The Ultimate Guide to Product Qualified Lead (PQL)

Every business venture exists and thrives by providing value for its customers or a specific group of people in society. Usually, the first step to setting up a business is identifying an existing problem that affects a group of people – and creating an innovative, long-lasting solution to solve the problem for people.

Once this is settled, the next steps to business growth are finding customers and developing effective strategies to sell the products or services to them. Essentially, lead generation and customer acquisition are the two most crucial steps to finding customers in contemporary business practice.

For the longest time, a lot of sales and marketing teams have relied on marketing qualified leads (MQLs), and Sales qualified leads (SQLS) to identify and qualify prospects’ purchase intent and readiness to buy as well as convert a lead to a paying customer. While this process provided results for certain businesses, it didn’t quite work well for Saas companies and enterprise software companies with a different business model.

Marketing qualified leads (MQLs) are leads who have interacted with your marketing content or campaign (ebooks, newsletters, blogs, webinar sign-ups, whitepapers, etc.), while sales qualified leads (SQLs) are MQLs that the sales team works on and engage with for possible sales discussions.

The underlying problem with this for a Saas company is that they operate on a product-led growth (PLG) strategy – where they allow their customers to use/try the products before actually buying. Since these companies offer value to their customers before trying to sell to them, the product qualified lead (PQL) offers Saas companies a better chance at qualifying leads that will most likely convert to paying customers.

In this guide, we will walk you through the definition of product-qualified leads (PQLs) and all you should know about them.

Table of Content

1. What is a product-qualified lead (PQL)?
2. MQLs vs. SQLs vs. PQLs
3. Why are PQLs important to B2B SaaS businesses?
4. How to identify PQLs?
5. Important PQLs metrics to know
6. How to improve PQLs for conversion
7. Frequently Asked Questions (FAQs)

What is a product-qualified lead (PQL)?

A product-qualified lead (PQL) is a potential customer who has used or engaged with your product through the freemium model or free trial and has gained meaningful value from using it.

Essentially, PQLs are potential customers that have used a product and gained value over time from using it and are most likely considering buying the product or subscribing to it to gain continuous access to it.

PQLs tend to have a higher conversion rate because the prospects, the majority of the time, are sold on your product and have experienced its benefits on their business, so it becomes very easy to convert them to paying customers. All that’s required of the sales team is to convince them to upgrade their free plan to paid plan.

Instead of doing customer research and constantly developing strategies and tactics to interact with prospects and sell to them, sales teams when using the PQL model only have to track and monitor the activity of every free user from the backend to generate product usage data – the amount of time spent using the product and what features they use the most – to identify your most ideal customers.

Streaming services like Netflix, YouTube TV, Disney+, etc., and product-led growth companies like Slack, Dropbox, HubSpot, Grammarly, Calendly, DocuSign, SurveyMonkey, etc., use the PQL model to entice prospects to get more value with a price.

Types of PQLs

Product-qualified leads (PQLs) are genetically categorized into four groups that product-led growth companies can work with on a basic level. They include;

1. Free users who spend more time and use more features of the product. This set of people is maximizing their business value from product usage.
2. Free users that request more information about the product, features, and pricing system.
3. Free users have reached or are nearing the product usage threshold and would need to upgrade their payment plan to access more features.
4. Product users who purchased the product without going through a sales team (To provide them with more information on the product and possibly convince them to upgrade their plan).

MQLs vs. SQLs vs. PQLs

The main difference between a sales qualified lead (SQL), a marketing qualified lead (MQL), and a product qualified lead (PQL) lies in their behaviors and interaction with your business.

A marketing qualified lead is a lead that is still relatively new in the sales pipeline. They are people who are aware of the product or service but have not necessarily shown interest in it or indicated any plan to buy from you.

Examples of MQL behaviors may include downloading whitepapers, guides, e-books, brochures, submitting website forms, signing up for email newsletters, and liking, commenting, sharing, tagging, and tweeting your post on social media.

SQls, on the other hand, are leads that are ready to buy from you (whether immediately or later). They are active leads that either requested a consultation or showed interest in buying your products.

Whereas, product qualified leads(PQLs) are potential customers that have been given access to use a product free of charge within a specific period to enable them to interact with the product and gain value from it. These leads have better chances of converting because they have used your product and have felt what it can do, so they are most likely willing to pay to continue using the product with access to more features.

Why are PQLs important to B2B SaaS businesses?

Product qualified leads (PQLs) are important assets to SaaS companies looking to promote their products and expand their customer base. Here are more specific benefits of PQLs to SaaS businesses.

They represent the ideal customers

Product qualified lead is an actual user of your product- they have problems that your product can solve – hence they are willing to signup for a free trial to test your products and get value from using it. This set of people can give you an idea of who your ideal customers are, what their pain points are, and how they use your products to achieve their goals.

They have a shorter sales cycle

Usually, the sales process with MQLs and SQLs is a bit long, and depending on the sales reps and customer, there can be a lot of back and forth. However, PQLs are potential customers who know what they want – which is why they use your product’s free trial to achieve their goals. Hence working with these people wouldn’t take too much of your time turning them into paying customers since they are already product users.

They are more likely to convert

Similar to the previous point, a product-qualified lead wouldn’t cost you so much time, effort, and resources to convert to paying customers. Unlike MQLs and SQLs where sales and marketing teams would have to create so much content and strategies to convince prospects that the product is good for them, PQLs know this, and it’s only a matter of time before they convert to paying customers.

They are less likely to churn

If your users gain value from using your product and are constantly exploring all features to achieve their business goals, it is less likely that they would churn – stop using your product. Also, when the free trial period elapses, the sales team can always direct them to the pricing page to continue using the product with access to more features.

They have lower-cost acquisition costs (CAC)

Unlike MQLs and SQLs where the sales and marketing teams have to invest a lot of money to get the prospects and nurture them to become paying customers, PQLs don’t cost a fortune to gain – by giving them access to a free trial, they can convert to paying customers at will. 

PQLs are more successful customers.

PQLs have better buying intent- they are more likely to make payment after testing the product.

PQLs have a better chance of upselling, cross-selling, and becoming retained customers that can bring in recurring revenue.

PQLs have a better customer experience and are more likely to become satisfied customers because of the time they have spent using the product during the free trial period.

The review given by PQLs and their behaviors while using the product can help product teams develop new features and experiences. Check out the guide for customer acquisition costs.

How to identify PQLs?

A Product Qualified Lead (PQL) is a potential customer that has been given access to your product free trial to experience the value that the product promises. As a result of these experiences, they are more likely to make payments for the product – which is why they are important to SaaS companies.

Identifying PQLs requires you to define the characteristics that your lead must portray to qualify them as PQLs. HeadsUp identified three defining features that you can use to identify a PQL

Fit – How best does the user look like a customer?

This criterion looks at the lead’s eligibility to become a customer of your company. It specifically considers how best the product user fits into your ideal customer profile (ICP) and user persona. To find out your product user eligibility to become a paying customer, you must ensure they match the firmographic and demographic characteristics of your target customer.

Checking out how best your product user fits into your target customer profile helps your sales reps to save their time, effort, and resources by focusing only on users that would most likely pay for the product upgrade.

Value – How much value do they get from using your product?

This second criterion looks at the value the product user is getting from using the product. Value is achieved when the product user completes the activation flow – the point where they use your product so much that they understand how it helps them solve their business problem and why it’s important for them to get it.

This is the point of customer experience and satisfaction that your product users get while using your product that awakens their desire and readiness to buy your product (make payment for it).

The value criterion effectively combines product development with sales support – the product team optimizes the user product experience while the sales team provides support for the user on a better way they can use the product and more advanced features they can gain access to by paying more – thereby encouraging sales.

Intent – the product user’s readiness to buy

This criterion looks at the product user’s intent to make a purchase decision from their behaviors. It specifically considers a lead’s intention or interest to become a paying customer by looking at their readiness to make a payment or wanting to initiate a conversation with a sales rep.

Consider the following signs that may indicate their interest or readiness to make payment to close sales:

• Calling a sales rep for support.
• Sending an email to request more information.
• Visiting the product pricing page.
• Filling in a sales-related website form.
• Exceeding or is expected to exceed product usage limit.
• Clicking on an enterprise or upsell feature
• Not completing product payment.

Important PQLs Metrics to know

Raw/Fresh PQLs

This metric looks at the number of leads going through your sales process and the revenue they generate. It is one of the easiest and simplest things to measure PQLs – it requires identifying the number of PQLs in your current pipeline. It specifically measures:

1. Existing PQLs
2. The number of PQLs you receive on a weekly or monthly basis

PQL Rate

Calculating your product qualified lead (PQL) rate is as crucial as calculating the amount of PQLs you gain on a weekly or monthly basis.

PQL rate is the percentage of new product signups who reach the PQL status within a specific period. The PQL rate is an important indicator to track because the number of signups you receive does not affect it.

It specifically calculates the percentage of product users that become a PQL within the period set by your sales team to show the activation process.

Time to PQL

Time to PQL is the time it takes for a new account to reach/achieve the PQL status. Considering the significance of PQL to SaaS businesses, it specifically tracks the amount of time it takes a new account to be qualified as a PQL within the shortest available timeline.

So if you gave users a 2-week free trial, you want to make sure they attain the PQL status within those two weeks to help you gain a high conversion rate.

PQL to Paid Conversion Rate

This metric considers whether your product/service provides enough value to persuade or convince product users to make payment. For your new signups to become PQLs and PQLs to become paying customers, you must identify the value that your product offers so the product user can achieve their business goals with your product.

You calculate this by dividing the number of accounts that switched from PQL to paid customers by the total number of PQLs in a specific period. Check out some sales quotes to motivate your sales team.

How to Improve PQLs for Conversion

The ultimate goal of qualifying leads into MQLs, SQLs, and PQLs is to nurture the leads to become paying customers. According to a study by sales benchmark research,

Out of 13% of MQLs that become SQLs, only 6% of the SQLs convert into paying customers.

This result indicates a decrease in the number of leads as they move through the sales pipeline. However, to deal with this decline in qualified leads, PQLs are now used to generate and nurture potential customers more likely to become paying customers.

By giving them access to your product within a specific period – usually two weeks – you get them to experience the product value to convince them to become satisfied, paying customers. To achieve this, here are the ways you can improve your PQLs to customer conversion rates:

Providing an amazing onboarding experience

The interesting thing about the PQL model is that prospects are given free access to the product without payment to use the product to achieve their business goals within a specific period. As far as lead qualification is concerned, the PQL model tops it all because they allow users to use the product before making a payment.

However, as amazing as free trials are, they would be counterproductive if not backed with solid information or guidance. If a lead starts experiencing your product without full knowledge of what the product does or how they can leverage it for their business success, they might not explore all the features that can benefit them.

By providing support for your product users, you can help them experience your product entirely and show them how great it is to work with you. Consider onboarding software to guide your prospects through the product.

Understand your users

Audience research is critical to the success of every business activity. Researching your target audience and identifying their pain points, goals, objectives, and interests are the most effective way to generate quality PQLs.

When you fully understand your target audience, you can develop the right marketing strategy and message that connects with your audience and can make them click your marketing message.

Adhering to all these procedures can help your marketing and sales team effectively target your users and convince them that your product is the solution to their business problems.

Use PQL Scoring Benchmark

Lead scoring is the process of determining the sales readiness of your leads by assigning numerical values to identify qualified leads.

Sales experts recommend examining, studying, analyzing, and learning from users to convert customers. To determine how best your product is ideal for your users, you need to analyze their behavioral data to see what features of your product they are best interacting with and the amount of time spent using those features.

From this data, you can develop better strategies to convert them to paying customers.

Maintain constant communication with them

To understand how best to serve your prospects and target your marketing messages to the target users, you should constantly stay in touch with them to keep track of their activities, challenges, and achievements.

By constantly monitoring your user’s journey, you can determine the best time and way to send relevant, simple, clear, and attention-grabbing marketing content that can offer them value and help you build stronger relationships with them – and ultimately close more deals.

Conclusion

A PQL growth strategy is essential to most Saas companies’ long-term growth and success. This model enables prospects to experience the product and gain value from using it to influence their decision to use and pay for the product in long term.

The sales, marketing, product, customer success, and engineering team have to work together to monitor and use existing data to focus on each stage of a customer lifecycle and effectively execute a successful PQL process.

PQLs Frequently Asked Questions

What is PQL?

A product-qualified lead is a potential customer that has access to a product via a free trial or freemium model to use the product and gain value from it to encourage payment. They usually have a high likelihood of becoming paying customers.

What is the difference between PQL and SQL?

A PQL is a prospect that has experienced a product and is very likely to become a paying customer as a result of the value they got from using the product while an SQL is a prospect already in talks with the sales team but has not used the product – hence they might not eventually convert to customers.

What teams in an organization manage PQLs?

PQLs are mostly managed by the sales, marketing, product, customer success, and development team.