There’s a dominant, new trend in sales qualification, and it’s quickly replacing the traditional MQL and SQL lead filtering systems, particularly in the SaaS space.
It’s called Product qualified leads (PQL). And it’s taking for a good reason — it’s a much better predictor of conversion.
In this article, we’ll cover all that and more, so stay tuned to learn how you can drive more trial-to-paid conversions and get a leg up on your competition.
A Stale Lead Qualification System
The B2B sales process has remained largely unchanged for many years. Marketing generates new leads with activities like cold-calling, online advertising, and email campaigns. These are called marketing qualified leads (MQL).
These MQLs are sorted based on predefined criteria like filling out an online form, downloading a whitepaper, or visiting your landing page to determine who is most likely to buy your products. Those leads are then filtered out and sent to the sales team to form your sales qualified leads (SQL).
But is that enough information to conclude a prospect is likely to purchase your product?
How can these seemingly arbitrary actions — like someone clicking on a link in an email or fitting in a particular industry niche — tell us anything about whether a lead will turn into a paying customer?
The truth is, they really can’t.
What Are Product Qualified Leads?
But how do you get people to engage with your product before they become a customer?
The answer is free trials and freemium offerings.
This is a very similar concept to product-led growth (PLG), and in fact, they support each other very well.
This model is quite common in SaaS — think Dropbox, Mailchimp, Evernote, Basecamp, Spotify, Survey Monkey, and many others. These companies all offer part of their services for free for a set amount of time or until the user reaches a certain milestone.
Offering part of your product for free is the first step to gathering valuable data about your potential customers and how they engage with your product.
Why PQLs result in higher customer conversion
Perhaps no one said it better than the co-founder of Evernote, Phil Libin, who said, “The easiest way to get 1 million people paying is to get 1 billion people using.”
Once you get people using your product, they’ve qualified themselves, and it’s now much easier to convert them into a paying customer.
Let’s take a closer look at why product qualified leads are more likely to lead to a sale than any other type of lead.
PQLs show true product interest
Unlike MQLs and SQLs, product qualified leads have already experienced your product and have already shown some product engagement.
They took the time to look around your web page and understand what you are offering. They took the time to sign up for a free trial. They are interacting with and experiencing your product regularly. And hopefully, they’re getting value out of it as well.
This is a huge advantage to your business.
You can also track user behavior to determine key activation points to use as triggers for upselling (offering a paid version to the user).
For example, an effective upgrade strategy is to restrict premium actions, and then remind the user which features are free and which ones are part of the paid product whenever they try to click on a feature that’s not part of the free package.
These subtle, yet persistent, prompts are a great way to steer the user towards becoming a paid customer.
PQLs are based on real user engagement
Product qualified leads demonstrate purchase intent based on actual user metrics. Whereas, MQLs and SQLs have to base their recommendations on things like time-on-page or open-rates.
Let’s have a look at two common metrics that you can track.
Number of users
Let’s say you are offering a cloud-based collaboration software like Slack or Basecamp. In that case, it may be valuable for you to track how many people in the company are signed up for the software and are using it.
Once the number of users reaches a particular milestone, let’s say 50, you can send a message (email or in-app popup) asking them to upgrade to a premium version which offers an unlimited number of users and other advanced features.
Frequently used features
Frequently used features and overall feature adoption is a great way to determine the customer’s needs, highlight the value they’re getting from the product, and push them towards advanced features they may want.
One of our customers’ offers a social proof tool. They give away key features for free initially, and users can adopt advanced, secondary features later. Those frequently used features, that they offer for free, are the real sign of whether the customer is interested in other, more advanced features.
And more importantly, you can use this as an opportunity to nudge them towards the premium plan that will bring even more value to them.
By developing a scoring and ranking system for these metrics, you can easily collect data about how users are engaging with your product. You can then use it to identify those who are most likely to convert.
PQLs enable you to personalize content
There is nothing new about personalizing content based on user behavior. Nearly every eCommerce business is doing it in some way. If a prospect visits a specific page on your website, they may be added to an email nurturing campaign and start receiving information about a specific product.
The only problem is you don’t know how likely that visitor is to take the next step in the buying journey, or if they’re interested in the product at all.
With product qualified leads, you know a lot more about the prospect, and it allows you to build personalized content that precisely matches their activities.
How to Incorporate Product Qualified Leads Into Your Funnel
Even if you have a ton of people sign up for a free trial or a free plan, the reality is that not all of them will turn into paying customers.
This begs the question, is there a way to know which customers will convert and which won’t? And is there anything you can do to steer them towards becoming a customer?
The answer is YES, and YES!
But first, you have to define your PQL metrics.
Three of the most important metrics to understand are user behavior, usage, and interest in your product. Identify specific milestones that will tell you when you will consider a user a PQL.
For example, these are actions that may make someone a product qualified lead:
- An account reaches a 1,000 message limit.
- A user uploads 300 files to your platform.
- A company exceeds their free 2GB storage limit.
Again, these parameters may differ from program to program, but let’s look at a few real-life examples of SaaS companies doing this to give you a clearer picture.
How to push PQLs to a purchase
Dropbox is a good example of a freemium model where the customer has the option to choose between a free and a paid version of their service.
You get 2GB of storage for free. If you go beyond that, you have to start paying. Plus, upgrading allows you to enjoy access to additional features.
Mailchimp is another great example. Their free plan lets users send up to 12,000 emails per month and import up to 2,000 contacts. Once you exceed those numbers, you have to migrate to a different platform or upgrade to one of Mailchimp’s premium plans.
Another excellent example is Venngage, an infographic maker who gives you five free infographics when you first sign up.
They get you hooked on the product, and then you have to become a customer to continue using it.
The right message at the right time
By sending the right message, to the right user, at the right time, you can boost your conversion rates.
Track how people are using certain features of your product and make sure they’re getting the most out of those tools. Then let them know about the extra functionality that comes with a paid plan.
Here’s a great example from Slack:
An automatic message is sent to the user once their team reaches the limit of 10,000 messages. At this point, slack gives them the option to learn more and upgrade to a paid plan that will better support their needs.
Here are a couple examples of targeted content that you can send:
Congratulate users on activating your product, and let them know you’re going to help them by providing a short product overview with useful tips.
You can even create short, personalized videos to drive users to engage with your product more deeply.
Here is an example of a personalized, nurturing message that can be sent to a PQL via email or in-app once they hit a specific, predefined milestone:
It’s Time to Implement Product Qualified Leads
In short, product qualified leads are those who have engaged with your product, met a set of predefined milestones, and are using key features of your product.
Enabling your target market to use your product and have early success with it is the best indicator of long-term success.
Actual product usage allows you to pick out qualified leads much more accurately. And that means less time and money spent on determining who to sell to and more on selling to people who are likely to buy!
If you aren’t already using a free trial or freemium option to capture leads, then you should sit down with your team and figure out how you can offer one. You’ll be amazed at the amount of data you gain, the amount of attention you get from prospects, and the number of thank you’s you’ll get from your sales team.