What Is a Product-Qualified Lead? How To Identify PQLs (2024)

Most salespeople will tell you that not all leads are equal. Although many people might express interest in your product—perhaps they visit your website or sign up for your emails—not all of them are ready or able to purchase. Those that areready and able to buy are called qualified leads.

The lead qualification process can take different forms for different businesses. When a lead qualifies by using your product, they become a product-qualified lead. Here’s what that means and how it can affect your business.

What are product-qualified leads?

Product-qualified leads (PQLs) are potential buyers who qualify as high-priority leads based on their product usage. Software-as-a-service (SaaS) businesses that offer a free plan typically use this approach. Once a user has completed a free trial, they are classified as a PQL. Some businesses designate any user who signs up for a free trial as a PQL, whereas others only label them PQLs once they’ve taken a key action. For example, a potential customer for an accounting software brand could be classified as a product-qualified lead only after they upload a financial document during their free trial.

Sales and marketing teams qualify leads to help them understand what prospects are ready to discuss a purchase. This process is used primarily in business-to-business (B2B) transactions of high value—when the time and effort involved in completing a sale is considerable. Direct-to-consumer (DTC) businesses typically don’t use the lead model because sales are relatively small in value, completed quickly, and often made on impulse.

SQL vs. MQL vs. PQL

The lead qualification process, which confirms that a potential buyer is ready to have a sales conversation, breaks down leads into three broad categories:

Sales-qualified leads (SQLs)

Sales teams start the process by emailing or calling prospective buyers. They ask questions about budget and organization size, seeking confirmation these potential customers have real buying intent and are ready for further conversation. If they are, they’re classified as sales-qualified leads (SQLs).

Marketing-qualified leads (MQLs)

For this type, marketing teams review user activity across channels like the company website and marketing emails to qualify leads. They set criteria, such as company size or number of visits to the website, and then determine if leads meet those criteria through their analytics tools and information-form submissions. When a lead meets predefined criteria, they become a marketing-qualified lead (MQL).

Product-qualified leads (PQLs)

A product lead typically is qualified through the lead’s use of a software service or product. Similar to MQLs, the product team is measuring activity, but they’re looking at product usage instead of marketing engagement. The PQL model is often used in conjunction with a free trial or freemium business model, in which users access a free version of the company’s product. The product team defines a set of actions the user completes to become a product-qualified lead (PQL) that’s ready for outreach from sales reps.

How to identify product-qualified leads for your business

1. Define your product-qualified leads criteria
2. Design your qualifying free experience
3. Implement measurement systems
4. Create systems to engage product-qualified leads

To implement a PQL system, consider strategic, technical, and operational factors.

1. Define your product-qualified leads criteria

Decide which users you want sales reps to contact first. Criteria you might consider include:

• Fit. Many products serve specific industries or types of businesses. For example, if your accounting software only serves Canadian businesses, your team needs to qualify potential customers by ensuring they use Canadian accounting standards.

• Scope. Verify that buyers have the scale to afford your product. Many SaaS companies sell to smaller customers without a sales conversation, while larger customers work directly with a sales team for customized agreements.

• Intent. Does the user’s behavioral data show that they’re willing and ready to buy? Users who derive value from the product are more likely to have real buying intent.

2. Design your qualifying free experience 

A free trial has multiple goals. First and foremost, it should show your product’s value so that users want to convert to paying customers. Secondly, your trial should also qualify the free user to talk to your sales team and enter the sales funnel.

This goal can affect how your free trial is designed. For example, many free trials ask for just a name and email when signing up. To qualify users, you may also ask for their country and number of company employees. Similarly, you can consider how product usage indicates the prospect is ready to talk to sales. This could be a specific button in your online product saying, “I’m ready to talk to sales,” or something more subtle, like trying to access a key feature that’s only available to paying customers.

3. Implement measurement systems

Ideally, product usage data is measured and tracked by your product analytics software and passed through to your marketing and sales software systems, such as your customer relationship management (CRM) tool.

It’s important that your product analytics track overall PQL data and provide analysis, such as the percentage of free-trial signups that become PQLs. Ensure that your CRM can report whether individual leads are product qualified and capture key information such as their country of domicile. A customer data platform (CDP), such as Segment or RudderStack can help ensure product and CRM data align seamlessly.

4. Create systems to engage product-qualified leads

Once you define, qualify, and measure product-qualified leads, you need to engage them. This is a sales process. Sales teams need to have smart systems in place to contact PQLs in a timely and personalized manner.

To do this, your CRM can create a record once a PQL is identified, and automatically assign them to the proper salesperson. The record should contain information about the user’s company and their free trial experience.

Example of a product-qualified lead

Annie is a product marketer at hypothetical SaaS company XYZbites. Its product provides businesses with work-time tracking software. XYZbites primarily serves large law firms that bill by the hour.

XYZbites offers free trials, but it has no PQL system. When a user signs up by email for the service, they can use all of its features free for seven days, and then pay a monthly fee based on the number of users they have. XYZbites finds that it’s not converting as many free users as it would like, and the sales team often wastes time speaking to the wrong people, such as lawyers who don’t work at big law firms.

Annie wants to develop a PQL system to help address this. She makes several changes:

• In the free trial sign-up process, XYZbites asks for job title, industry, company name, and size.

• When a user logs their first hour, product analytics track and send this data to the CRM.

• If a user tries to invite more than 10 other users to their account, they receive a message saying, “Speak to our sales team to access team plans.”

If a free trial user’s title includes “partner,” “operations,” or “administrative,” they say they’re in the legal industry, their firm has more than a minimum number of employees, and they log their first hour, they are labeled a PQL and handed to the sales team. XYZbites also immediately classifies free plan users as PQLs if they try to invite more than 10 users.

Annie’s change creates more high-quality leads and converts more free trial users into paying customers.