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A quick guide to product-qualified leads

What are product-qualified leads (PQLs) and why are they important? Learn how to track them + tools to use for real-time product insights.

For the longest time, software sales have included the involvement of sales reps. Historically, the sales team relied on marketing or sales-qualified leads that theoretically seemed to be a good fit for the business. But this lead qualification process was often inaccurate, which caused sales teams to spend excess time on potential leads that never intended to become paying customers.

But product-led growth strategy has changed the way companies sell software products. This strategy typically involves a free trial or freemium model, which allows users to engage with your product before committing to an actual investment.

Let's start this guide by defining what product-qualified leads actually are.

What are product-qualified leads?

Product-qualified leads are users, businesses, or individuals who have used trial or freemium models to test your product's value. Because of this, these types of leads are already sold on your product, which makes them relatively easy to convert into paying customers. They tend to have a higher conversion rate as a result. All the sales team has to do is convince them to upgrade to a paid plan.

Most SaaS customers aren't interested in flashy marketing gimmicks but do want to engage with your product before they decide to buy. The current self-service market involves leveraging data to identify your ideal customers.

Why are product-qualified leads important in business?

Selling software was traditionally a taxing task for most sales reps. They needed to be hands-on in demonstrating the product while also conducting lengthy customer discussions before making a sale. But thanks to the SaaS sales model, all that has changed. The following are some of the benefits PQL has brought to subscription companies.


They represent the ideal customer profile

A product qualified lead does not need any convincing to buy your product. These leads have experienced it already and found value. In comparison, sales-qualified and marketing qualified leads are determined using sales and marketing engagement metrics. Most of the time, though, these customers haven't had a chance to interact with your product. You, therefore, cannot predict their buying intent with accuracy. As a result, PQLs are typically the easiest customers to sell to.


They have a shorter sales cycle

With PQLs, you do not need to take the lengthy steps traditional software sales reps had to years ago. In the past, potential customers required many demos and discussions before they committed to a sale. But once you generate product-qualified leads, the sales team does not have to do much to convert the leads into paying customers.


They are more likely to convert

Compared to MQL, PQL converts at a higher rate. Statistics show that, on average, only 13% of MQLs convert to SQL or even reach the opportunity stage. Of those that become sales-qualified leads, only 6% end up converting at all. Also, it takes 84 days before a sales conversation even takes place. In contrast, product-qualified leads convert at 5 to 6 times MQL.


They are less likely to churn

If users have an excellent product experience, they are less likely to churn. Also, since the sales team is going after users who have already gotten value from your product, this sales funnel will not stop after a few months. As a result, retention rates tend to be high within a PQL model.

How to build product-qualified leads?

Software companies usually have large amounts of product usage data on their users. Behavioral data includes insights into actions that users take when converting to a paid customer. This data will ultimately help you to build a product-qualified lead persona. The following steps will guide you into defining and engaging with PQLs.


Define what qualifies as a PQL in your business

Depending on your product or company, you may have to define what qualifies as a PQL in your business. A good way to start is by identifying the most critical metrics that define one, such as conversion rate. Tracking your metrics is free with software like ProfitWell Metrics.

Once you have this information, evaluate the action or series of actions taken by freemium users that lead to conversion. You can develop ways of engaging  leads from this resulting data.

For example, Slack considers accounts that have sent 2000 messages to be engaged enough with the software to potentially buy. Sending 2,000 messages takes about one week for a team of 10 people. These users have experienced the product's core features and have a 93% conversion chance as a result.

You also must consider that varying accounts and users will have different qualifying actions that lead to the sale. For instance, wherein a smaller team might need to repeat an action 30 times to qualify as a PQL, an enterprise account may need to repeat the same actions 100 times to achieve the same likelihood of purchasing.    


Build a system for qualifying leads

You need to build a system that will automate the lead qualifying process for you. Once you have defined your PQL, you need to apply a scoring model to each action. The process of scoring and qualifying leads can be almost impossible to do manually. But several lead qualification software options exist in the market to make your work easier.

These tools combine action triggers and historical data to determine a user's status with pinpoint accuracy. When integrated with your CRM, the lead scoring process can be automated. Tools like Salesforce and other marketing automation platforms do this well. The CRM will trigger notifications or email alerts for highly qualified leads, and sales teams can view a user's current qualification status whenever they need to. 

Having an analytics tool is also crucial to the lead qualification process as it helps you feed correct data into the lead qualification software. You should also use it to identify opportunities to improve the customer's journey.   


Create a program to engage with leads

Having the correct data and not taking action is pointless. When the sales teams receive the user qualification statuses, you must have a strategy prepared to engage with each group of PQLs. The amount of engagement you pursue depends on where each lead is on the spectrum of the buyer's journey. The following are the four main categories that leads fall into: 

  • Free users 
  • Users requesting sales assistance 
  • Users that have maxed out their free plans 
  • Users that convert without assistance

Free users require the most sales rep involvement when converting to paid plans. The second group defined by many SaaS companies as the hand-raisers need a bit of convincing, but not as much time and energy on the part of the sales team as the free users. These are the leads that willingly fill out forms requesting assistance from a sales rep.

The third group requires smaller pushes to become paying customers. Product adoption by this group is so successful that they have actually exhausted their free plan subscription. The final category consists of leads who don't need any assistance to become paying customers. They are sold purely based on the product's value.

Depending on where a lead falls, you can use several data points to engage with them meaningfully. For instance, look for the most used product feature and show them how much more they can get with a paid plan. Also, by taking a look at the kinds of limitations they have faced on your free plan, you can help customers better choose a tailor-made solution that fits their needs.

Keep track of relevant product metrics with ProfitWell Metrics

The process of qualifying PQLs can only be successful if the data you are working with is accurate. ProfitWell Metrics tracks all your essential metrics, such as free trial and freemium conversion rates, free for life. The following are benefits for your business when you sign up.


Get real-time product data

Integrating our software into your CRM ensures your teams receive relevant product data in real-time. This data can then be channeled to product qualification lead software for immediate lead qualifying.


Get a clear overview of the entire customer lifecycle

From acquisition to conversion, you can analyze the entire customer lifecycle with science-backed data. This data gives you insights into areas that ultimately need improvement.


Improve retention rates

The cost of retention is only a fraction of acquisition. If your business fails at retention, your growth may stagnate. Hence, companies need to keep an eye on all metrics related to retention, including churn rate and retention rates.


Estimate revenue

Tracking MRRARR, and ARPU are important as they reveal your product's overall health. But if you use the wrong figures for calculating these metrics, your business is destined to fail as your growth plans will be based on incorrect information.

Take the headache out of growing your software business

We handle your payments, tax, subscription management and more, so you can focus on growing your software and subscription business.

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Product qualified leads FAQs

How do you generate product-qualified leads?

To generate a product-qualified lead, a business needs to define the specific qualifying features for its product. The criteria for identifying leads differ from company to company and are dependent on the product in question. Qualifying criteria also needs to consistently identify leads and create a means of engagement with them.


What does qualifying leads mean?

Qualifying a lead means determining which lead is likely to convert to a paying customer. It can be accomplished either through marketing sales or product engagement. Teams can then focus their efforts on only those leads that have the potential to make a purchase.


What is the difference between PQL and MQL?

PQL looks at customer engagement with the product, while MQL looks at marketing engagement to qualify as a lead. Under both categories, you need to consider how customers fit into the identification process. The next step after identification is the initiation of a sales process.


What does PQL stand for?

PQL stands for product-qualifying lead. It refers to a user who has had a meaningful engagement with your product or business through a freemium model and is now ready to convert to a paying customer.


What are the benefits of qualifying leads?

Qualifying leads ensures that your team focuses on users who are most likely to convert, which can boost your conversion and sales close rate. Also, personalizing messages is easiest when dealing with qualified leads.

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