
They need more nurturing from the marketing team before becoming a sales qualified lead (SQL). Once the marketing team believes they’re showing buying intent, you can classify the marketing qualified lead as a sales qualified lead.
2. What’s the Difference Between PQL Vs. SQL?
PQLs indicate interest in your product by directly using it.
SQLs indicate interest by engaging with your brand.
Like PQLs, a sales qualified lead shows they’re open to purchasing.
So, what’s the difference?
Although they’re both high intent, with SQLs, you assess leads based on a content and website data model, not product usage data.
In a nutshell, SQLs will talk to a sales rep before buying. PQLs may not even want to talk to the sales team before purchasing. They’ve already used your services, which is the main deciding factor in their purchase decision.
For SQL lead generation to be profitable, you need a top-notch sales team. Meanwhile, PLG companies utilize a PQL model because they have a strong quality assurance process and believe the product speaks for itself.
Spot Qualified Leads Lightning-Fast with Product Data
By firmly establishing your own qualification criteria, you can correctly identify who’s deriving the most meaningful value from your services.
Product led growth provides a fantastic way to shorten the sales cycle, combat churn, and identify conversion opportunities.
Follow our rock-solid tips and pave the way for a smooth, efficient PQL-to-customer pipeline.
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