Building a Product Qualified Lead process for your Simple Product

This is part 2 of a 4-part series on PQLs: What they are, how to find them and how to build a winning Product Qualified Lead process

Want to know everything you need to know about Product Qualified Leads? Download our e-book.

activation slack alerts for Product Qualified Lead process

In case you haven’t heard, PQLs are leads that are more likely to convert because they have found value in your product. If you’re a modern SaaS business, you want to find these leads. So the only question left — how? It’s elementary: you need a Product Qualified Lead process.

So you’re convinced: you want to find PQLs and make a Product Qualified Lead process for your business. But where to start?

To build a proper Product Qualified Lead process, you will need to:

  1. Properly define what the criteria by which your leads will become product qualified (otherwise known as an Activation checklist)
  2. Have a set of guidelines for turning these leads into paying customers.

Let’s get started!

defining a pql is important for a winning Product Qualified Lead process

First off, how complex is your product?

When our customers ask how they should be designing their Product Qualified Lead process, the first question we ask them is: 

How complex is your product? 

More simply, how hard is it for a new user (or small group of users) to self-serve their way to first value? Don’t forget: self-serve means without any manual support of intervention from your team. 

The answer to this question is the starting point for your PQL definition. It’s answer tells you how Activated a new account should be before your team gets involved. 

This post covers a Product Qualified Lead process for simple products. Not sure if that’s you?

Ask yourself how many of your last 10 signups self-served their way to first value. If the answer is more than 7, read on!

Slack and Dropbox are great examples of simple products. With both, a single user (or small number of users on an account) can easily self-serve their way to initial value. Both also have freemium versions, which are more commonly seen with simpler products.

Looking for a different product type? Download our e-book.

Next, how big is the opportunity?

Even with a simple product, there is some variance in how quickly you’ll want to get your Sales team involved. You need to also consider the size of a Sales opportunity. If a new trial holds the potential for more revenue, you’ll want to get your Sales team involved earlier. 

At the very least, you should be able to categorize your new trial signups into Small, Mid-Size and Large revenue opportunities. 

Oftentimes, companies will use the company size of a new trial as a proxy for opportunity size. This is certainly one way to go about it, but you define opportunity size based on whatever criteria makes sense for your business. 

Putting it together with Activation Rate

The more complex a product, the earlier your Sales team should intervene. Similarly, the bigger the size of the opportunity, the sooner you want your Sales team on it. Sounds simple, right? (That’s good, because it is). 

If you have a simple product, you should generally wait for accounts to become (almost) fully Activated before getting manually involved. However, if a large deal starts using the product, you can might want to start the manual intervention phase earlier to increase the chances of a close. In this case, you’d have your Sales (or CS team) start engaging when the account is only 25-50% Activated. 

Here are good rule-of-thumb Activation rate guidelines for a simple product:

Deal SizeReach out when:
Small 80% – 100% Activated
Mid-Size60% – 80% Activated
Large25% – 50% Activated

As you go through the next section, keep in mind the goal of a Product Qualified Lead process for simple products is to drive as many paid conversions as possible with little to no manual intervention.

Product Qualified Lead process for the Small Opportunity

Product Qualified Lead process for the small opportunity simple product
Product Qualified Lead process for small opportunities — Wait until they’re ready to convert

Simple products are designed so that the majority of accounts coming in are small accounts that can self-serve their way to value (and, most likely, even to a point of paid conversion). With a simple product, you can choose to not offer any manual intervention or you can choose to intervene when they approach the point of conversion.

While it’s easy to write off small accounts (you may not even have a dedicated salesperson for them), realize that there is gold in them there hills! Your Sales (and CS) teams should be monitoring this segment on a regular basis and looking for opportunities to take some of these accounts over the finish line. 

Any small account that gets to 75% Activation is absolutely worth some light manual intervention. 

How to engage these Product Qualified Leads

They don’t really need a value pitch but a slight nudge or reminder could be just the thing that gets them over the finish line. 

Want to know how to win over small deals? Download our e-book and get considerations and sample emails.

Product Qualified Lead process for the Mid-Size Opportunity 

Product Qualified Lead process for the mid-size opportunity simple product
Product Qualified Lead process for mid-size opportunities — more users, lower Activation

You have a simple product and a mid-size opportunity. Great! The goal is still to have users self-serve their way to success — at least as much as you can. 

With that being said, mid-size accounts are more likely to have multiple users (and multiple decision makers) so it’s likely that some manual intervention will be required. More users, more touch points, and more potential decision makers complicate the on-boarding, Activation, and conversion of these accounts. 

You should consider these account product qualified and get someone on your team involved at about 60% – 80% Activation.


Looking to win that mid-size deal? Download our e-book and get everything you need.

Product Qualified Lead process for the Large Opportunity

Product Qualified Lead process for the large opportunity simple product
Product Qualified Lead process for the large opportunities — It’s ok to jump in a bit earlier

The whales! Go get ‘em! 

But be careful. It’s typical for Sales teams to see a big, shiny logo and then drop everything to chase it down. Don’t do this! The user that signed up for your product is probably a lower-level employee who was doing some initial investigation. (This is why we call these types of trials “Heartbreakers”) 

Don’t let your Product Qualified Lead process falter chasing a heartbreaker

Have some restraint and let these trials self-serve their way forward before reaching out. Your Sales team should allow this ac- count to show sufficient interest before chasing them down. Of course, the size of the potential opportunity means you should product qualify this lead at an earlier stage of Activation (about 25-50%). 

Ready to take that large opportunity from trial to forever? Download our e-book.

How to Improve the Sales CS Handoff

Oh the handoff. Ah — the handoff. Are you shivering yet? We would write poetry about the Sales CS handoff, but the conflicts between these two teams are more systematic than symbolic.

The Sales CS handoff is a seemingly simple transfer of account ownership between a salesperson who closed a new account and a customer success rep who will be on-boarding and managing the account. 

What could be more straightforward?

Ah, but there is nothing more deceptive than an obvious fact! Sales CS handoffs are not a simple ownership transfer. If you want to take the account from close to forever, the Sales CS handoff needs to be a knowledge transfer.

The salesperson needs to be able to effectively share the information they gathered about an account during the sales process with the customer success rep like who the key players are and what features caused them to make the purchasing decision. 

Still sounds straightforward? Indeed not. Your Sales CS handoffs probably sound more like this:

Sales CS handoff nightmare

The pain of the Sales CS handoff

smh. Does it have to be like this?

Why is a good Sales CS handoff important? 

Do you want your customers to have a good experience? Do you want an efficient SaaS process? Do you want a foundation for long-term customer success? Don’t even try to pretend the answer to any of those questions isn’t a resounding “Indeed, I do!”

Good Sales CS handoffs make your precious customers happy by preserving continuity and momentum. We’ve all been there: You get yourself all set up and jazzed about a product, finish your trial without a hitch (ok, without an unsolved hitch), go through a series of negotiations with a salesperson, hand over your credit card and then — you have to start over with someone who wants to talk about what you’ve done the past month. Don’t be the cable company. Don’t do this to your customers.

Good Sales CS handoffs also keep your SaaS organization efficient. If your team is spending time repeating customer research, educating and training customers on the same things twice, fumbling through multiple tools to figure out the best path forward, then your operation simply isn’t going to efficient and its certainly not going to scale well. 

Want a better Sales CS handoff? Learn how Sherlock can help.

But what’s the real reason for an as-close-to-perfect-as-you-can Sales CS handoff? Brace yourself for everyone’s least favorite 5-letter word: churn. This is SaaS, guys. An initial conversion does not a profitable customer make. You need to keep that customer from churning, retain them for a long time before they will be valuable for your business. A good Sales CS handoff lays a good foundation. During a trial, customers (hopefully) see enough value to start paying. But this doesn’t mean they have experienced all the value your product has to offer. Many times, it’s not even close. The post-conversion on-boarding phase is what determines team and feature adoption. Do you know what that determines? Whether or not this new, beautiful paid account goes from trial to forever.

Very well. I agree, but why is a good Sales CS handoff so difficult?

Quite the conundrum, surely! Good Sales CS handoffs should be easy (but when is anything worth having ever easy?). 

Let’s see why they’re not:

As mentioned before, the Sales CS handoff is a knowledge transfer between two departments. To make any knowledge transfer successful, you need:

  1. Good communication
  2. Good information

Good communication

Ah, communication. The stuff poems are written about. Or is that love? (If only communication was easier, we might have some clarity on the subject.) But it’s not. We’ll spare you the philosophy and get to the root of the problem: The communication challenges around a Sales CS handoff are all rooted in objectives. More specifically, misaligned objectives. 

Sales and CS teams are (still) not well-aligned in terms of goals and incentives. CS teams are charged with helping customers get long-term value out of your product, while Sales teams will do anything they can just to close a deal. Now before you send your Sales team to egg our offices, we’re not saying CSMs are a holy, benevolent antitheses to a greedy, money-grubbing horde (Sales teams aren’t part of a greedy, money-grubbing horde).

It’s just that the two teams are compensated differently. Salespeople get paid on closed deals. So salespeople only care about closed deals. Not long-term success. They don’t care because they’re not paid to care. So is it any wonder that it’s difficult to get Sales to actively participate in the Sales CS handoff? They have fresh leads to chase down! And we know what you’re thinking: But my Sales team is different. If they really are, congratulations. You’re in the minority. Do everything you can to keep them.

Good information

The next major requirement for any successful knowledge transfer is having good information. It’s tough to transfer knowledge if you don’t have it. And this is a major problem for the Sales CS handoff — and it’s only getting worse as we move more toward a Product-Led world

Firstly, let’s consider some structural issues. It is sometimes the case (although not always) that the information a sales person needs to close a deal is often different than what a CSM team needs to properly onboard and manage an account. During a Sales CS handoff, CS may want to know some things that the salesperson simply never asked about or researched because they didn’t need to. 

Then there’s the issue of access to information. This is often the bigger issue. Sometimes Sales and CS need different information to accomplish their objectives. Sales only asks about the information they need and only remember the information as long as they need it to close a sale. But the bigger issue, especially in this Product-Led world is that: 

  • Sales is spending less and less time with accounts before they convert 
  • The data that is most important for a proper Sales CS handoff is product engagement data, which is difficult to access — especially in a format that meets the needs of these teams. 

In this Product-Led world, the goal is to allow users to “sell themselves” on a product with a free trial period or freemium version of the product. Introverts rejoice: that means less Sales involvement! In earlier times, a Salesperson would have multiple touches — phone calls, email interactions, face-to-face visits, etc — with a prospect before closing a deal. But today, Sales is having far fewer interactions with a prospect before a conversion. Do you know what that means? Until you find a way to make your Sales teams omnipotent, they will have less information about new accounts. And this isn’t great from a Sales CS handoff perspective.

While we’re on the topic of information, let’s talk about the most important kind — how the accounts have been using the product. 

  • What features have they used (and not used)? 
  • Who had been engaging and what roles? 
  • Have they run into any issues? 
  • What integrations are they using? 
  • What is left to do to get them on-boarded? 

The answers to all these questions, my good friend, are based on product engagement, i.e. things that don’t come from a traditional Sales interaction. They need to be tracked and compiled in a way that make it easy for both teams to understand. And unless you have this data in that format, it’s really difficult to get any value from a Sales CS handoff.

How to solve your Sales CS handoff woes with Sherlock

Some hard truth: There is no software product that’s going to fix the the communication and misalignment issues present in a Sales CS handoff. If these are big issues for your teams, you first need to find a way to change your culture (and your incentive programs) so long-term retention has the highest value. If your company has a sales-first culture, you might be SOL. You can try changing incentive programs, focusing on longer-term KPIs (like 12-month revenue retention, churn rates, etc), or even moving to an aggressive product-led model but, this is going to be a toughie.

Now then. The good news: the knowledge piece can be solved. As mentioned earlier, the most important data in a modern Sales CS handoff is the product engagement of your new accounts. Your CS team will need to know what the account did, how far they got, and who on the account was doing it. 

Enter Sherlock. It was built so your Sales team can track the product engagement and Activation of all their accounts in trial. 

Product engagement scoring is the key to mastering the Sales CS handoff
Product engagement scoring is the key to mastering the Sales CS handoff

This is great for a more efficient modern sales process, but it’s super magical when it comes to a Sales CS handoff. And why? It’s simplicity itself! You’ve already been tracking the activity, progress  and everything else there is to know about the engagement of accounts during their trial. With Sherlock, CS has all this information at their fingertips once an account moves to paid. 

They can quickly and easily find out: 

  • What features has the account already used (and not used)? 
  • Who had been engaging – what has each of them done? 
  • Have they run into any issues? 
  • What is left to do to get them on-boarded? 
Sherlock gives you everything you need for a winning Sales CS handoff
Sherlock gives you everything you need for a winning Sales CS handoff

Sure, there are other things your CS team might want or need to know. Things like goals for the account, organizational makeup, personalities of the stakeholders, etc. But with Sherlock, CSMs will have the most important knowledge about their new accounts readily available. 

That means, even if you never get the awkward Sales CS handoff meeting scheduled, your CS team will be well prepared to deliver a great on-boarding experience and beyond. Or maybe you’ll just end up with a meeting that’s actually productive.

Don’t you want to be having a different kind of Sales CS handoff? Click here.

The Seven SaaS Trial Leads You Need to Know for SaaS Revenue Forecasting

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If you’re a modern SaaS business (you are, aren’t you?), you probably have some sort of revenue forecasting system. And to get any value from that system, you need to know how likely your SaaS trial leads are to convert.

That means plugging values into a spreadsheet with a formula, typically

deal size x likelihood to close

Of the two, deal size is relatively easy to determine. But how do you determine likelihood to close? If you’re like the average modern SaaS business, you might have a conversation with the Account Rep in charge of the account. Surely they’ll know. 

“How are we feeling about Footprint Inc?” you ask the Account Rep. “How likely are they to close?”
Oh, they’ll close. We’ll get them for sure. I can feel it.
“Great! I’ll just put them in the spreadsheet —”
94% — they’re going to close.
“Because they’ve been especially engaged with our key features during their trial?”
No, how would I know that? I can just feel it.
“You can…feel it?”
Yes, I can just feel it. They’re going to close.
“Ok. Is it because they’ve gone through all the Activation steps?”
I told you! I can feel it.
“Ok, Jim if you’re going to give a percent you need a reason.”
No, I don’t.
“Ok, very well. I’ll just ask Product for the account engagement and put them in the spreadsheet based on —”
“638 what?”
They’ll close.
“Jim, that’s not even a percent!”

This is clearly not a sustainable way to determine how likely it is that a trial will convert. Want a better way to forecast revenue? Product Engagement metrics give you singular insights for your revenue forecasting so you don’t have to rely on Jim’s “feelings” anymore. (Sorry, Jim, but who were you kidding? 638?)

The key product engagement metrics to consider for your SaaS revenue forecasting are:

Activation (Rate):

n. A static measurement of how far along a user or account is in their journey toward “first value” or the “aha” moment where they realize how great your product is. 

n. An indicator of how far along someone is to becoming a product qualified lead

Engagement (Score):

n. An over time measurement of how much a user or account is using your product


n. A measure of responsiveness and proactive outreach that a user or account displays during a free trial period

Most SaaS trials fall into one of seven types, based on their Activation, engagement and communication during their trial period. Have you met all seven? 

Ready to find trials that will convert? Give Sherlock a try.

Types of SaaS Trial Leads

SaaS Trial Lead #1: The Golden Leads

90% Chance of Conversion

If only SaaS revenue forecasting was all Golden Leads

SaaS Trial Leads golden lead description
Don’t we all wish every lead was a Golden Lead?

These people are almost guaranteed to convert. From the beginning, they do everything right. They get set up in the product quickly and stay highly engaged throughout the trial, often bringing in more team members. They’re also extremely open and communicative with your team, clearly describing their goals, taking advice, and asking questions whenever they get stuck. You can’t do better than a Golden SaaS trial lead.

Key engagement indicators:

  • High Activation
  • High Engagement
  • Actively Communicate

How to handle these SaaS trial leads:

Just enjoy the ride with these leads. They’re really committed to making your product work for their use case so do everything you can to help them make it happen. And don’t be afraid to show them important but less obvious features — they’ll be on board to try them! 

SaaS Trial Lead #2: The Silent Successes

75% Chance of Conversion

Don’t be discouraged by silence when SaaS revenue forecasting

SaaS Trial Leads Silent Successes
Just because these SaaS Trial Leads are quiet, doesn’t mean they don’t care

These SaaS trial leads sign up and self-serve their way to value. They don’t respond to any emails or communication attempts from your team, but they maintain high Activation and engagement rates throughout the trial. As much as may seem disinterested, their engagement tells a different story.

Key engagement indicators:

  • High Activation
  • High Engagement
  • Low/No Communication

How to handle these SaaS trial leads:

Firstly, don’t give up hope. Just because they’re not communicating, doesn’t mean they’re not interested. It’s easy to rank the likelihood to close lower for these leads because they don’t talk much, but stay focused on their Activation and engagement and be available if and when they do need help. Then wait and watch them lead themselves to glory. 

SaaS Trial Lead #3: The Contrary Converters

60% Chance of Conversion

Feedback (even if negative) is good for your SaaS revenue forecasting

SaaS Trial Leads Contrary converter
These SaaS Trial Leads complain a lot, but they’re still engaged

These people communicate constantly and consistently throughout their trial — but most of what they have to say is negative. They challenge your features, complain about your on-boarding experience, question how you wrote your help docs, etc. They just don’t seem happy with what you’re doing. Despite all of those complaints, though, these SaaS trial leads keep engaging and implementing. 

Key engagement indicators:

  • Medium Activation
  • Medium Engagement
  • Actively Communicate

How to handle these SaaS trial leads:

Support these SaaS trial leads happily through their grumpiness. When they frown, you smile. Listen to them and make them feel heard. If they find value in the product, they will convert. And they might even become one of your biggest advocates!

SaaS Trial Lead #4: The Positive Procrastinators

30% Chance of Conversion

Actions speak louder than words when it comes to SaaS revenue forecasting

SaaS Trial Leads Positive procrastinator
Don’t get caught up trying to give these SaaS Trial Leads everything they want

These SaaS trial leads may seem like some of the most promising. They say all the right things and seem excited in a too-good-to-be-true sort of way. These trials always have some excuse for why they can’t make progress on their trial. They never get set up with your product, and their sweet nothings may feel nice but are meaningless in the end.

Key engagement indicators:

  • Low Activation
  • Low Engagement
  • Actively Communicate

How to handle these SaaS trial leads:

The biggest thing to remember with these SaaS trial leads is that talk is cheap. Be firm with them. Make them commit to an action plan. Make them commit to becoming Activated with your product. If they can’t or they won’t follow through, don’t waste your time. 

SaaS Trial Lead #5: The Fizzlers

10% Chance of Conversion

When SaaS revenue forecasting, keep in mind: early excitement doesn’t always lead to lasting results

SaaS Trial Leads fizzler
These SaaS Trial Leads start hot and then burn out

These leads are the most disappointing of all in many ways. They start out so excited (much like the Golden Lead), becoming Activated quickly and constantly remarking how all of your features feel made for them. But then something changes — their engagement tails off, and they’re gone.

Key engagement indicators:

  • High Activation
  • Low Engagement
  • Low/No Communication

How to handle these SaaS trial leads:

Keep these SaaS trial leads on your marketing lists. (As far as SaaS revenue forecasting, they’re not going to close during their trial). They were clearly excited about something you had to offer, but it may have been a matter of bad timing. No one knows what the future holds!

SaaS Trial Lead #6: The Incompatible Ignoramus

5% Chance of Conversion

Bad leads are bad leads — no need to categorize them otherwise when SaaS revenue forecasting

SaaS Trial Leads incompatible ignoramusSaaS Trial Leads incompatible ignoramus
Is it even fair to call these SaaS trial leads?

These SaaS trial leads are just bad. There’s nothing else to it. They don’t have the resources or motivation to get your product implemented, but they interact with your team, taking up valuable time. They insist they want to make things work, but who are we kidding? 

Key engagement indicators:

  • Low Activation
  • Low Engagement
  • Actively Communicate

How to handle these SaaS trial leads:

Smile and move on. Be grateful for the initial interest and efforts of these leads, but don’t waste time. They may, at some point in the future, have the resources or feature needs. They may come back. But in the meantime, you don’t need them signing up and spreading bad vibes about your product in the marketplace.

SaaS Trial Lead #7: The Heartbreakers

5% Chance of Conversion

Sometimes SaaS revenue forecasting requires that you let go of a hollow dream

SaaS Trial Leads heartbreaker
Don’t let these SaaS Trial Leads turn into a morale black hole

Like their namesake, these leads are everything you want but can’t have. They’re well-known logos that would make your brand shine. Just saying their name gives you goosebumps. But the problem is they never actually use the product after signing up and are generally unresponsive to Sales outreach.

Key engagement indicators:

  • Low Activation
  • Low Engagement
  • Low/No Communication

How to handle these SaaS trial leads:

Just. Let. Go. Be happy that such a great SaaS trial lead showed enough interest to sign up but don’t dwell on them. Likely, the wrong person started the trial and they just aren’t engaging with your features. It might be worth it for your Sales team to spend some time mapping this account and trying to find the right buyer, but not too much time.

SaaS revenue forecasting is all about product engagement

Chances are, by this point, you’ve realized that SaaS revenue forecasting is all about looking at engagement. Is the SaaS trial lead engaged during the trial period? If so, they’re more likely to convert. If not? There are more fish in the sea.

Need a tool to separate the Heartbreakers from the Golden Leads? Try Sherlock free for 17 days.

What do you think? Did we miss any SaaS trial lead personas? Send us an email at and let us know.

Activation vs. Engagement: What’s the difference?

If you spent a day at Sherlock, you’d hear us throwing these terms around as often as “coffee” and “SaaS” (very well, perhaps less than “coffee”). But what does Activation mean? What does Engagement mean? How are they related? What’s the difference?

Quite excellent questions!

Here’s our CEO, Derek Skaletsky, on the topic.


Let’s begin with Activation (Rate)

n. A static measurement of how far along a user or account is in their journey toward “first value” or the “aha” moment where they realize how great your product is.
n. An indicator of how far along someone is to becoming a product qualified lead

There are a few things a user would need to do to get set up in your product and get value out of it. These things vary based on the product. Let’s say you’re a modern SaaS company with a GSuite plugin for email collaboration. Your Activation steps might look like this:

The account journey from signup to Activation
The account journey from signup to Activation

Here’s an obvious fact that follows: Activation rate is just the percentage of steps completed. That means if an account or user has done 2 out of the 5 steps above, they are 20% Activated. 

They are 20% of the way to hitting first value with your product. Excellent!

Sherlock screenshot showing Activation rate
Account Activation is on the left in Sherlock

In Sherlock, you can see an account or user’s Activation rate in a few places. The full Activation checklist is on the left side of any account or user detail page, and the Activation rate is visible on any user or account overview (because it’s such an important metric!) Additionally, you can see Activation rates in other platforms you’ve integrated with Sherlock — Intercom, Slack, and Hubspot being among them.

Use Activation rate in Slack, Intercom, Hubspot
Sherlock integrates with Slack, Intercom and Hubspot

Setting up Activation in Sherlock is simplicity itself. Get started and never miss another Activated trial again

When to use Activation (Rate)

Activation Rate in the Customer Journey
The Customer Journey

Activation rate is quite important in the early phases of the user journey, especially if you have a freemium version or free trial. In that case Activation, occasionally combined with firmographic criteria, is the best indicator of when a trial account is ready for an interaction with your sales team. (It becomes even more important when you have a large number of trials and your Sales team needs ones to focus on.)

But that doesn’t mean that Activation is no longer important after the free trial is up. Post-sale, Activation gives your Customer Success team a way to measure how far along the account is in the on-boarding process and what steps each user needs to complete to be fully on-boarded onto the product.

Separate you paid and trial accounts so your different teams can use different Activation criteria

User vs. Account Activation

It’s been said (and will be said again): If you are a SaaS business, you operate at an account-level. 

  • Accounts sign-up
  • Accounts adopt
  • Accounts convert 
  • Accounts pay
  • Accounts expand
  • Accounts cancel

Curious, it seems there’s a trend here.

Sales teams have always known this. Just look at how any CRM is organized. Marketers know this. That’s why ABM has taken off in recent years. SaaS businesses sell to other businesses — your product is used by teams. You operate at the account-level. 

Why wouldn’t you track Activation the same way? You would track it the same way. But accounts are made of users.

Track activation at both the account and user levels
Sometimes users have different Activation criteria than accounts

There are some Activation criteria that the account needs to do. For example, adding a certain number of team members to the account. On the other hand, there are some Activation criteria that a single user needs to do to become Activated. Think actions like setting up a profile or creating an individualized template. To truly understand how far along an account is on the path to Activation, you need to understand both the account Activation and the Activation rate of the individual users on the account. 

Track both account and user activation with Sherlock

Now, Engagement Score

n. An over time measurement of how much a user or account is using your product

This is all about the events (or actions) a user or account can take in your product. As you are well aware (surely), there are several things that one might do in any given SaaS product. Some of these things are more important than others. Login, for example, is not that important. Sure, everyone does it, but how much value does someone get from logging in? 

An obvious fact, that — not a lot.

Creating a report, however, is more valuable. A user would certainly derive more value from creating a report than logging in. (This is, of course, assuming you have the sort of SaaS app where creating a report is part of the value.) There are events that are likely even more valuable than creating a report and similarly events that are less valuable than creating a report.

engagement scoring model pql
Some events are more important in your product than others, so why would you weight them all the same?

So to get a good sense of how engaged a user is with your product, you need to collect all the (at least somewhat) important events that one might do in your product and weight them accordingly. Then, you need to do some math to find the engagement score for both users and accounts.

Don’t want to do the math yourself? Weight your events in Sherlock and let us calculate your engagement

When to use Engagement Score

Yet another obvious fact — all the time! In all seriousness, there are several things an engagement score can tell you. 

  • It surfaces accounts that are at risk and ones that are ready for an up-sell. 
  • It shows you which users on an account are going to be internal champions for your brand. 
  • It gives you an indication of which accounts might be good to reach out to when it comes time to build out your social proof

But most importantly, and partly because it is over time, the engagement score offers singular insights into the overall health of your business. If it’s on a downward trend, it could indicate you need to make some changes. A graph with a positive slope means you’re doing something right!

engagement going up/down over time
Engagement is a good indicator of how your product is doing

At-a-Glance: Activation vs. Engagement

Activation RateEngagement Score
Static metric to determine how far a user/account has progressedOver time metric for assessing how much a user or account is using your product
Use it at the beginning of the customer journey – both pre and post-saleImportant to track across the entire customer lifecycle
Trends are essential for identifying risks and opportunities

Ready to start scoring? Give Sherlock a try.

PQLs (Product Qualified Leads) Are Hiding in Your Data — Find Them!

This is part 1 of a 4-part series on Product Qualified Leads (PQLs)

Want to know everything you need to know about Product Qualified Leads? Download our e-book.

You couldn’t have come at a better time, my friend. You already know what product qualified leads (PQLs) are and why they’re singularly remarkable when it comes to generating SaaS revenue.

You’ve decided you need PQLs for your SaaS business (because you’re a modern SaaS pro).

Now all you need is a process to find product qualified leads.

pql product qualified leads based on activation going to a slack alert
Activation is a key indicator of a PQL. Track it and send the information to your sales team

Before you start looking at data to find PQLs, get your free trial into the hands of future customers

If you’re a SaaS business (you are, aren’t you?), you’ve likely already got a free trial or a freemium version of your product. If you don’t, stop reading now. 

Customers love trying products before they buy them and the emergence of the Software-as-a-Service business model has made that exceedingly prevalent. Now all you need to do is get people to sign up. Get users to try your product, see what they say and if it’s good (it is good, isn’t it?), they’ll surely join the ranks of your other PQLs.

The key to going from dizzying numbers to PQLs: Define what makes someone a PQL

As you may already know, the first step in finding something is defining it. Want to find a product qualified lead (who doesn’t)? You need to know what makes a user “product qualified.”

By definition, a PQL is a lead that has been successful with your product during a free trial period. But what does success mean for your SaaS product? 

Generally speaking, it’s a combination of two things:

  • Activation: Is the trial account all set up? Have they reached first value?
  • Engagement: How engaged is a lead during the trial? How often are they using the product, especially the core features? 

Here’s how you find the answers to these questions for your SaaS business:

  1. Set up a system for keeping tabs on your product data
  2. Define Activation criteria for your product (don’t forget to track it too!)
  3. Rank Activated trials by engagement
  4. Do all of this at the account level

Bonus: Get the gong ready

Set up a system for tracking your product data

It’s elementary: You have to track product data if you want to qualify leads based on product usage. We’re not talking about an extensive audit — just focus on events that are important for setting up a new account and events that are core to your product.

Want in-depth insights on how to track product data? Read our e-book

Define Activation criteria for your product (don’t forget to track it too!)

You don’t have a PQL until your lead gets the product set up and reaches “first value.” That’s called being “Activated.”

Try this thought exercise to define Activation for your SaaS business

Suppose you have a user (let’s call him Watson) who sets up a trial so he could give your product a go. You gave him some breathing room — excellent. But how do you know when Watson is “Activated”?

Grab a few of your team members (the more, the better) and ask them:

What are the three, four, five (maybe even six!) specific actions that allow a new account or user to experience “first value?” Is it inviting a team member? Creating a new workspace? Something that’s completely singular to your business? (Clue: If you’re an analytics tool your Activation criteria might be something like connecting data and creating a report.) 

These actions are your Activation checklist. And because you’re diligently tracking product data (you are, aren’t you?), you’ll be able to track Activation progress for each of your accounts. You’ll be able to answer questions like: How many of my five Activation steps has my latest signup completed? What is the average Activation rate for this month’s signups? 

Who should my sales team focus on?

Rank Activated trials by engagement

Create an engagement scoring model for your product and measure how engaged your accounts are. Compare them. Rank them. Look for trials that are not only more Activated, but also more engaged. The ones that are high on both axes are closer to being product qualified. The ones that are lower — not so much. This is how you can make a PQL spectrum. This is how your sales team can really start directing their actions intelligently.

engagement scoring model pql
Weight your product events by importance to score engagement

A little tip: Creating an engagement scoring model is not a simple task. You’ll need to rank your product events based on how important they are and then keep tabs on the number of times each account uses your important features over time. Remember, “last active” and “login” are not acceptable substitutes for real engagement.

Sound daunting? It’s an obvious fact that nothing worth having is easy, but Sherlock makes finding PQLs remarkably so

Do all of this at the account level

This is of the utmost importance. You’re a SaaS business. You sell to accounts — not just individual users. While a single user will sign-up for a trial, multiple users will work together to make the account “Activated” and engaged during the trial period. Multiple stakeholders in a company make the purchasing decision. 

So why would you track product data at the user-level and not the account-level? It’s even more so when you’re tracking PQLs. PQLs are accounts, not users. You’re selling to accounts, your leads are accounts — you need to track accounts.

pql product qualified lead output chart for sales team
Ranking leads by Activation and engagement helps you create a PQL spectrum

This is all very well, but how do you turn this information into revenue?

You know what a PQL is — excellent! You even know how to find PQLs using your product data — exceedingly excellent! Now you need to take action. Track Activation for every account during the trial period, get PQLs to your sales team. Ring the gong!

Curious to read more on PQLs?

The Three Phases of the SaaS Revenue Model (and How to Win at Each)

Ah, the digital age — computers, chrome and software all over the place. Indeed, software revolutionized the way we do business, but the SaaS revenue model revolutionized the software business. For customers, the benefits of the SaaS model were clear. It brought lower costs, lower commitment risk, and a try-before-you-buy model, which gave customers a remarkable opportunity to assess a product before making a purchase. Indeed, the benefit is so clear that a 2017 study conducted by BetterCloud found that 86% of organizations estimate that 80% of their business apps will be delivered through the SaaS model by 2022.

companies will be running on saas and the saas revenue model

For software businesses, on the other hand, the SaaS model presented an entirely new way to build, distribute, market, sell, and support a software product. It literally affected every single part of a software operation. But the most significant change that the SaaS model brought — the one at the root of all the other changes — was the SaaS revenue model.

The Three Phases of the SaaS Revenue Model

Before SaaS (let’s call that time the Age of Sales), the software revenue model was transactional and all that mattered was the initial sale of the software product. Big, fancy salesmen sold long-term deals for one, two, even five million dollars a pop. Done. Hands dusted, gong rung, contract signed — all the revenue that was going to come from that deal had been generated.

Enter the SaaS revenue model. It swapped the single point of revenue with three essential phases (and it couldn’t have come at a better time):

Initial sale → Retention → Expansion

SaaS Revenue Model Phase 1: The Initial Sale

It still exists! And it’s still an essential part of the SaaS revenue model. “Closing” an initial sales includes everything from a simple self-serve upgrade to an annual contract shepherded by an inside salesperson.

If you play this phase well and show strong initial sales growth, you’ll get somewhere with your SaaS business. You’ll probably be able to raise some money, maybe even have a mini-brand — excellent! But wait — don’t ring the gong just yet. These days, an initial sale brings in far less revenue than in the traditional SaaS revenue model.

It’s still extremely important — you need a flow of new customers — but you also need to move on to…

SaaS Revenue Model Phase 2: Retention Revenue

“You mean we have to keep them happy?!? ! Forever??”

– Early SaaS pioneer

Quite so, Mr. Early SaaS Pioneer. There’s a new (SaaS) revenue model in town.

Most early players, however, maintain the sales-first mentality even though they’re selling much smaller, month-to-month deals. They’re celebrating the initial sale disproportionately (and have been for years).

Not everyone, though. Some SaaS companies quickly realized the importance of retention. Indeed, they saw that an initial sale didn’t matter much if a new account canceled three, six — even 12 months later. They realized they couldn’t possibly sustain growth if they churned the customers they brought in. These people know how to play the game of SaaS.

Today’s SaaS pros realize that retention is the biggest revenue opportunity in SaaS. An initial sale might get you $500 in the bank when you convert that deal. But retention, retention will bring in that amount times the number of months the account stays active. And why? Here’s some fast math on that point:

  • 1 month (initial sale): $500
  • x 12 months = $6k
  • x 24 months = $12k
  • x 36 months = $24k

Indeed, the revenue opportunity from retention is exponentially larger than the initial sale. Execute well in this second phase, my friend, and you will build a solid, sustainable SaaS business. Excellent!

But wait (there’s more) — if you want to build a great SaaS business, crush the competition, and have a shot at an IPO, you’ll have to master the third phase of the SaaS revenue model: Expansion.

SaaS Revenue Model Phase 3: Expansion Revenue

Often overlooked, always important — this is where the true secret to SaaS growth lies. Savvy SaaS teams quickly realized that they could drive revenue growth by expanding existing accounts. Upsells, cross-sells, and any any other sells that could generate additional revenue from existing customers became SaaS staples. And it worked, mainly because the opportunity for second-order revenue was huge.

Just look at what happens when a SaaS company masters this phase:

impact of upsell on growth performance in the saas revenue model

And why? Expansion revenue is the root of the most magical of all SaaS metrics — Net Negative Churn.

What’s Net Negative Churn?

It’s simplicity itself! Here, take a look:

 Churned Revenue – Expansion Revenue = Net Churn

Stay with us here. Churn is generally expressed as a positive number, so if expansion revenue exceeds it, then Net Churn is negative — that’s good. You don’t want churn, you want Net Negative Churn.

That way even if you never close another deal (who are we kidding, you’re a SaaS pro!), your business will continue to grow. Like magic.

Ready to master the three phases of SaaS Revenue? Get a demo of Sherlock.

Want SaaS Success? Make Organizational Shifts

You understand the realities of the three phases of SaaS revenue. Excellent! But that’s only half the battle. The other half is executing against it. You’ll need to shift the way you look at adoption, customer service, sales, and even marketing. Thanks to the SaaS model, the operations of software businesses are changing.

A Focus Shift for Your Sales Department

You’ve got a sales team. They might even be really good at what they do, but they’re going to require a makeover as SaaS companies tune-up their revenue model. In the old days, your sales team was singularly focused on identifying new prospects, pitching your solution to them, and closing the sale. While those goals still exist in a SaaS sales department, the department must shift its focus toward a more supportive role, especially in companies that offer a try-before-you-buy experience.

The Emergence of Customer Success

Once the early SaaS pioneers realized the importance of retention, they understood that the traditional post-sale approach wasn’t good enough. Building a strong retention revenue game is no longer about a reactive customer support approach, but more about building a proactive Customer Success operation.

A Customer Success operation that makes sure a SaaS product is properly adopted and integrated; one that drives education and oversees reactive support; A Customer Success operation to ultimately improve retention rates. Customer Success teams are no longer just passive caretakers of your client, but active drivers of revenue.

Enter the Chief Revenue Officer

Nowadays, SaaS pros (that’s you!) have come to understand the need for continuity across the three phases of the revenue model (that’s you, right?). If so, you need to replace the wall between your sales and customer success teams with a bridge. Siloing revenue responsibilities can lead to misaligned compensation systems, infighting, and an unhealthy revenue base.

What good is selling a new deal if you know it’s not a good long-term fit for the business? How do you coordinate your on-boarding efforts? How do you plan your expansion efforts?

These are the questions you need to ask if you want to win the game of SaaS. (You do, right?) Sophisticated SaaS leaders have realized this and are starting to organize Sales and CS under a single management point, a new role — the Chief Revenue Officer (CRO).

The CRO connects the full revenue lifecycle. She’s fully responsible for designing strategies and driving revenue growth across the three phases of SaaS revenue. Having one person responsible for that means no more throwing customers over the fence and forgetting about it, no more signing bad deals, no more churn (well, lower churn).

Product Engagement: The Key to Mastering the Three Phases of SaaS Revenue

The SaaS revenue model is absolutely dependent on product engagement. Product engagement tells us so much about our customers: who uses our solution? How do they use it? Where are they integrating? Where are they not integrating? You need to know the value you’re giving individual customers. You need to know how engaged they are — in every phase.

With this data on hand, SaaS companies can better prioritize where their marketing, sales and customer success teams spend their time and effort, maximizing their ability to create longstanding relationships with uniquely qualified customers and prospects.

Let’s examine the role product engagement plays in each revenue phase:

Product Engagement in the Initial Sales Phase

It’s a try-before-you-buy world. You offer a free-trial or a freemium option of your product, thinking it’ll give a customer the ability to use your product without ever talking to a salesperson. You’re right, but this also means that SaaS salespeople are almost always selling to accounts and users who have actually used the product.

Don’t waste that trial time by letting potential customers play around on their own. By measuring product engagement in this phase, tracking whether or not they are “activated”, and learning about which users on an account are getting the most value, you can ensure you’ll close the deal and go after the right leads.

For example, if you have 100 prospects in your system, a small sales team might be able to reliably focus on building relationships with 20 of them. Using engagement data to determine which of those 20 prospects that they should focus on not only helps to improve their success rates, but it sets the stage for improving retention and expansion revenue down the line.
Product engagement is an essential component in the initial sales phase. In fact, the Product Qualified Lead (PQL) has become a key part of the sales process for many SaaS businesses. Measuring and qualifying potential sales based on how they are engaging with the product during a trial is more effective than any other form of qualification and helps to drive more efficiency in a sales process.

Product Engagement in the Retention Phase

This is where product engagement shines naturally. Every SaaS business has a small percentage of accounts that continue to pay even though they aren’t using the product. Sounds great? Not so much. It’s impossible to build a strong SaaS business on these customers. If they’re not engaged, they’re going to churn.

As a future SaaS superstar, you need to keep a sharp eye on overall engagement levels for your paid accounts while your customer success team needs to know:

  • The on-boarding progress of newly converted accounts;
  • The engagement and adoption rates of all key accounts;
  • Exactly which features are being adopted by each account and user;
  • Which paid accounts are showing drops in engagement;
  • Which users are showing drops in engagement

All of this data needs to be at the fingertips of your CS team if you are going to execute well during this retention phase. There can be no fishing, no guessing — no question.

Product Engagement in the Expansion Phase

This one’s elementary — unengaged accounts don’t expand. It doesn’t matter how many employees an account has, how many departments, how many different offices — if they aren’t using the product, then they aren’t going to expand.

Product engagement is a leading indicator of expansion revenue opportunities. Just as product engagement serves as an essential qualifier for new trial signups (i.e. PQLs), it also determines whether or not an account is prime for expansion.

Measuring product engagement levels of existing account users is a great way to identify expansion opportunities. User not using the product effectively? Don’t waste your time trying to convince them to expand. User loving your star feature? Give them a call and upsell.

In short, strong execution in the expansion phase is dependent on smart visibility to the engagement of your existing paid accounts.

Build a Winning SaaS Revenue Operation

In order to build a great SaaS revenue operation, there are three truths teams must accept:

  • SaaS revenue goes well beyond an initial sale. There are three essential phases of revenue and a SaaS business must execute well in all three phases in order to become great;
  • Building a management structure that provides continuity and strategic consistency across these three phases of revenue will ensure the best shot at success;
  • Product engagement is the key to winning the game of SaaS. Great SaaS operations understand this and find a way to bring this data to their team in the most actionable way possible. Great SaaS revenue models seamlessly integrate product engagement insights into every part of their customer facing operations.

Do you want to build a winning SaaS revenue operation and become a great SaaS organization? Try Sherlock today.