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GTM Playbooks

Product-Qualified Leads And Product-Led Growth: Lessons from Slack, Atlassian, and Zendesk

This post by François Dufour is part of our series on Product-Led Growth Playbooks. There, we share insights and advice from leaders who have built successful PLG businesses that target developers and their teams.

I’m a big champion of product-led growth (PLG) when the product itself becomes the best marketing and sales channel. It enables users to quickly experience its value, with as little friction as possible. PLG isn’t about foregoing a Sales team, however. In fact, successful PLG companies have well-trained Sales teams that are fed with Product Qualified Leads (PQLs) and grow them into meaningful customers.

Take it from Harsh Jawharkar, a successful Marketing Exec & PLG Pro, who’s a former VP of Marketing at Atlassian and early marketing leader at both Slack and Zendesk. Harsh has seen how defining PQLs, and then leveraging them to build a PLG-led GTM machine can drive exponential growth.

Harsh recently sat down with me and shared his insights on how growing companies can leverage PQLs.

We covered:

  • what PQLs are
  • when they should be used
  • how to create more of them
  • how to create an integrated approach between Product, Marketing, and Sales around them

Understanding PQLs

Slack, Atlassian, and Zendesk have all used PQLs in one form or another to drive their growth. But what are they? According to Harsh, PQLs are an expression that a customer has transitioned from interest to intent in a measurable way. The bridge between interest and intent is formed by customers (and users) using the right capabilities in your product at the right time that quickly demonstrates value. In hindsight, product-led companies have been using some form of PQLs even if they weren’t using that exact term in the past.

For example, customers using Zendesk in a free trial period set up their customer-facing help center and/or their ticketing service desk. When they took certain actions – such as populating their customer-facing help center with content and configuring their ticketing system – it was clear they were beginning to realize the value in the product. All these customer actions are non-trivial, they require a lot of thought and effort. So when customers invest demonstrable effort in your software, your product is literally ‘qualifying’ them step by step.

“PQLs are a tangible signal that a customer has transitioned from interest to intent in a measurable way. They’re not just trying your product: they’re intentionally working to realize the value of your product by taking discrete and quantifiable actions.”

It’s at these moments, when customers are realizing the product value, that you need to help nurture them on the right path. Do that either through a self-service motion or with your technical BDR, support and/or Sales team.  They can spring into action to offer support along the journey, ultimately converting the free trial or freemium customer into a paying one. Along the way, your segmentation will help you determine the best way (cues, messaging, education, etc.) in which to guide them along the path to conversion.

Are PQLs for You?

PQLs are a great fit for Product-led companies. If your product has a self-serve motion and customers can see the value of your product quickly on their own, then PQLs are an excellent way to create a repeatable, scalable, and efficient GTM model.

However, not every company is a perfect fit for PQLs. For example, Harsh was the VP of Marketing at Narvar, which provides software to major retailers that gives customers an easy way to track their orders, and PQLs weren’t an obvious fit.

“If your product has a self-serve motion and customers can see the value of your product quickly on their own, then PQLs are an excellent way to create a repeatable, scalable, and efficient GTM model.”

“Unlike products like Slack or Trello, Narvar’s customers need time to set up the software, integrate it with their (often legacy) systems,” he said. “Even once the product is implemented, it might take several months before the retailer realizes the value. In this instance, it’s difficult to implement a PQL approach because it’s challenging to self-serve and compress time-to-value.” The same pattern usually applies to CRMs like Salesforce as well (unless the user has used it previously). Not only does the customer have to consider purchasing Salesforce, but they absolutely need to factor in implementation timelines, configuring integrations with other adjacent systems, and employing a professional services team to do that. This means they can’t simply just try the software and realize its value in days and weeks, they have to commit to the software overall several months to start seeing a return.

Either way, understanding the role of self-purchase or self-service along with time-to-value can help software companies build the right functions to successfully go to market.

PQL 101, 102 and 103: The Different Types and Sophistication of PQLs

Harsh has seen PQLs used in a number of ways to different degrees of sophistication. He divides the different types of PQLs into three categories based on the objectives and sophistication of the strategies: 101, 201, and 301.

PQL 101: Free to Paid

The simplest way to leverage PQLs is when converting someone from a free user to a paid one. In this case, a prospective customer is on a freemium plan or on a free trial, hopefully actively sending signals that they are getting value out of the product, indicating they would benefit from being on a paid plan or tier.

These signals tell you that you need to nurture this lead, whether via automated outreach (in-app or via email for instance) or a human on your team. For example, when Slack users on the free plan search their messages, they’re automatically reminded that they’re missing out by not upgrading.

Source: ReallyGoodUX by Appcues

Not only that, Slack users are also limited to 10 integrations with other tools. Both of these aspects feed off one another. Adding integrations leads to more interactions and messages, which means there are more messages that won’t be available in the history. For the ideal customer profile, this creates positive pressure to move to a paid plan since they would benefit from unlimited message history and integrations.

PQL 201: From Paying to Paying More

If you want to level up your strategy, consider using PQLs to determine when it’s time to encourage someone to go from paying… to paying more by upgrading.

If a customer is currently on the first tier of your paid plans and you’re receiving signals that they would get substantial value from your higher tier, design a monetization approach to acting on these signals.

“At some point, you may see customers reaching the limits of your standard plan. They’re starting to show measurable signs that they are ready for more. These are PQLs that should be addressed with targeted campaigns.”

For example, as customers expand and add more users to the instance or workspace of your product, that will correlate to greater (and sometimes unexpressed) needs in terms of security, governance, compliance, storage, and administration. This creates an implicit PQL. Reach out to these customers and incentivize them to upgrade to the next tier (which may have capabilities like Single Sign-on, Data Residency, 99.99% SLAs, and more).

Trello does a great job signaling who should be using their next tiers and why. They have a clear hypothesis in terms of which specific features and capabilities should attract customers to Premium. This allows them to run experiments and test if those features have sufficient weight to be anchors.

How Trello signals who should be using their next tier and why
“As customers add more users that correlates to greater needs in terms of security, governance, compliance, storage, and administration. ”

PQL 301: Cross-selling to Other Products

Once you’ve nailed PQL 101 and 201, it’s time to consider cross-selling other products. This option is only relevant once you have a suite of products, but it can help you expand your reach and provide customers with holistic cross-product solutions.

For example, an Atlassian user might be using Jira and getting substantial value out of the product. Knowing how well JIRA integrates with Confluence (also Atlassian), you can begin to cross-sell Confluence based on actions a user is taking in Jira. As teams and users adopt a highly flexible and versatile tool like Jira, they create projects and tasks which need to draw on a source of information or a knowledge base. By quantifying signals in Jira’s adoption journey, Atlassian is able to elegantly introduce Jira customers to Confluence and nurture them to try and buy Confluence .

In fact, Atlassian takes a very sophisticated approach by ‘cross-flowing’ customers from one product to another to introduce them to the value of the new product. In this case, a customer has the opportunity to create a Confluence page (with a template) from within a Jira instance. Not only is this frictionless it also takes place contextually without disrupting the customer’s job-to-be-done.

Cross-flowing customers from one product (Jira) to another (Confluence)

How to Design Your PQL Framework and Criteria: Lessons From Slack

According to Harsh, there are two things you have to figure out before you design your PQL and pick your criteria:

  1. Understand Audience Behavior Dynamics. When designing PQLs, differentiate between who is buying your product, who is using it, and who is administering it. Consider whether your product is single or multiplayer. One person, on their own, can get value out of a single-player product. But many products are multiplayer, meaning that many people need to adopt and use the product to see the value. “Photoshop or Evernote is an example of a single-player product, and Slack is an example of a multiplayer product,” said Harsh. “Understanding what type of product you have is crucial”
  2. Understand Your Product’s Unique Mechanics. Each product has different mechanics but they all have to address the cold-start problem. For example, with products like Slack and Trello users not only have to acclimate to the interface and navigation but also how to translate their real-world workflows into the software. “When you go into Trello, you may see a sample board, but the user has to decide where they go and what they do next and that can be challenging,” said Harsh. Successful onboarding is seeing these moments and designing ‘wayfinding’ experiences to nudge users towards actions that will help them achieve the product’s value.
“Each product has different mechanics but they all have to address the cold-start problem.”

Slack used Slackbot to its fullest extent to provide every type of user with a soft landing and gently introduce them to what was then a radically new interface.

The team at Slack created a product-qualified model to drive growth. For example, within Slack, a few critical actions together created a strong signal that customers were actively realizing value and therefore had entered into the realm of a PQL for conversion.

  1. Sign Up for Slack. The first step, of course.
  2. Invite Your Team to Join. Next, users need to invite people to join them. The team at Slack wanted to see if they could get the primary user to invite their team to join in a short time-frame (preferably 72 hours), knowing that getting conversations started as quickly as possible would help people see the value.
  3. Start Having Conversations. Now, users must start to have conversations. Slack recognized that if users weren’t talking, then they would churn, never becoming a PQL. The team tested how many messages and how many people users needed to talk to before being truly qualified.
  4. Bring Work Inside Slack. Slack becomes even more valuable when work is brought inside it. The Slack team nudges users to integrate the apps they use for work – such as G-Suite, Dropbox, and Jira. Once people have set up these integrations, they’re moving quickly down the path to becoming a PQL.
“Successful PLG companies see PQLs as part of a growth system, rather than a one-time strategy for converting more leads. If you treat growth– and by extension your PQLs– as a product, then naturally you’ll build a small scrum team of product managers, data scientists, designers, and engineers”

You’ll notice that the users are nudged along the way. “PQLs are not generated by themselves; that’s a misconception,” said Harsh. “You need to manufacture them by defining experiments and incenting users to take action so that they can start getting value from your product.” While we focus on conversion rates, it’s also important to measure and compress the time it takes to create a PQL.

Successful PLG companies see PQLs as part of a growth system, rather than a one-time strategy for converting more leads. “It works really well to treat growth like a product,” said Harsh. “If you treat growth– and by extension your PQLs– as a product, then naturally you’ll build a small scrum team of product managers, data scientists, designers, and engineers, who can then create a backlog of different experiments, eventually creating a system that is self-operating and autonomous.

How to Arm Sales Teams, Especially BDRs, to Work PQLs

Once you’ve defined what your company’s PQLs are, you’ll need to segment them so that you route them appropriately - either for a self-service motion or a Sales motion.

For a Sales motion, you need an agreement and engagement model between Marketing and Sales, so that PQLs are seamlessly passed to Sales when they get a high enough score.

The dream is when a PQL also becomes a hand raiser to the Sales team, as they’re pre-qualified and very warm.

While it’s hard to provide a precise conversion rate benchmark since different types of SaaS business (horizontal vs vertical, single-player vs multi-player) will have different audience and product dynamics, PQLs can convert at  20% to 30% rate to Sales Qualified Lead or Opportunity, significantly higher than plain vanilla MQLs.

Your Sales teams need to be trained on how to work with PQLs, as well. Typically, you’ll equip them with information about the persona, major pain points, and common objections. You’ll also help them by providing materials (including metrics and social proof), specifically tailored to PQLs. It’s important that the PQL handoff is smooth because customers will get frustrated and churn if they have to continue repeating themselves to your Sales team.

BDRs will likely need to handle PQL and MQLs differently. Balancing MQLs and PQLs can be a challenge, but Harsh recommends routing MQLs based on the customer segment. SMB MQLs can be routed directly into the product for further nurturing, whereas Enterprise MQLs can be sent directly to Sales if they are the right persona, especially if they are the economic buyer instead of a user.

Regardless, just like you should apply a demographic and firmographic filter to your MQLs before passing them on to Sales, you should do the same with PQLs. Someone may be a super user and send many great signals through their product usage, but firmographics and segmentation will create an efficient way to route customers into the right lanes for self-service or sales assistance.

Harsh speaking at an Atlassian Conference.