{"id":353,"date":"2019-10-22T09:07:40","date_gmt":"2019-10-22T09:07:40","guid":{"rendered":"https:\/\/ec2-34-253-215-75.eu-west-1.compute.amazonaws.com\/?p=353"},"modified":"2021-09-21T09:57:26","modified_gmt":"2021-09-21T09:57:26","slug":"product-qualified-leads","status":"publish","type":"post","link":"https:\/\/refiner.io\/blog\/product-qualified-leads\/","title":{"rendered":"Product Qualified Leads: The Ultimate Guide"},"content":{"rendered":"\n

Have you heard about product qualified leads (PQL)<\/strong> but can\u2019t figure out how to use the model to drive more sales?<\/p>\n\n\n\n

Are you wondering whether the PQL model could help your sales team identify the biggest sales opportunities among your free trial or freemium users?<\/p>\n\n\n\n

It absolutely can. <\/p>\n\n\n\n

Before we discuss how it happens, though, let\u2019s cover some basics. <\/p>\n\n\n\n\n\n

What is a Product Qualified Lead? <\/h2>\n\n\n\n

The concept of Product Qualified Leads<\/em> (some people prefer the term Intent Qualified Leads<\/em>) is still relatively new. As a result, you\u2019ll find that its many definitions agree on some points and diverge on others. <\/p>\n\n\n\n

I\u2019m sure that, over time, we\u2019ll define PQLs more precisely. For now, however, let\u2019s work with what we have. <\/p>\n\n\n\n

So, what we all agree is that a product qualified lead is a user who has experienced the value of your SaaS product, typically through the free trial or freemium account.<\/strong><\/p>\n\n\n\n

As a result, such a person is more likely to become a paying customer and presents a sales opportunity to your reps. <\/p>\n\n\n\n

(We\u2019ll cover the reasons why shortly. But to explain this quickly \u2013 Such a person has a first-hand product experience already. A sales rep doesn\u2019t have to sell the user on that value. Rather, their job is just to convince them of the benefits of taking a higher \u2013 paid \u2013 plan.)<\/em><\/p>\n\n\n\n

There are two other aspects of a PQL definition that many other sources omit.<\/strong><\/p>\n\n\n\n

For the person to qualify as a PQL, he or she also needs to:<\/p>\n\n\n\n

  1. Match your ideal client profile (ICP.)<\/strong> In other words, PQL is not only someone who has used your product successfully. They also match the demographic characteristics of your target audience.
    Note: These might be as simple as being in your target location. However, company size, employee count, technology and many other factors can also affect whether a person matches your ICP. <\/li>
  2. Take actions that indicate the buying intent<\/strong>. Such actions will be different for each business, of course. It could be logging to the app regularly or performing specific tasks. It could also be inviting colleagues to use it or creating a team, spending time reviewing the pricing page or using the product following specific product usage patterns. <\/li><\/ol>\n\n\n\n

    In short, a product qualified lead combines all three factors to a unifying metric<\/a>: He or she has experienced the value of your product, meets your company\u2019s ideal client profile, and has expressed the buying intent by taking specific actions.<\/p>\n\n\n\n

    \"Product
    Product Qualified Leads as a Venn Diagram<\/figcaption><\/figure><\/div>\n\n\n\n

    On a site-note: Some people use the term Intent Qualified Leads<\/strong> (IQL) when they are talking about Product Qualified Leads. In our opinion, Intent Qualified Leads are more like a subset of PQLs because they don’t take the customer match into account.<\/p>\n\n\n\n

    But Why Focus on PQLs At All?<\/h2>\n\n\n\n

    We\u2019ve touched on this briefly above. However, I believe that the issue demands a thorough explanation. <\/p>\n\n\n\n

    To understand the benefits of using the PQL model, we must analyze how your customer acquisition process has evolved, particularly in recent years. <\/p>\n\n\n\n

    Customer Acquisition in the Software Industry \u2013 A Brief Overview<\/h3>\n\n\n\n

    Historically, selling software meant a high-touch, sales-led approach. Software companies relied on demos and meetings to convert prospects. <\/p>\n\n\n\n

    Reps had to physically show the product to a client, discuss potential modifications that would make it more relevant to the company\u2019s processes, envision the testing and deployment stage, and go through many other steps in the lengthy enterprise sales process<\/a> to make the sale. <\/p>\n\n\n\n

    For many companies, the process looked nothing short of this:<\/p>\n\n\n\n

    \"Typical
    Typical Sales Process (Source: A16Z<\/a>)<\/figcaption><\/figure><\/div>\n\n\n\n

    SaaS has enabled software companies to sell faster. For one, the software came as-is. Rarely, SaaS companies offered modifications or customization options (except for the enterprise-level packages, of course.) <\/p>\n\n\n\n

    More importantly, however, SaaS customers also have the opportunity to test the software before committing to the purchase. <\/p>\n\n\n\n

    The SaaS model reduces the risk of the purchase through a free trial or the freemium model. Customers are now able to experience the product and decide whether its features and processes match what they need. <\/p>\n\n\n\n

    Finally, the self-service model freed the company from playing an active part in the acquisition process. <\/p>\n\n\n\n

    Today\u2019s SaaS customers educate themselves about the product, sign up to try it on their own, and experience its value first hand without having to make any significant investment into the process. <\/p>\n\n\n\n

    Well, apart from their time, of course. <\/p>\n\n\n\n

    As a result, self-service has become the dominant SaaS sales model<\/a>. <\/p>\n\n\n\n

    In the model, the marketing takes full responsibility for generating revenue. By generating awareness of the product, attracting the right audience, and optimizing conversions, the company generates new freemium or trial users. <\/p>\n\n\n\n

    From then on, the sales can take over, and that\u2019s where the PQL model makes all the difference. <\/strong><\/p>\n\n\n\n

    Such a \u201ctry before you buy\u201d mentality has changed the way software brands engage with potential customers. <\/p>\n\n\n\n

    MQLs, PQLs, and SaaS Inside Sales<\/h3>\n\n\n\n

    Historically, let\u2019s refer to it as the pre-\u201ctry before you buy\u201d mentality days, software brands evaluated leads based on specific qualifying actions. These could have been the number or frequency of email opens, white paper downloads, website visits, and many others. <\/p>\n\n\n\n

    Based on such factors, marketers aimed to predict a lead\u2019s level of interest in the product, and their likelihood to become a customer. <\/p>\n\n\n\n

    We referred to those people as marketing qualified leads<\/a> (MQL.)<\/p>\n\n\n\n

    The MQL model has some flaws, unfortunately. <\/p>\n\n\n\n

    First of all, it\u2019s highly subjective. Since leads had no previous interaction with the product, marketers had to rely on their interpretation of why someone has downloaded white papers or opened emails. <\/strong><\/p>\n\n\n\n

    But, as I\u2019m sure you agree, none of those activities could predict the buying intent with any accuracy. A person could have, in fact, downloaded white papers out of sheer interest in the topic (rather than the product.) They may have opened the company\u2019s emails but have never engaged with their content, and so on. <\/p>\n\n\n\n

    The marketing qualified leads MQLs model analyzes basic activities only.<\/strong> Once again, without any product engagement, it relied on uncovering the purchase intent from arbitrary factors only. <\/p>\n\n\n\n

    Finally, it misses the critical aspect of modern software sales<\/strong> \u2013 Today\u2019s customers want to experience the product themselves, without any interaction with sales. Without allowing for the trial or freemium usage, it\u2019s impossible for a SaaS company to gain any product usage data, and ultimately, uncover the real buying intent. <\/p>\n\n\n\n

    <\/td>Marketing Qualified Lead<\/strong><\/td>Sales Qualified Lead<\/strong><\/td>Product Qualified Leads<\/strong><\/td><\/tr>
    Basic Demographics<\/td>yes<\/td>yes<\/td>yes<\/td><\/tr>
    Firmographic Data<\/td>yes<\/td>yes<\/td>yes<\/td><\/tr>
    Online Behavior<\/td>yes<\/td>partially<\/td>yes<\/td><\/tr>
    Manual Research<\/td>no<\/td>yes<\/td>possible, if needed<\/td><\/tr>
    One-on-one Call<\/td>no<\/td>yes<\/td>possible, if needed<\/td><\/tr>
    Product Usage Data<\/td>no<\/td>no<\/td>yes<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n

    Why Product Qualified Leads<\/h3>\n\n\n\n

    Well, the biggest benefit of identifying product qualified leads is being able to identify sales opportunities based on demographic, firmographic and product usage data.<\/p>\n\n\n\n

    Because of its laser-focus on identifying the perfect match of the ideal client profile and engagement, PQL helps inside sales teams to focus on the highest opportunities, rather than wasting time trying to process all leads.<\/p>\n\n\n\n

    To understand it better, let\u2019s consider the opposite \u2013 Having no PQL data. <\/p>\n\n\n\n

    Common Challenges with Going Upmarket<\/h3>\n\n\n\n

    Consider a SaaS company operating a successful self-service model. They get leads. Potential users sign up for a free trial or the freemium account. Some of those people convert into paying customers, generating the company\u2019s revenue. <\/p>\n\n\n\n

    But, at some point, its founders decided that it\u2019s time to ramp up growth. They\u2019ve realized that the self-service model isn\u2019t capable of providing growth fast enough. <\/p>\n\n\n\n

    So, they decide to go upmarket. <\/p>\n\n\n\n

    The company hires its first salespeople and sets them off to convert more customers. But, since there is no lead qualification process, their reps end up running around in circles. <\/p>\n\n\n\n

    They don\u2019t know which users to go after. <\/p>\n\n\n\n

    To solve this, some reps define their own lead qualification criteria. Others go by the gut feeling and reach out to leads they feel could become clients. Many others call every user, regardless of whether they offer any sales opportunity or not. <\/p>\n\n\n\n

    The result? Wasting time, for one. Missing out on high-value opportunities is another. Burnout, stress and poor results happen in such a situation often too. <\/p>\n\n\n\n

    Consider what would happen if the company had a PQL model in place.<\/p>\n\n\n\n