SaaS companies should come up with a way of measuring qualification for their new users. Even though most companies do that in the onboarding process, there is no doubt that you can qualify your users before you onboard them. And with 80% of companies without a free version admitting that their in-product onboarding is lacking, it is way better to qualify someone before the onboarding starts.
The solution here could be to use Product Qualified Leads (PQLs) as a way to measure product engagement. However, as we’ve stated in the past, using PQLs as a way to qualify new users is not possible in every case and for any product. Thus, software companies new to find other ways to qualify new users.
In this article, I am going to talk to you about Product Marketing Qualified Leads (PMQLs) and how they can help you close the gap between Marketing Qualified Leads (MQLs) and PQLs. This is a new concept that will help you qualify users before they use your main product with the help of Product Lead Magnets (PLMs).
Chapter 1: What is a Product Marketing Qualified Lead (PMQL)?
According to Sherlock—and assuming that you offer a free trial of freemium version of your product—identifying a PQL is usually a combination of two things:
- Activation: Have the user set up her account? Have they reached the first meaningful outcome?
- Engagement: Is the user engaged with your product? Is she using the core features of your product?
Thus, measuring PQLs is a matter of defining activation for your product and identify how engaged users are with your product. However, only 44% of software companies clearly define the actions that indicate activation for their product. This means that measuring PQLs is not always possible.
In addition, not all products are self-served, which means that not all products can define activation and product engagement so easily. A typical example is enterprise SaaS, that may require days and even weeks until a user can be considered a product qualified lead.
In a previous article, we’ve introduced a new way of acquiring users for your SaaS company. Software companies can acquire new users through product lead magnets (PLMs)—sub-products of their main product which function independently, as standalone products.
As an example of a product lead magnet (PLM), we mentioned the MozBar by Moz, HubSpot’s Sales Chrome Extension, and SEOquake by SEMrush. The question that arises here is: If the people who are using a company’s main products are MQLs or PQLs, how can you call the users using the PLM of a company?
The answer here was not so simple, as neither MQLs nor PQLs can describe this segment accurately. Thus, we came up with a new category of qualified leads that we named Product Marketing Qualified Leads (PMQLs). Here is the definition of such a PLM:
Product marketing qualified lead (PMQL) is a lead that fits the criteria of a MQL with a serious level of product qualification on top of it.
Let’s use the MozBar by Moz as an example to understand what a PMQL is.
Let’s assume that a user has signed up for Moz to start using the MozBar for free. The actions that the user has taken until the first meaningful outcome could be the following:
- Discover the MozBar online
- Sign up for a freemium account
- Start using the MozBar
- Reach the first meaningful outcome
In this case, getting value out of the MozBar—which functions as an independent, sub-product—is easy. All you need to do is install the extension on your browser and start using it to analyze top ranking pages on the SERPs. There are some facts that we can’t oversee here:
- Time to Value (TTV) is very low
- Experienced value is high
Even though the user may never use one of Moz’s main products, she/he has experienced value out of the MozBar in a very short timeframe and thus has no reason to stop using the sub-product. How can we call—in this situation—the user of the MozBar?
This user is an MQL, since she/he has shared personal information with Moz through an online interaction (sign up for a freemium account) and is also a PQL, since she/he has been using the MozBar (the sub-product) and getting consistent value out of it since day one.
It is obvious that this user is playing at the intersection of MQLs and PQLs, but may never become a paying customer for the company. Thus, according to the extended product-led growth theory—and assuming that the MozBar functions as a PLM, this user is a PMQL.
Chapter 2: How PMQLs Compare to MQLs & PQLs
MQLs, SQLs, and lately PQLs have been very helpful in segmenting leads based on certain actions they take on a marketing, sales, or product level. However, we’ve seen that oftentimes, a user may not be easily identified as MQL or PQL based on the nature of the product or the complexity of the sales process.
Let’s break down each of the terms to understand the differences between them. To begin with, let’s see how HubSpot defines Marketing Qualified Leads (MQLs).
A marketing qualified lead (MQL) is a lead who has been deemed more likely to become a customer compared to other leads. This qualification is based on what web pages a person has visited, what they’ve downloaded, and similar engagement with the business’s content.
MQLs indicate qualification based on actions that are related to marketing. On the other hand, PQLs indicate qualification on a product level. One of the first online mentions of PQLs was back in January 2013 by venture capitalist Tomasz Tunguz. Now the managing director at venture capital firm Redpoint, Tunguz defines PQLs as:
Potential customers who have used a product and reached pre-defined triggers that signify a strong likelihood to become a paying customer.
Simply put, the PQL approach uses in-product insights to predict when a lead is ready to make a serious commitment, post the trial, or limited-time offer period. In 2017, Emanuelle Skala, SVP of Customer Success at Toast, presented a graph that shows that PQLs are the intersection of three areas:
- Marketing behavior
- Product behavior
- Demographic characteristics
Thus, we understand that PQLs are better at describing how likely it is that a user will become a paying customer and stick with the product. According to Mickey Alon, CTO and Founder of Gainsight PX, there are two reasons why SaaS companies widely adopt pqls:
- Their ability to validate it’s the right solution for them by simply trying the software using only a web browser
- The lower risk associated with SaaS because of the smaller upfront investment and the customer’s ability to opt-out without taking a big financial hit
The above graph clearly shows that PQLs are at the forefront before someone becomes a paying customer. Based on that graph—and keeping in mind that sometimes the transition from signup or free trial to PQLs is not easy, we can say that PMQLs play at the intersection of MQLs and PQLs, thus the name PMQLs.
The following comparison guide shows how PMQLs can be used in the context of using a sub-product of a company’s main product to acquire new users:
As it is evident, the PMQL is a hybrid type of leads, which can be used by companies with products with a steep learning curve, high TTV, products with a complex sales process or enterprise products. The question is: How can a software company optimize for PMQLs? This is what we are going to cover in the next chapter.
Chapter 3: How to Optimize for PMQLs
Similarly to the MozBar example, the users of a PLM can now be identified as PMQLs. Thus, if a software company wants to optimize for PMQLs and build a mechanism that measures PMQLs, it has to build a PLM first. But, what is PLM? Here is a quick definition:
A Product Lead Magnet (PLM) is a free standalone sub-product that helps you generate leads. Ultimately, the value leads get from it should encourage them to use the main product. Product lead magnets can take the form of extensions, widgets, and similar downloadable assets.
The PLM that a SaaS company will build has to be relevant to the company’s core products and—as we already mentioned—to have short TTV and a low learning curve. Simply put, the user has to experience value has to be able to use the product right away. Another example of a PLM is Clearbit’s Logo API tool:
The Logo API by Clearbit is a PLM that allows users to lookup company logos and embed them on their website. Once a user embeds the logo (or logos) of a company that interests her/him on her/his website, Clearbit asks for a link with the text “Logos provided by Clearbit” back to Clearbit’s website.
The benefit here is threefold:
- Clearbit gets backlinks from websites using the Logo API
- Clearbit can “push” its PMQLs to start using one of its paid products
- Clearbit can gather data on its PMQLs and create a segment based on patterns
Thus, it is clear that—to optimize for PMQLs—you have to create a PLM that truly stands out. Keep in mind that your PLM—and PMQLs in general—will live outside of your main product. But, the purpose of building and sustaining them is to get more users to try your main product through a freemium or free trial.
The difference between a regular lead magnet and a PLM is that with the latter, users get value out of the sub-product consistently. Moreover, they are able to experience the capabilities of your main product without having to try it. Thus, a lead magnet and a PLM are two totally different concepts.
To optimize for PMQLs, you have to create a high-quality PLM—a sub-product of your main product to allow users to get a sense of how your main product can help them. The way to measure PMQLs is by taking into account actions that indicate engagement on a PLM level.
For the Clearbit Logo API that we just mentioned, that could be the number of logos added by a single user, while for the MozBar could be the number of daily searches on Google using the MozBar. As you can see, you have to treat your PLM like a regular product and your PMQLs like PQLs.
The only difference is that when it comes to PMQLs, actions that indicate qualification happens outside of your main products, while for your PQLs actions happen inside the main product. Let’s close this with some final thoughts.
Chapter 4: Final Thoughts
According to the 2017 SaaS-powered workplace report by BetterCloud, 38% of companies say that they run solely on SaaS, while companies use 34 SaaS on average to run their operations. This shows us that gradually, companies will need more SaaS tools that will make their lives more comfortable and help them outperform the competition.
Moreover, it seems that we’ve reached fatigue when it comes to lead generation tactics that have as a goal to generate MQLs. Thus, we need to find other ways to help users experience the value of our product or sub-product and develop a meaningful relationship with them.
PMQLs could be the solution here, as they play at the intersection of MQLs and PQLs, and they don’t require a large investment or a complex tracking system with a high cost to sustain. SaaS founders and marketers can try this approach to see the benefits of measuring PMQLs for their own business.