How to use product-qualified leads (PQLs) to drive growth

As any salesperson knows, not all leads are created equal. Because of this, lead qualification is a critical part of the sales process. It helps businesses focus their sales and marketing efforts on the cream of the crop, the leads that are most likely to buy.

For product-led Software as a Service (SaaS) companies, the concept of Product Qualified Leads (PQLs) takes center stage. These leads have demonstrated readiness to transition from a free trial or freemium account to becoming valued customers.

What is a product-qualified lead (PQL)?

A product-qualified lead is a prospective customer who's experienced meaningful value from using a product, typically through a free trial, freemium model, or limited version, and has exhibited behaviors that indicate they are likely to become a paying customer.

Another way to define a PQL is as a lead who has:

Used the product in a way that demonstrates its core value
Reached or exceeded predefined usage thresholds
Shown engagement patterns that correlate with a high likelihood of conversion to a paid account

When I think about and describe PQLs, I like to look at each of the three criteria, which combined determine qualification: engagement (also called behavioral), fit, and intent.

Each criterion is assigned a score based on how well the lead aligns with a company's specific definition of the criterion. Once they reach a certain threshold, they are deemed PQLs and passed off to the sales team.

The remainder of this article explores the criteria for qualifying PQLs and provides actionable steps for businesses implementing their lead qualification process.

The Power of engagement

Engagement serves as a critical criterion in determining the qualification of PQLs. It encompasses the breadth, depth, and frequency of a user's interaction with the product. Engagement scoring looks at how much the user (or business unit, department, or account) has engaged with the company's product, including the features they have used, the number of times they have logged in, the recency of engagement, inviting team members to join, or how much time they have spent using the product.

Actionable Steps:

Set up tracking within your SaaS product to capture key events you want to consider when assessing the quality of leads.
For each, list different but relevant frequency and time frames to grade. E.g., three times in the last seven days or one time in the past 14 days.
Give each behavior, frequency, and time frame grouping points out of 100 (the more recent and frequent the event, the more points you should award).
Give each event an overall weighting percentage to indicate how important the behavior is to the overall score. E.g., logging in may have a different weight than inviting other users into the app.
Don't forget to track and aggregate engagement at a business unit, department, or account level if this is important for your business!

Unveiling the Perfect Fit

Fit evaluation determines how well a user (or business unit, department, or account) aligns with a company's ideal customer profile (ICP). By considering factors such as job title, buying role, company size, industry, and other demographic or technographic information, businesses can assess the suitability of a lead for their product. The more you know your customers, the better you can define your ICP. I suggest you do customer analysis annually and adjust your ICP and fit scoring based on your findings.

Actionable Steps:

Capture ICP data you want to consider when assessing the quality of leads. *Leveraging progressive profiling or supplementing your first-party data with third-party data are excellent ways to capture complete profiling data.
Give each profile criterion an overall weighting percentage to indicate how important each is to the overall score. E.g., different verticals or company sizes may have different weightings.

Decoding Intent

Intent scoring for PQLs is all about activation and product triggers. It determines how likely the user (or business unit, department, or account) is to become a paying customer by analyzing user behavior within the product, such as looking at activation rates, whether users will surpass (or are projected to surpass) a usage limit, and product triggers or actions that signify they have gained value.

Actionable Steps — Three Options:

1. Set up tracking within your SaaS product to capture the actions that signify a new account has experienced "first value." For business intelligence software, this might be:

Create a dashboard
Edit a dashboard
Share a dashboard
Invite a team member to join.

2. Measure 100% activation rate within a timeframe. E.g., a 2-week activation rate.

3. Measure >100% usage limits or projected overage within a timeframe. E.g., projected to exceed usage limits by the end of the month.

Conclusion

Recognizing that engagement, fit, and intent form the bedrock of PQL qualification, businesses can choose an approach that aligns with their needs. Lead scoring methodologies can range from simplistic to complex, utilizing heuristic systems within CRM or Marketing Automation Platforms, AI-powered lead scoring tools, or a combination of both.

It is worth noting that companies often begin with a simple approach and adopt more sophisticated methods as they grow. Additionally, lead qualification definitions and methodologies should evolve in response to changing market, business, and technology landscapes.

For driving growth and success, PQL information should be presented in a digestible format for sales teams and shared via a seamless integration with sales enablement platforms such as Salesforce, Intercom, or Slack. By simplifying the understanding of why a lead is qualified as a PQL, businesses can empower their sales teams to take swift and effective action. An overload of information can be overwhelming and just as bad as an aggregated PQL score that doesn't provide any detail.

In summary, mastering the art of Product Qualified Lead qualification empowers businesses to prioritize their efforts effectively, optimize sales and marketing strategies, and ultimately drive success in the competitive landscape of product-led SaaS companies.

Come be a part of the Product-Led Summit in Berlin on October 5th, 2023.

We've brought together leading pioneers in the field of product-led growth to share their insights, challenges, and experiences just for you.

Get your tickets now.