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What Marketers Need to Know About Product Qualified Leads (PQL)

Usha Vadapalli
March 2, 2022

What do we want? Profitability and growth.

How do we get it? By closing more sales and expanding accounts.

How do we get more sales and expansion opportunities? Increase the number of qualified leads.

Merely increasing the number of MQLs and SQLs for more conversions is not the most ideal path to take. MQLs and SQLs lose their sheen as soon as it becomes about passing on the leads to the next funnel stage. Demand generation to keep the sales pipeline from drying up comes with great costs. Cost of acquiring customers (CAC), cost of more resources (marketing, BD, sales, CS), and cost of churn or customer dissatisfaction.

That brings us to the question of quality. Why do we need to qualify leads better?

Raise your hand if you’ve heard or witnessed a “discussion” about the quality of MQLs between Sales and Marketing. 🖐

There are marketers out there qualifying the leads who engaged with content, downloaded gated content of the topic, checked the pricing page a few times, and fitted the buyer persona. All this activity can still give you a false positive about the lead’s buying intent.

It made sense when we set up the lead scoring process. But, the fundamental flaw of the old way is that we do not take the user’s experience of value with the product into consideration.

A buyer would purchase a product for the things it can help them get done — functional value, how we feel or avoid feeling by using it — emotional value, and sometimes how we want to be perceived by others by using it — social value. Also known as the jobs to be done (JTBD) framework.

Source: Experiencing Information

The old lead scoring processes are not set up to measure the outcomes that a user experiences. And, the Sales team ends up chasing those leads.

When we have to ensure not drying out the sales pipeline we sometimes compromise with a few qualification steps and chase arbitrary metrics to hit the goal.

What Are PQLs?

You can get a broad understanding of the Product Qualified Leads from OpenView's definition.

Product Qualified Leads (PQLs) are the users who signal their buying intent based on product usage rather than just traditional marketing or sales qualification.

PQLs are 5 to 6 times more likely to convert than an MQL, likely to complete the sales cycle faster, and are less likely to churn — all because of experiencing the product value. Unlike white paper downloads, email click rates, or webinar registrations, PQLs are not the same for every business. You get to carve out the description that suits your business.

Unlike white paper downloads, email click rates, or webinar registrations, PQLs are not the same for every business. You get to carve out the description that suits your business.

Identifying PQLs

There are so many different ways to describe a PQL but you know you have one if you can answer these questions about the lead.

  1. Have they experienced product value?
  2. Do they match the Ideal Customer Profile (ICP)?
  3. Did they show buying intent?

We are approaching the familiar lead scoring process more holistically by including product usage data along with the demographic and firmographic information.  

  1. Experiencing Product Value

In product-led companies, the product delivers the value experienced unlike the promised (or perceived) value delivered by marketing.

Look at your value metrics to understand how this helps define a PQL. For a communications platform like Slack, the value metrics like the number of messages sent by a person and the number of users from the same company can be the value metrics.

Both these numbers show how the employee is experiencing value from Slack ( smooth communication with team members ) functional, emotional, and social. Also, it helps Slack grow as the value metric increases.

Figure out the outcomes your product user experiences, how fast they get to the Aha moment, the product usage patterns, and product usage data.

If you are still in the early stages of launching your product, talk to your initial users to understand what made them sign up in the first place and what outcome they are looking for to achieve with your product. Keep tabs on their product usage patterns to understand the value metrics better and eventually narrow down on the usage triggers that happen before they convert to a paid customer.  

  1. Ideal Customer Profile (ICP)

You might have done a good amount of research into what an ICP is for your product while planning the go-to-market (GTM) strategy or understanding your total addressable market (TAM). Gartner describes it as the most valuable customers and prospects that are most likely to buy.

Moritz Dausinger, the CEO of Refiner suggests having more than one ideal client persona. Even if the differences between these personas are minute, it helps in identifying and prioritizing the PQLs better.

He also recommends having the elimination criteria for a seemingly potential account that wouldn’t mature into a business opportunity.

  1. Showing Buying Intent

Consult your product data to identify the actions that a customer took before they converted to a paid customer. You can add the number of logins, time spent with your product, usage of advanced features, reaching out to in-product customer support, or similar actions that scream ‘I see what your product does and I want to use more of it’.

Wanting to talk to your sales team also qualifies as intent, but you can prioritize these customers based on how they fit into your ICP.

Identifying PQLs

Yes, it’s the same sub-heading again (you’re paying attention 😃). No, I didn’t repeat it by mistake.

Identifying PQLs is a job half done. As Wes Bush, founder of ProductLed says, ‘PQLs are like a moving target.’ As your product, users, and organization continue to evolve your PQLs need to change too.

Keep an eye out for how the product usage and patterns are changing over time and with user account expansions. Adjust your PQLs as fit for your business changes.

PQLs Are a Team Sport

In traditional demand generation, the leads are owned by a team depending on the funnel stage, with occasional overlap. When it comes to product qualified leads, like anything involving product-led growth, lead generation and nurturing is a collaborative effort.

Value metrics like the ratio of PQLs to customers can be a common goal for both sales and product teams. Because in PLG, the friction in the product is equally responsible as a sales team’s ability to persuade a buyer.

Similarly, marketing and customer support share the responsibility of getting a sign-up to convert to a PQL.

Before setting the goals for your teams, think of what you’d do to hit the quota. That should give you a clear picture of how the teams strategize to achieve those goals. If you are setting arbitrary metrics you might fall for the same flaws of MQLs.

Wes Bush suggests a healthy mix of both qualitative metrics such as the visitor to sign-up to PQL rates and qualitative metrics such as the expansion of MRR, life time value (LTV) of the customer, and so on.

Acquiring Leads

So far we’ve talked about qualifying the leads that your product already acquired. Armed with the same information, you can apply this playbook to acquire good fit leads to try out your product.

Like Victor Eduoh, Founder of VEC puts it —  ask the who, what, why, and where.

Who: You know it from mapping the ICPs

What: Your product is the best source of what the users are doing with it. In other words, your product usage data and pattern.

Why: If not already done as part of research for identifying ICPs, talk with your product champions. Ask them about their pain points and how your product solves those better than a competitor’s.

Where: Now, identify where your target audience is. Use all the information above and tailor your content and messaging to speak to the ideal customer. Establish visibility in the channels and ensure signing up for your product is a breezy experience. You’re acquiring future PQLs in no time.

The concept of Product Qualified Leads is still evolving. Although the goal is the same, PLG companies are going for different flavors of it. Let me leave you with this thought. Unlike MQLs, PQLs are not single-dimensional. They put the user at the center and consider value metrics and customer profiles (not target audience) to identify opportunities driven by product intelligence.

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