What is a Product Qualified Lead (PQL)?

What does it mean for a lead to be qualified?

To be qualified, a lead must take some kind of action to meet a set of predetermined conditions. For example, consider marketing qualified leads (MQLs).

The term MQL characterizes prospects who have interacted with your website’s content enough to suggest they are highly engaged and more likely to purchase your product. At a given company, that might mean they viewed a blog, clicked a CTA and downloaded a piece of content.

Leads are not only qualified based on their interactions with your content, though. They could be qualified based on the way they interact with your product. This is where product qualified leads (PQLs) come in.

What is a Product Qualified Lead?

“A PQL is a trigger to notify your company that someone is using the product such that it’s worth following up with them,” says Guido Bartolacci, New Breed’s Head of Demand Generation.

At a particular point, individuals become consistent enough users that it’s worth sharing the additional functionality available if they purchased the next tier of your product.

“They start leveraging certain features or using it so much to indicate that they’re going to need to purchase it soon,” Guido says.

For instance, imagine you’re using a CRM that’s tiers are based on how many contacts you have in your system. If you are currently using the lowest level of the product and the threshold is 10,000 contacts, you might become a PQL when you reach 8,000 contacts. Since you are approaching the threshold, the company knows you will need to upgrade soon if you plan on continuing to use the system; they want to facilitate that next step.

Once an individual has taken actions indicating they’re a PQL, you can program your software to send them a notification detailing reasons for upgrading or reach out manually.

“If your tool is that frictionless, sometimes you don’t even need to involve sales,” Guido says. “But, if you have more of a high touch sales process, that notification can be sent to the sales rep who owns that contact’s account.”

From there, the rep can reach out and discuss the benefits of purchasing the product. 

Where Does a PQL Fit Among the Traditional Lifecycle Stages?

The traditional lifecycle stages include subscribers, leads, MQLs, SQLs, opportunities and customers. 

“All of those stages are basically from the perspective of the company looking at what marketing material the prospect is interacting with,” says Guido.

Meanwhile, with a PQL, the company considers how an individual interacts with the product itself. 

“It gives you deeper insight because someone who’s actually using your product is a lot more likely to buy from you than someone who’s just reading your content,” Guido says. 

He explains that if you’re only looking at the material they’re reading, you must infer they have interest, but with a PQL model, you can actually determine whether they’re using and gaining value from your product. However, the stages don’t have to live independently; companies can use both models.

“HubSpot is a decent example of this,” Guido says. “A small business might not need some of the features that are available in the paid versions of HubSpot, so they get on for free. Once their business grows to the point where they need to leverage some of the paid features, that will trigger them to become a PQL. On the other side, enterprise-level companies in HubSpot’s database will probably come through the traditional model.”

For instance, companies moving from top-tier marketing automation platforms can’t move onto the freemium version of HubSpot if they expect the programs to perform identically — the freemium version simply doesn’t have the same functionality. As a result, an enterprise company moving to HubSpot is far more likely to come through the traditional model where they interact with content. Since they can’t jump onto the freemium version to actually try the product, they’ll take the next best option and perform research before purchasing. 

“I think it comes down to how high touch of a sales process is necessary [for your clients],” says Guido.

If you expect that many of your prospects will need to be educated on the benefits of your product and interact with a sales rep throughout their buyer’s journey, you likely have a high-touch sales process. Leading your prospects through the traditional lifecycle stages probably makes the most sense for your company. 

Alternatively, if you think your product speaks for itself and prospects won’t need to interact with reps often, you have a low-touch sales process. Since your product is lightweight and easy-to-adopt, leveraging the PQL model might be your best option. 

The PQL model is particularly relevant if your company uses product-led growth (PLG). PLG is a term coined by Openview Venture Partners. Basically, it is a go-to-market strategy that focuses on letting individuals try a limited version of your product to garner adoption. As they continue to use it more and more, your product will become integral to their daily lives. Eventually, they’ll introduce it to their peers and more people will begin to use it. 

PLG closely aligns with free trials and freemium models. During free trials, users get a product for a restricted amount of time until they hit a paywall and must make a purchase before further use. Freemium offers are free over the lifetime of the product but have limited features compared to the premium, paid version. PLG is designed to give users a taste of how valuable a product is so they will purchase the full offering when it is time.

Overall, if your organization has a mix of buyer personas who require different levels of nurturing, utilizing both models might be the most prudent solution.

If you can leverage a low-touch sales process, it can prove to be very efficient.

“There are companies who have basically moved all the way towards the PQL part of their growth model where they don’t even need to leverage sales because it’s not necessary. People [start using their product and] purchase from them — the product sells itself. It’s product-led growth,” says Guido.

Focusing Conversions

At New Breed, we heavily leverage content marketing and have a relatively high-touch sales process. As a result, we follow the traditional lifecycle model and have a large number of conversions throughout the buyer’s journey.

It’s normal for our prospects to convert multiple times on content offers as they prepare to make a purchase.

“Most companies that leverage a freemium model don’t have as wide a variety of conversion points as we do,” says Guido.

In those organizations, everything is focused on sign-up conversions and ensuring customer success.

“Most of the content they have on the product is about how to use it and what it does. It’s all ungated, free content for you to consume,” says Guido.

So, if you’re using a PLG model that means there are fewer conversions and subsequently less overall information on prospects. The information that is collected, though, is more valuable. You can amass data on product usage before any purchases are actually made. That can inform your company about when prospects become PQLs, which signals you to reach out — either with automated messaging within your product or through a sales rep.

Key Takeaway

Overall, it’s easy to see the advantages of utilizing a PLG strategy. It can increase your organization’s efficiency by reducing your reliance on sales and consolidating conversions. For this to work, though, you need to nail your tier and pricing strategies. 

Whether you’re using a freemium model or not, if you have pricing tiers, they need to have logical cutoff points. If users get too little out of lower tiers of your product, they won’t see enough value to make a purchase. Alternatively, if they get too much out of the limited version, they won’t see the need to upgrade because they already have everything they need. This is where defining PQLs can be extremely useful.

Users need to receive just the right amount of value from the free version of your product so they purchase the premium version.

“Your pricing is a big piece of that too. If your pricing is built around the wrong thresholds, it all falls apart,” Guido says. “Video hosting is always the easiest example in my head.”

He explains that the pricing model for video hosting tools is typically built around the number of videos you post from the tool. As you start to post more videos, you’ll eventually need to upgrade to the next level. 

Now, consider a different scenario. Instead of basing the thresholds on the number of videos you post through the tool, they could be based on aggregate video views. Such a model likely wouldn’t capture how integral the tool is for a given user. A popular company might post one video on the platform and reach the aggregate view total, while a small company might post 50 videos before reaching the mark. Obviously, these companies shouldn’t be evaluated the same way. 

This is where PQLs are vital. 

By observing how leads use your platform, you can determine when they are ready to take the next step, becoming PQLs. From there, you can adjust your free offer and pricing thresholds accordingly.