The path to Product Qualified Leads

This post was originally published on ProductCraft.

Traditionally, businesses looked at growth as “build the product, market it, and drive sales.” Of course, along the way, teams listened to their customers and used their suggestions to improve the product. Then they marketed those improvements to drive more sales. This traditional approach, which has long proven reliable, emphasizes growth metrics that focused on marketing- and sales-qualified leads.

This “traditional” sales model once applied to software firms as well. Sales teams sought out decision-makers (not necessarily end-users) to pitch their software product. I personally remember building prospect lists by providing datasheets, whitepapers, or other collateral in exchange for some form of contact information. We qualified those individuals as marketing qualified leads (MQLs) because they’d shown interest in our product. Any decision-maker with budget authority became a Sales Qualified Lead (SQL). We spent considerable effort in building these account-based programs. But they didn’t necessarily determine whether our products engaged and delighted users, or truly solved their pain points.

A new kind of business needs a new growth strategy

The SaaS model has fundamentally changed this by letting users try the product in their corporate environment, typically with a free trial or a freemium product. Take a look at Slack. They didn’t market or sell their product to a company’s IT group. They delivered a free version of the product to entice users and show immediate value. By the time someone needed to make a purchasing decision, a significant number of employees were already happily using the service. And this made a convincing reason to buy.

Slack’s meteoric rise was in large part fueled by product-led growth. Users try a product, see its value, and share it with others, thereby quickly solidifying its place in an organization. As more companies model their strategies around this kind of growth, they need to know how to compete on this playing field. That’s why you need to arm yourself with a set of data and metrics that allow you to understand and optimize your product engagement.

How much do potential customers like your product?

Enter the product qualified lead. Marketing or sales qualified leads have demonstrated some level of interest or intent to purchase your product. A PQL indicates that someone has had some measure of success using your product.

So how do you go about defining a PQL? Well, in the beginning, you might consider a PQL as someone who has “activated a trial account” or “logged in at least five times.” However, as you become more sophisticated, start considering how you would quantify a user “realizing the value” of your product. This measurement should help you understand their likelihood of buying it.

So for Slack, the PQL might be that an organization had at least 50 users who were sharing 300 messages a day. For Zapier, it might be that an organization has used at least four integrations.

It’s also important to tie your PQLs to your business model. Using Slack as an example again, their basic service includes “unlimited search” and “unlimited apps.” So another PQL of theirs could be if someone has “attempted at least 20 searches” or has “added at least four apps.”

These show that users have an active interest in your product and a potential willingness to pay. Experiment with your PQLs to make sure you’re measuring the right things. Ultimately, you’ll want to ensure that you’re tracking a user’s actions (did they do a thing?) and engagement (are they continuously doing a thing?).

How to use PQLs

Once you’ve determined these PQLs, it’s important to share them with other parts of your organization so that they can align their own goals to them. For example, if marketing has goals to bring a certain amount of traffic and trial conversions, you might measure how many of those users become a PQL (i.e., visitors -> trial -> created a new project). Communicate and review these metrics regularly so that the entire organization can rally around driving your PQLs. Remember, this isn’t just a product team, marketing team, or sales team activity. PQLs drive the entire company to make sure that users clearly and easily understand the product you’re delivering.

While some advocate that PQLs replace MQLs and SQLs, it’s unlikely that, even if you agreed with that idea, you’d make that kind of a change overnight. Initially, it’s helpful to think of PQLs as a broader part of your growth ecosystem. How you weigh, prioritize, and connect these metrics depends on your organization’s goals and strategy. For example, your strategy may focus on PQLs for self-service customers, on MQLs for mid-level customers, and on SQLs for large enterprise customers.

Driving product-led growth

A reliable set of PQLs will help you systematically measure whether you’re showing value to your users and delighting them. You won’t do this by selling them on the idea of “value,” but by letting them discover it for themselves. As you use this to improve the product experience, your users might become your staunchest advocates within their organizations, improving the likelihood of purchase. This is the very definition of product-led growth.

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