What Is a Product-Qualified Lead and Why It Matters for Software Companies
Written by :
BEN SKELLY
Posted on :
04.09.2023
Tags :
Marketing | PQL
Don't be an anti-innovator -- blaze a new path with better leads using PQLs.
- Product-Led Growth (PLG) is a go-to-market strategy focused on solution adoption and using the actual product to drive customer acquisition, retention, and upselling.
- The Product Qualified Lead (PQL) represents a prospect who has hands-on experience with the value of your solution and has taken certain actions within a platform that lead to higher attachment than users who have not.
- Defining your PQL can open up a world of fringe benefits beyond more efficient sales and marketing, including high-quality leads, increased conversion rates, improved customer retention, better product development, and efficient use of resources.
Unlock Growth With the Power of Product-Qualified Leads (PQLs)
A lot of software companies we chat with are familiar with Product-Led Growth (PLG), the go-to-market strategy focused on solution adoption, and using the actual product to drive customer acquisition, retention, and upselling. The strategy hinges on ease-of-use through free trials or guided/hands-on demos which can be deployed before a sales team ever engages. The belief is that once a user tries the solution, they’ll realize the value, can’t live without it, and become a paid user without the need for pushy sales tactics.
We’re big fans. Assuming your product actually solves a real problem, the strategy works at an incredibly efficient clip.
If there’s any trepidation in sales and marketing leaders adopting PLG, it’s because of lead qualification and attribution. These leaders are accustomed to being judged on lead volume and quota, usually garnered through content, campaigns, and demo requests. This old-hat MQL > SQL model gives them a perceived level of control in the outcome, even if it’s leading to less qualified prospects. If they can’t qualify with these tactics, how do they gauge progress?
Enter: The Product-Qualified Lead (PQL)
The product-qualified lead (PQL) represents a prospect who has hands-on experience with the value of your solution. These users have taken certain actions within a platform that lead to higher attachment than users who have not. When a user levels-up to a PQL, it’s an indicator for sales to initiate outreach, taking them from free-to-paid, confident that they understand why your product rocks. Shooting fish in a barrel. So how do you define the PQL? A few tips:
- Identify which metrics are important for measuring the success of key user actions. If your product is a collaboration tool, you might measure the number of users who collaborate on a project, the number of projects completed, or the number of comments made on a project.
- Determine the threshold for each metric that indicates a user has successfully adopted the feature. This threshold will vary depending on the feature and the product, but it should be set at a level that indicates the user has achieved a meaningful outcome.
- Identify the user actions that are associated with reaching this threshold. For example, if the threshold for successful adoption of the collaboration tool is five tasks completed, the user actions might include creating a project, adding team members, and completing tasks within the project.
Define the PQL criteria based on these user actions. In this scenario, a user who has created at least one project, added at least one team member, and completed tasks on at least three projects would be considered your PQL.
The Benefits of the PQL Model
Defining your PQL can open up a world of fringe benefits beyond more efficient sales and marketing and when to go for the close. Here’s a few worth mentioning:
- Quality of Leads: PQLs have already experienced the value of your product, which means they’re much more likely to convert to paying customers. This ensures you’re generating high-quality leads that result in actual revenue.
- Increased Conversion Rates: By focusing sales and marketing efforts on PQLs, you’re targeting users who have indicated a real level of interest and engagement with the product. These users are much more likely to convert to paid customers than cold leads.
- Improved Customer Retention: PQLs are more likely to be satisfied with your product because they already know they need it. This reduces churn and improves customer retention.
- Better Product Development: By analyzing PQL behavior, you gain insights into the features and use cases that are most valuable. This can help prioritize product and feature development efforts, ensuring you’re delivering features that users actually want and need.
- Efficient Use of Resources: Focusing your sales and marketing efforts on PQLs saves time and resources compared to old school lead generation. Leads have already indicated interest and perceived value, requiring less nurturing to convert to paying customers.
ABOUT THE AUTHOR
Ben Skelly is a co-founder and Managing Partner at Skellator, primarily responsible for web development / design and visual branding initiatives for clients. Prior to building Skellator, Ben spent over a decade as an in-house Creative Director and Head of Growth Marketing for numerous cybersecurity companies, establishing himself as a thought-leader in branding and product-led growth in the space. Connect on LinkedIn.
Want To Capture Better Leads?
