What is a Product Qualified Lead (PQL)?
There is a growing trend towards bottoms-up adoption in enterprise software. The simplest definition of “bottoms-up” is allowing self-service usage of a product by an individual user that doesn’t require a demo from a salesperson or sales engineer. Some of the leading public enterprise software companies including Datadog, Zoom, Twilio and MongoDB have deployed this growth strategy to great effect.
By putting your product directly in the hands of customers upfront this completely upends traditional enterprise software go-to-market motions. When individuals, teams and entire companies can adopt your product for free or by using a credit card, this makes the role of the sales team far different than in the traditional model of a demo, product trial then year-long contract.
The sales teams at these companies are often focused more on upsell or expansion activities in addition to traditional “net new logo” sales. This means that being able to identify which free or self-serve users are ready to engage in a sales conversation is critical. That often entails having some understanding of how those individual users or customers are using the product.
The current state of the art: PQLs
Over the last few years, many sales teams have attempted to solve this problem by leveraging signals from product usage to generate what’s commonly known as a Product Qualified Lead (PQL). This has become especially common at companies that have a “bottoms-up” model since free or self-service usage is often the best indicator that a prospective customer is ready to become a good customer.
PQLs are often a bit scary to sales teams because there’s a lot of variation in how to implement them. Questions can include: what metrics should be included in an activation score? When is the right time to engage with someone who is using a freemium or self-service product? Census has more details on how to implement PQLs in your company and data showing that PQLs convert at a 5-6x rate to marketing qualified leads (MQLs). Wes Bush, writing for OpenView, has a great beginner’s guide to implementing PQLs.
Right now, the state of the art for PQLs is to take product usage metrics that your data team has collected using a tool like Segment and curated in your data warehouse (Snowflake or BigQuery) and bring them to your CRM so your sales team can see enriched Leads, Contacts and Accounts with product usage data. The end result is often a set of relevant data points in Salesforce that you can use to manually create prioritized lists.
What's the downside of PQLs?
While PQLs have been a net positive for sales teams at bottoms-up SaaS companies, there are some drawbacks. The largest complaint most sales teams have is that PQLs are a "black box" and that a single score is not enough context. Simply offering a list or report with Accounts or Contacts with a high score can erode trust from the sales team.
There's also a risk in reaching out at the wrong time or with the wrong message, which is why some teams are trying out a PGL CRM on top of their existing CRM. Simply noting that a particular Account or Contact has a high PQL score doesn't help a salesperson craft the right message at the right time.
Finally, the ability to test or change how PQLs are constructed, to avoid the black box issue, is often not something sales teams can do on their own. They need help from their RevOps or data team to make the necessary changes to adjust the score. This inflexibility also erodes trust.
Should sales teams use PQLs?
Despite the potential downsides, PQLs can be extremely valuable for sales teams. Here at Correlated Labs, we think sales teams that use PQLs are just scratching the surface on what’s possible.
- What if you could create dynamic segments based on product usage that trigger workflows like a Slack notifications, a task in Salesforce and a campaign in Outreach?
- What if you could test dozens of different segments based on product usage thresholds, use of new features, or billing caps to find out which messaging worked to facilitate upsell and expansion conversations?
- What if you had attribution reporting to show the results of these tactics across your entire sales team and identify and scale the top performing strategies.
By giving sales teams the ability to use the behaviors of their customers with their own product, we believe this can help them initiate conversations with the right people at the right time using the right message.
We’re working on making this possible for sales teams at forward thinking B2B SaaS companies with a bottoms-up sales motion. If you’re interested in learning more, we’d love to hear from you.