Revenue leaders know lead conversions have dropped precipitously over the last few years. If you weren’t convinced, though, take a look at the following chart compiled from data collected by Ruler Analytics. Revenue teams need to ditch the old approaches and recenter around product-led growth if they want to remain competitive.
Across the board, on every channel, leads are not turning into SQLs or customers. There are some bright spots in a few specific channel/industry pairings, but that’s not the kind of happy little chart Bob Ross would like to paint if he worked in RevOps.
There are many reasons for these disappointing numbers: buyer fatigue, analysis paralysis, better spam filters, a fundamental shift in how buyers buy, and broader economic headwinds. Each could fill an entire ebook by itself, but one especially crucial contributor is the economy. The post-COVID era has seen massive increases in interest rates, and an end to cheap and plentiful money for funded companies. There have been two big effects:
- Fewer investment dollars flowing to customers that could be used to invest in technology and SaaS platforms.
- Fewer investment dollars flowing to sellers that resulted ina contraction of sales teams — the infamous technology layoffs of ’22/’23.
The end result is smaller sales teams working harder to chase a smaller pot of buyer dollars. Sales efficiency and optimizing every single potential deal through sales qualification is the name of the game. In this environment, MQLs just aren’t going to cut it: Revenue teams need to embrace product-qualified leads to succeed.
What Are Product-Qualified Leads (PQLs)?
Who would you rather have on your callsheet: someone who filled out a form to read a report your marketing team put together three years ago, or someone who’s played with your product or automated demo and handed over their contact information so they could see more?
That’s the difference between traditional MQLs and PQLs, in a nutshell. A PQL is a lead that has actually played around with your product, or at least a demo version, and has actively signaled that they’re interested in playing around with it some more — and maybe even getting more information on it.
Instead of forcing prospects to fill out a form then ‘nurturing’ them to an arbitrary score and lobbing them over the fence to sales, product-led growth tears down the old gates and lets users get in and experience your software. Lead information is typically captured mid-way through this product exploration, after the potential buyer has gotten past the obvious value proposition and really engaged with the features and functionality that they would be using as a customer.
The result is a more engaged, high-quality and high-intent lead that has seen your offering, at least in a limited fashion, and liked what they experienced.
Why Should Revenue Teams Care?
Three big reasons:
- Buyers increasingly hate going through the traditional marketing → sales funnel, a big driver of the shift to Sales 4.0.
- Revenue teams can’t afford to waste time chasing down poorly qualified MQLs that aren’t really in the market for your product (and most MQLs are poorly qualified compared to PQLs).
- PQLs convert to sales-qualified opportunities at 6x the rate of MQLs.
The truth most revenue leaders know, but rarely admit, is that a lot of sales qualification is completely arbitrary and made up. We assume if someone has downloaded X ebooks and visited the site Y times and opened Z emails, those metrics combined add up to someone who wants to buy. But at best, these are generalized guesstimates based on historical trends from successful sales. More likely, no one has ever bothered to go through years of data or run a regression model, the data is incomplete and stale, and we make guesstimates based on industry benchmarks and a finely developed professional intuition. Forrester Research has found 79% of MQLs never convert into buyers!
What’s worse is that we seriously annoy buyers when we make them jump through hoops to get to the information they’re looking for — whether it’s about our product or a piece of industry content. Customers increasingly want to lead the buying process, whether that means collecting research before reaching out to sales, or bypassing sales altogether and opting for a fully self-serve approach. Engaging with your content or your brand can definitely signal interest, but interest is not intent. Intent buys software, interest just came in to get out of the cold and doesn’t want a salesman following them around.
PQLs are different. They still need to fit all the broad firmographic sales qualification criteria (ICP, in-market, etc.) but they have also gone beyond interest. In using your demo, they’ve shown real intent to use your product. When they reach a gated demo section and still give you their information, they may not be full hand-raisers, but at the very least you know that they saw something they could really use.
How to Reach a PQL Motion
Product-qualified leads might sound like magic, but they aren’t. Like any great sales strategy, there are some key questions that need to be resolved before you can implement and see success:
1. Define ‘Qualified’
This is probably the most important question to answer before starting your PQL journey: what, exactly, does “qualified” mean? It’s not enough to have just requested a demo or product trial. Often, it’s not enough to have viewed the demo or even upgraded from a free product tier. Potential buyers still have to fit your ICP, they still need to give you their information freely, and they need to show real engagement beyond your core value prop.
Some good metrics to focus on are actions and outcomes that demonstrate a real willingness to use your product, like hitting a free-tier limit, a number of uses or views, or shares of a demo with colleagues on the buying committee.
2. Find the Right Time and Place
Or the right times and places, because this point covers two decisions: when customers first get access to your demo, and when they have to give you their information to continue. If your demos are a trial of the full product, or even a free tier, you can largely ignore these considerations: You’re going to get buyer details when they sign up for an account. If you use video or automated demos, on the other hand, this will be a much more important consideration.
If you’ve been following along with our Sales 4.0 conversation, you already know anything that places roadblocks between a prospect and information they want is a no-no. So if your demo-building process is automated or one-size-fits-all, the strong recommendation is that you make it entirely self-serve: Let people view or download your demo whenever they want with no need to hand over contact information or involve sales reps, AEs, CS, or product teams. Instead, find a place inside your demo where user activity goes from casual interest to in-depth feature exploration, and collect information there to get the best possible intent signal you can.
If you’re still building demos the old fashioned way, lovingly and by hand on demand, giving it away may not be feasible. In that case, find a place in your current sales flow where your cost to continue escalates significantly. For most companies, that’s right around the time the sales engineers get involved. Instead of going whole hog right away and building a fully custom demo, put together a limited one and let leads play with it until they’ve decided it’s for them and they request the full one-off experience.
In either scenario, the earlier you can put a demo in customers’ hands, the sooner you’ll know who’s really shopping and who’s just kicking tires.
3. Pay It Forward (and Feed It Back)
PQLs are a great feedback process for letting your product and marketing teams know what’s resonating with prospects and what isn’t. Take advantage of this and make sure that you’re passing on user behavior data any comments that you get from people going through your demo. User data is worth its storage space in gold, but only if you remember to share it.
4. Split the Leads
An hour of your sales reps’ time is a lot more expensive than an email stream, and should be reserved for buyers who are really ready. PQLs will help you figure out who that is, but that doesn’t mean you need to completely discard leads who don’t pass muster. Automated nurture campaigns are cheap enough to run that there’s no reason not to throw the lower-quality leads into a more traditional marketing funnel to give them time to cook. Remember that the point here is sales efficiency — as long as you’re prioritizing sales time on the highest quality leads, you aren’t hurting the bottom line by letting unconvinced browsers take some more time to learn about your brand and products.
5. Don’t Be Afraid to Say Goodbye
Our 360 Sales Leader dashboard features leads prominently, but it’s important to remember that “leads” aren’t the goal of revenue teams. Revenue is. Revenue efficiency is a close second — especially in a world where profit (or at least on the path to it) is the new active user growth. Letting go of bad leads takes discipline and commitment, but it’s critical for building a high-performing sales team.
Qualified Sales Qualification
Interest rates are almost certainly going to go back down (they’ve already started), and budgets are probably going to open back up in the not too distant future. What’s less likely is that investors and executives are going to forget the lessons of the last few years. Profit is now king, revenue is second, and nebulous “user/engagement growth” metrics are left in the dust. It’s just as unlikely that buyers will suddenly wake up tomorrow and decide that they actually really did like getting cold calls just because they looked at an infographic they found on Google.
PQLs bridge the gap between the old and the new: They let you provide value through your marketing efforts without asking for anything in return, and get better leads when you finally collect user information.
In my time at Consensus, I’ve seen automated demos as a great middle ground where you can ungate all your written content and put the gate for your demo in the middle to allow people to see what you have to offer, but still capture contact information for Sales to have follow-up conversations with warm leads.
And the big win for revenue teams is you can now spend your time just following up on warm, motivated leads that have shown real intent. That means higher sales efficiency, reduced revenue team overhead, and better performance metrics at the next QBR. The only question left is: Why are you still doing sales the old-fashioned way?
