Product Qualified Leads (PQLs) are still a relatively newconcept. Just to be sure we’re all on the same page, the definition of a PQLI’ll be using is: a potential customer that is likely to convert to a paidcustomer, provided they achieve some initial value from your free offering.
If you aren’t tracking PQLs or aren’t sure why you would, Ihave to ask…
How can you NOT care about PQLs?
In the new world of SaaS, PQLs are the only way we can reliably measure new opportunities.
To watch the video on this topic, hit play below or read on for more...
https://www.youtube.com/watch?v=yhomDAKXxHM
Out with the old, in with the new
The old world of software was sales-led. A lead would contact the company, speak to someone on the sales team, go through some QC checks, arrange a demo, and maybe a face-to-face meeting... You couldn’t buy without talking to a salesperson.
The new world is product-led. If you have a credit card and an internet connection, you can go out and buy any software you want. The funnel has changed, sales teams are much more selective now and don’t get involved until much later. The new world is built on try-before-you-buy. Your product is your sales team.
Whether it’s through a free trial, a freemium model, or a proof-of-conceptdemo, nobody buys software these days without trying before buying.
If your sales are driven by your product, failing to qualifythem based on product usage means you are operating in a way that is counter toyour business model.
Why would you get people to use your product and then notmeasure how they use it?
The Why and How of Product Qualified Leads
Why should you use PQLs?
PQLs are essential if you want to optimize the efficiencyand effectiveness of your sales team. Time is money and nobody knows that morethan sales teams. Using PQLs means you’re able to work out who you can affordto spend time with.
With a solid PQL framework in place, you can determine thepoint in your customers’ journey at which it is actually worth your resourcesto start communicating with and selling to them.
How do you use Product Qualified Leads?
The best PQL models are based on two factors – firmagraphicsand interest.
Firmagraphics match your leads to your target customerprofile (size of company, industry, location, integrations, roles). These are howyou qualify the account/firm you’re selling into. It’s a very traditional modelthat has existed in plenty of older sales strategies.
Measuring interest from PQLs is far different from a traditionalmodel. In the old world, we tracked prospects’ interest through website visits,page visits, downloads, and demo signups. In the new world, we track how they areusing your product.
That’s it.
Organic interest is as simple as asking: are they using it?
If you want to really push the limits, you can ask a secondquestion: are they still using it?
Measuring interest
Okay, I’m being a little facetious there. Interest is bestmeasured by two metrics: hand-raising and organic engagement.
Hand-raising is more common in freemium products. This meanslocking off features and leaving an ‘unlock’ button or easy interest signal thattakes the user to your sales team so that they can access that (or those) paidfeature(s).
Organic engagement is best measured in free trial models andmeans tracking the engagement of all trial at the account level to create abaseline and then measuring activation rate.
Activation rate is where PQL really comes into its own andshould be the cornerstone of your PQL framework. Let’s dive into it more.
Measuring activation rate
Let’s get a few definitions cleared up first.
Activation is the “aha” moment that your customer has after a series of actions. The point where they have passed through all the gates you opened for them and picked up all the breadcrumbs.
Activation rate is a measure of how far along that accountis towards their aha moment.
At Sherlock, we believe that SaaS companies are making ahuge mistake when they treat activation as a binary.
Your users are not either “activated” or “not activated”.They are all on a path and you need to understand how far along each account ison that path, as there are different interventions you can make to move them onfor each step.
For example, a Gmail customer journey might look somethinglike:
1 – Account sign up
2 – Connects to GSuite
3 – Create first template
4 – Send 5 emails
5 – View report 2 times
6 – Invites 2 teammates
7 – Activation!
If they’ve taken two of those steps, they’re considered 20%there. If they’ve done 5, they’re considered 80% there.
Once an account has reached a certain activation rate, youcan consider them a PQL.
So, what activation rate should you use to classify aprospect as a PQL? There are two questions we need to ask before we can say…
Building your Product Qualified Leads framework
Those two questions are:
- How complex is your product?
- What is the size of the opportunity from your lead?
The more complex your product, the earlier your team need toget involved.
The bigger the opportunity, the earlier you can afford toget your team involved.
For a simple product, 70%+ of trials may be able to self-serve themselves to value and activation.
For an intermediate product, ~50% of trials may be able to self-serve themselves to value and activation.
For a complex product, <25% of trials may be able to self-serve themselves to value and activation.
Putting all of this together creates this framework:
Use the framework to work out how and when to get your teaminvolved, to work out where in the activation journey you can get your teaminvolved.
A note on the PQL framework:
It is hard to predict deal sizes as small, mid-sized, or large with high accuracy, but PQL is not a rigid framework. It is designed to flexible and transparent so as to provide trustworthy signals to your team so that they can make informed decisions.
How to engage with your Product Qualified Leads
PQL engagement strategies are best divided into two phases:the automation phase and the human touch phase.
Automation phase at the start looks like in-app onboarding,onboarding emails, your help center, and videos.
Human touch looks like calls, demos, and onboarding/implementation support.
What separates these two phases is the PQL status based onactivation rates. For example, if you determine your PQLs as leads who havepassed 80% activation rate, that’s the point at which you begin the human touchphase.
Product Qualified Leads across the customer lifecycle
Here’s a gold nugget for you… PQLs don’t just exist at initial conversion stage! Year-on-year, expansion revenue is becoming a bigger percentage of overall new revenue for SaaS companies.
As a result, you really need to adopt PQL across your company. Customer Support need to know about it, Account Management need to know about it, Product need to know about it.
You can build PQL models into your full customer lifecycleby adding hand-raising triggers in your product (such as new features that needunlocking), usage limits (x number of tracked event, number of seats available,anything!), and measuring engagement over time (if a customer is gettingmassive use out of their current tier of product or have suddenly spike theirusage, they may be ready for an upgrade).
Product Qualified Leads are a unifying metric
Hopefully the engagement and customer lifecycle perspectiveshave shown you why a PQL model is asilo-breaking metric. So many teams can rally around it, as everyoneparticipates directly towards its success and operation.
Look at your raw monthly PQL generation numbers (20 PQLs inJanuary, 25 in February, etc.) as a great overarching metric for the company.
Another great choice is your PQL rate (% of total newsignups in a period that reached PQL status – e.g. 100 signups and 20 of thembecame PQLs = 20% PQL rate).
It should be clear how so many teams are involved in this:
Product has a huge stake in this, as they need to build agreat product with smart onboarding to improve PQL.
Marketing has to drive trial signups, perfect onboardingsequences, and hone product marketing. Just because somebody has signed up fora trial, doesn’t mean marketing’s job is done. It carries on inside the productand throughout the customer lifecycle.
Customer Service has to be on top form with an up-to-date, in-depth support library and world class in-trial support.
PQL means no more silos and a lot more unity.
Product Qualified Leads in six steps
We’ve been through a lot in this post, so let’s summarize things real quick.
- Try-before-you-buy model necessitates qualifyingleads based on product usage
- Product engagement and activation = best measuresfor interest
- Track and use Activation Rate as the key metricfor PQLs
- Design your PQL framework around the complexityof your product and the size of leads
- Bring PQL mentality to post-sale, expansionareas of your funnel
- Rally your team around PQLs
Check out our free eBook if you want to go into more detail on how you can determine and create your PQL framework.
