You’ve heard about this magical thing called product-qualified leads (PQLs) and how it’s the future of SaaS.
But, if, like many others, you’re wondering, ‘How do I identify and use them at my company?’ you’re at the right place.
In this guide, we’ll talk about PQLs, identifying them, tracking critical metrics, implementing a system, and more.
TL;DR
Identifying product-qualified leads isn’t complex. A PQL has used your product, shows buying intent, and fits your target audience. Setting up a system is the key to success. Identify the activation moment, track key metrics, score leads, and follow up.
What is product-qualified leads (PQLs)?
PQLs refer to people who have used your product, extracted value from it, and shown buying intent.
Here’s an example to illustrate this better:
Imagine you sell a messaging app like Slack that caters to mid-sized SaaS companies.
You have three leads: John, Joe, and Jane.
John is on your product’s free trial. He has:
- Added a dozen of his teammates.
- Used it for more than two hours daily.
- Shown buying intent by talking to your customer success about your tool’s benefits
On the other hand, Joe has signed up for your company’s email list, attended a webinar, and downloaded a couple of free e-books.
Lastly, Jane has engaged with the company for some time and has booked a sales consultation.
These three people are examples of PQLs, MQLs, and SQLs, respectively.
John is a PQL because he has used your product, extracted value, and shown buying intent. Joe is an MQL because he has engaged with your company’s resources. And Jane is an SQL because she has shown buying intent by booking a consultation.
Simple, right?
The role of product usage in product-qualified leads (PQLs) identification
Product usage is one of the critical components in identifying PQLs.
Remember, not every free trial signup is a product-qualified lead. They only become one after using your product enough to extract value.
This reaction is when you know they’re a PQL:
A customer is called ‘activated’ when they see the value in your product.
Now, the question arises, how do you know whether a customer has reached activation or not?
The answer: Tracking their product usage and mapping the activation journey.
Their activation journey shows how they will discover your product’s key features. If your product has 5 key features, and the customer has discovered 2, they are 40% activated. You can understand this by tracking product usage.
Here are some crucial metrics that are a must-track (regardless of your product):
Onboarding completion rate
This metric measures the percentage of people who complete the onboarding process. They are more likely to reach activation and, thus, are more likely to become customers.
For example, an automatic image generator, DynaPictures, tracks if the leads have uploaded a logo and created a template.
Time to value
It’s the time it takes a user to discover the value of your product. Your goal should be to reduce this, as this directly affects paid conversions and your churn rate.
After all, people will leave if they don’t see the value in your SaaS.
Your onboarding process and customer success teams are crucial in this process, especially if it’s a complex offering.
Product activation rate
It calculates the percentage of activated users out of new signups.
Product Activation Rate = No. of activated users in the given timeframe/New signups in the given timeframe * 100
Many factors affect it, like effective marketing, onboarding, customer success, product quality, etc.
Account-level usage
In a B2B company, you don’t sell to individual users but to accounts. Thus, tracking product usage at both account and individual levels is essential.
This will allow you to identify the most engaged users for specific accounts. They can act as your product’s advocates in their organization, allowing you to close more deals.
You can track things like the session time, usage frequency, and no. of features used.
Retention
Retention is a great metric for finding your most loyal customers and learning more about user satisfaction and engagement. It’s also a great metric for identifying whether users see the value in your product. You should track two types of retention:
- Day 1 Retention: This metric measures the percentage of users who return to the product within the first day of signup. First impressions are hard to shake; you’ll probably lose them if you can’t retain a customer on the first day.
- Retention Day 7: It measures the percentage of users who return to your product within the first week. PQLs who continue engaging with the product are more likely to convert.
Key Indicators of product-qualified leads (PQLs)
The truth is that there are no specific indicators of who’s a PQL. It’s your job to set indicators based on your company’s offerings.
But you can make it easier by focusing on one thing: your target customer’s willingness to buy.
You must identify behavior that leads to a purchase.
Continuing our messaging app example forward, your product usage data might show that most mid-sized SaaS companies upgrade after adding 10+ teammates and sending 3,000+ messages.
Thus, you should optimize your onboarding process to get accounts to do these two actions.
Some common behaviors might indicate buying intent, like:
- Collaboration and sharing: Research shows that 49% of people share products with others to encourage action. If people invite others to your product (super crucial for B2B), it can point to buying intent.
- High product engagement and usage: They want to explore how your product can help them.
- Frequent logins: It’s a part of product engagement, but it also shows that they are trying to make it a part of their existing workflow.
- Engagement with support material: Talking to CS, attending webinars, and reading docs and guides can show interest.
Implementing a PQL identification system
You need a system for identifying PQLs at scale; otherwise, things will get out of hand quickly.
Now, we’ll show you step-by-step how to build a PQL identification system from scratch. The prerequisites are solid ICP and user persona documents.
Step 1. Map out the activation journey
You can call a person ‘activated’ when they complete a series of actions using your product.
You must map out the journey to this activation point, or “AHA! moment” where the user derives value from your product.
If you don’t have product usage data yet, you must base this on your target audience’s needs.
Write down a list of essential things your product helps/aims to help your target audience accomplish and the features that allow that. At this stage, you must experiment and test your assumptions.
Once you have product usage data, you should start tweaking this based on buying patterns you find there.
Step 2. Decide on usage metrics that matter
The cool thing about PQLs is that they don’t have any universal rules. They are different for everyone.
Thus, defining and sticking to what counts as a PQL yourself is extremely important.
Now, you must define product engagement thresholds qualifying someone as a PQL. That could mean session time, login frequency, feature adoption rate, etc.
For our messaging app example, that would be a high week one engagement, 3,000 + messages sent, and 10+ teammates added.
If you have a video conferencing app, that might mean a high no. of scheduled meetings, lots of people invited to each meeting, and integration with Google Calendar.
Step 3. Track your users
Here comes the fun part (at least for us).
Once your product analytics platform is set up, you must use the data to test your assumptions and tweak everything based on that.
Ask yourself:
Which features are our customers using the most?
What are some signs of buying intent?
What event leads to a purchase?
How do our best customers make use of our platform?
The key is to find large-scale patterns.
Step 4. Build profiles and prioritize
With this data, you can build PQL profiles to identify leads to go after.
But there’s one last important step left: prioritizing.
Making your sales team chase every lead is a great way to generate no results. Your best bet would be to pursue the hottest leads.
The best way to identify high-priority leads would be to make a good lead scoring system that considers all the factors. (more on that below)
Step 5. Take action
Once you have a new product-qualified lead, it’s time to notify your sales or customer success team using a little automation.
Tools like Zapier are perfect for this.
Diana Stepanova, Ops Director @ Monitask, says:
“At Monitask, we have implemented a system to identify PQLs using a combination of tools like Mixpanel for product analytics, Zapier for automation, and our CRM to manage PQLs effectively.”
According to UserMotion’s research, the most important tools you need to find PQLs are:
- CRM software
- Website analytics tools
- Product analytics solutions
- Customer support interactions
- In-app behavior tracking tools
Scoring product-qualified leads
A lead scoring system is very crucial to identify PQLs. After all, nobody wants to waste resources selling to companies that aren’t ready to buy yet.
41% of companies struggle to follow up with leads quickly. 39% of sales teams say that the ‘readiness-to-buy’ of the generated leads is a huge issue.
PQL scoring can help solve these issues. It can also help you identify lead nurturing opportunities. Companies that excel at lead nurturing generate 50% more sales-ready leads at a 1/3rd lower cost.
So, here’s how you can implement a robust PQL scoring system:
Step 1) Establish the product’s core features and value proposition.
Step 2) Track metrics like activation, feature adoption, onboarding completion, retention, etc.
Step 3) Analyze buyer behavior and product interactions manually and assign a score from 1 – 10, showing their readiness to buy. You can also automate this process using CRMs if your lead volume is high.
The team at Code200.io suggests considering the following factors:
“First, we test their level of interest and engagement. We assess how quickly they set up and try the product, indicating their commitment and readiness to explore its features. Finally, we consider how much they use the product during the trial period, as it shows their interest and potential value as a customer.”
For example, at StatusGator, the team uses Metabase and a custom-built CRM system to score PQLs. StatusGator is a platform to monitor the status of SaaS apps in your tech stack and alert you if something’s wrong.
Thus, they track metrics like the number of monitoring tools added, notifications setup, business vertical, and no. of employees. It helps to focus on leads based on engagement, industry relevance, and potential impact.
Challenges in identifying product-qualified leads
Some challenges you might face while identifying PQLs are:
1. Difficulty defining the ‘aha’ moments: This can be a huge challenge when starting. Interview current and potential customers to understand their fears, pains, jobs to do, etc. Then, based on that, you can identify key features and activation moments.
2. Difficulty differentiating between many target segments: Different segments have different product usage patterns and buying behaviors. You must gather more data during onboarding, like company size, budget, and the software they use. You should also study existing customers to define segments better.
3. Organizational alignment: PQLs can’t be siloed to one team, like sales or marketing. All the departments must be on the same page for proper identification and follow-up on PQLs.
4. Scalability problems: As the leads increase, identifying PQLs will become more complex and time-consuming. Manual lead scoring can become tedious; thus, developing automated systems is necessary.
Finally…
PQLs are the next big thing in the world of SaaS, and cleverly leveraging them can help you grow fast. They have endless benefits for the entire organization.
We hope this guide helped you understand how to identify PQLs, follow up with them, and motivated you to set up your own system.
Good luck.
Frequent asked questions
If you aren’t getting enough qualified leads, there might be a problem with your company’s messaging and positioning. Look at your best customers and find some common traits. If they are completely different from your ICP, you might have to change your ICP to target this market instead. Clearly tracking and nurturing leads can help with increasing the number of qualified leads too.
A product-qualified lead is someone who has used your product, shown buying intent, and fits your target audience. You measure PQLs by tracking product usage data and metrics like PQL to paid conversion rate, time to PQL, no. of PQLs, etc. Once you’ve identified PQLs, you can also assign them a score to show their readiness to buy.
Here are some examples of real-world companies that use PQLs:
Twilio: They track metrics like API calls made, messages sent, minutes of usage, etc. to identify someone who sees the value in their product.
Mixpanel: It measures user engagement with their product by tracking feature usage like no. of events tracked, A/B testing, user segmentation, etc.
Slack: Slack tracks PQLs by identifying companies that have sent a lot of messages, and have added teammates to their workspace.
Resources and further reading
Lead Nurturing Examples and Strategies
