If you’ve been around the block with terms like marketing-qualified leads (MQLs) and sales-qualified leads (SQLs), here’s a new one for you: Product-Qualified Leads (PQLs). Sounds fancy, right? But trust me, it’s not just another buzzword. Let’s dive in and see how PQLs can make a real difference in your product-led growth (PLG) strategy and how you can transition it into a sales-led growth approach.

What Are Product-Qualified Leads (PQLs)?

Imagine this: someone’s poking around your product, clicking buttons, exploring features, maybe even setting up their profile. These curious folks are your PQLs. They’ve shown interest not just by reading about your product but by actually using it. Unlike MQLs, who might download a whitepaper (and let’s be honest, who reads those?), or SQLs, who are basically just waiting for a sales call, PQLs are the people getting their hands dirty with your product.

Why PQLs Matter for PLG Strategy

Let’s break it down:

1. Higher Conversion Rates: These people are already using your product. It’s like they’ve test-driven the car and just need a little nudge to buy it.
2. Shorter Sales Cycles: You don’t need to sell them on the idea. They’re already on board, just figuring out the details.
3. Better Customer Retention: They liked it enough to try it, so they’re more likely to stick around for the long haul.

PQLs address the shortcomings of MQLs by optimizing for conversion rates by tracking reliable indicators of future purchases and upgrades. With PQLs, sales teams no longer have to second-guess who is a ‘good fit’ or ‘high-intent’ user because they can determine this accurately and with certainty by leveraging product-usage data.

This PQL definition leads us naturally to the significant upside of adopting PQLs. Because PQL qualification incorporates such usage data-driven attributes, they are 5-10x more likely to convert than MQLs.

Industry stats attest well to this:

1. PQLs often have conversion rates 5x higher than MQLs (Accenture)
2. 25-30% PQLs convert to paid (Tomasz Tunguz, Redpoint Ventures)
3. Only 2% of MQLs convert to paid (SiriusDecisions)

PQLs vs. MQLs: The Real Talk

Understanding the differences between PQLs and MQLs is like understanding the difference between a real relationship and a Tinder swipe. Here’s the scoop:

1. Source of Qualification:
   • PQLs: Qualified because they’re actually using your product.
   • MQLs: Qualified because they’ve interacted with your marketing content (a bit like window shopping).
2. Intent and Engagement:
   • PQLs: They’re hands-on and exploring your product’s value.
   • MQLs: They’re interested but haven’t taken the plunge.
3. Nurturing Process:
   • PQLs: They don’t need much convincing. They’ve already seen the magic.
   • MQLs: You’ve got to woo them a bit more with content and communication.
4. Sales Readiness:
   • PQLs: They’re almost ready to buy. Just need a little push.
   • MQLs: Still figuring things out. Need more info.

Why product-led companies should measure PQLs

One unique advantage of being a PLG company is that your freemium product generates thousands of potential customers, or ‘leads.’ These include free and trial users who could convert and basic tier users who may be open to upgrading.

1. Prioritize your valuable time

You can’t possibly send your sales reps to upsell to everyone. You cannot even reach half of these potential customers manually. You probably only have the resources to engage with a few actively.

Therefore, it becomes critical to prioritize well. With limited time and resources in your sales team, success comes from focusing only on those who are likely to convert. High conversion rates keep the acquisition cost low, helping you scale with greater revenue efficiency.

Some companies have tried doing this with marketing qualified leads (MQLs). But as most industry leaders observe, the MQL is broken.

2. Increase revenue

Current benchmarks show that less than 5% of MQLs convert. That is, they don’t truly deliver the kind of conversion rates and ROI on sales and customer engagement that you should be aiming for. If you’re still selling to MQLs, you’re wasting your time 95% of the time. Given this reality, it is surprising that so many companies still believe in the merits of the MQL.

PQLs, on the other hand, have 5X conversion rates, so when your sales team is devoted to interacting with PQLs, you can potentially boost monthly recurring revenue by up to 5X with the same number of account executives.

3. Improve customer relationships and brand perception

When your sales team uses PQLs, they’re armed with real contextual information before engaging with leads. By reaching out to the right customers at the right time, you prioritize efficiently and showcase your brand as helpful and relevant.

Even if they’re not ready to convert now, leads will have a positive perception of your brand if your messaging and timing are on point. Compare this with a company that sends pushy, irrelevant messages to the wrong users. If users haven’t engaged with your product yet, they probably don’t understand its value and might not resonate with any of your emails or retargeting ads.

The Challenges of Implementing and Tracking PQLs

Sales teams in PLG companies know they could be selling smarter. But they often struggle to do so. Here are a few reasons why.

1. Too much data makes it hard to discover PQLs

For most PLG companies, there’s data, but too much of it. PLG sales teams often lack the tooling to make sense of all the usage data their product is churning out. They spend too much time sifting through and making sense of it, or they simply don’t use it. They’re either wasting time or not taking advantage of the valuable data that is supposed to give them an edge.

How using Product Qualified Leads can help:

PQLs provide deeper context and fidelity to the lead. With product usage data, sellers can infer what problems a lead wants to solve and understand the champion vs. buyer dynamics based on how individual users within an account use the product. These insights improve a seller’s ability to close.

2. Without automated processes, sales reach out to PQLs at the wrong time

Sales teams cannot figure out the right time to sell. PLG sales teams often reach out to users at the wrong time, negatively impacting their chances of closing by appearing too pushy. However, figuring out what the timely moment is to reach out and provide the right assistance to close is something many teams haven’t figured out how to do well.

How using Product Qualified Leads can help:

PQLs check off need and timing in BANT qualification. A prospect taking time out of their busy schedule to test drive your product strongly indicates that they have a need and desire to solve that need immediately. An SDR or AE should still address the remaining BANT criteria, such as budget and authority. That’s why the PQL tees into an SQL.

3. Sales can’t accurately consult without actual usage to provide context

The role of PLG sales reps is changing—sellers are now not just salesmen but consultants. Sales aren’t just about pushing products but helping companies with complex use cases figure out how best to use a product to solve their business needs. Increasingly, sellers are expected to guide and demonstrate how the product can unlock value for the customer’s business before closing the deal. However, sales teams often lack the right insight into customers’ usage context to embrace this role fully.

How using Product Qualified Leads can help:

PQLs provide an elegant middle ground. PQLs ensure the product qualifies leads who pass the Fit and Intent criteria. The PQL measures whether the lead is committed and has found value in the product. It’s the perfect middle ground between MQLs and attributed revenue.

Transitioning from PLG to Sales-Led Growth

Once your PLG strategy is humming along, you might want to transition to a more sales-led approach. Here’s how to make that shift:

1. Identify High-Value PQLs: Look for users who have engaged deeply with your product and shown potential for higher spending. These are your golden tickets.
2. Train Your Sales Team: Your sales team needs to understand the product inside and out. They should be able to speak the language of your users and address their specific needs.
3. Personalized Outreach: Use the data from your PLG efforts to craft personalized sales pitches. Highlight how the user’s experience can be enhanced with a premium offering.
4. Smooth Handoffs: Ensure a seamless transition from product interaction to sales engagement. Your teams should work together to provide a cohesive experience.

Measuring Success

To see if your PQL strategy is working, keep an eye on these metrics:

• PQL to Customer Conversion Rate: How many PQLs are turning into paying customers?
• Time to Conversion: How long does it take for a PQL to convert?
• Customer Lifetime Value (CLV): What’s the long-term value of customers who started as PQLs?

Conclusion

Embracing a PQL strategy can seriously level up your lead game. By focusing on folks who’ve already dipped their toes into your product, you can boost conversion rates, shorten sales cycles, and keep customers around longer. And if you decide to shift to a sales-led growth approach, you’ll have a solid foundation to build on. Start identifying and nurturing your PQLs today, and watch your business grow.