We are firmly in the second phase of the Product-Led movement.
The first phase was defined by the emergence of this inevitable, yet bold new go-to-market strategy - a new business model that we now refer to as Product-Led Growth.
It dared to ask, can you build product in such a way that a user doesn't depend on human intervention to use it? To get value from it? To actually start paying for it? And could you do this at a scale that would enable you to build a big business?
Obviously, the answer to those questions has proven to be yes (check out Freshwork's S1 for the most recent evidence - or the Mailchimp acquisition). These early experiments ended up changing the industry forever.
More and more established software businesses witnessed its power. The ones that weren't wiped out by it realized they needed to adapt to it. They realized that dependence on a sales-led model limited the scope of who they could reach. It limited the potential size of their software business. Many traditional sales-led businesses started to introduce trials and even freemium offerings.
Then something strange happened. Many of the early Product-Led businesses started to have similar realizations. They realized that going exclusively self-serve was limiting the potential size and scope of their businesses in much the same way.
This brings us to this next phase of the Product-Led movement. One that requires software companies to successfully operate both a product-led, self-serve motion along with a more traditional sales approach. Call it a hybrid if you must. I just think it's going to be the new normal for how modern software businesses operate.
There are many things you must nail in order to operate efficiently in this model - one we will address in this post is that of lead qualification. In this post, we will break down the new requirements for qualifying in this new model as well as present a framework that you can use as a basis for your process. After reading this, we hope you better understand - how to build and operationalize a Product-Led Qualification process that successfully blends a product-led motion with an assisted sales motion.
The traditional lead qualification process in sales-led businesses have always worked (more or less) like this:
Of course, this last point represents the biggest difference between the traditional sales-led model and the product-led model.
And it's a big difference. And one that requires a new vector of qualification.
We won't spend a lot of time diving into the definition of PQLs in this post - there a plenty of good references for that. Here are a few:
In short, a Product Qualified Lead is a lead that has shown interest in paying for your software based on their use of the software. If you have a free trial or freemium option, the best indication that someone will buy is how engaged they are with the product during this free/trial period.
Conceptually, PQLs are not difficult to grasp. In many ways, it's just common sense. The challenge comes when you try to fit this new qualification criterion in the context of a traditional qualification model. The most common question I hear:
I get the idea of Product Qualified Leads, but do they replace MQLs or do they replace SQLs?
The answer, IMO, is neither. They represent another layer of qualification to the process.
Another layer?!? That sounds more complicated!
Well...it is. Operationally speaking, this new motion is not more simple. But don't freak out - it's completely manageable. Let's go forward and see how product qualification fits into a holistic qualification journey.
In a product-led motion, MQLs are driven, not into a qualification process for sales, but toward a trial of the product.
See that? No interaction with your team and you have a new user, a new account. The magic of Product-Led!
From there, the user should be directed and supported toward become "Activated" with the product. At a certain level of Activation, this lead will become "Product Qualified".
And here is where the fun starts.
So is this where my sales team starts hammering them with irrelevant emails requesting a meeting, right?
Not so fast. A Product Qualified Lead is NOT a Sales Qualified Lead.
OMG. Come on. When can I start that 21-email automated sequence from my reps!?!
To answer this, we need to get back to the basics of sales qualification.
As mentioned earlier, for as long as lead qualification has existed, it has been broken down against two main axes: Company Fit and Interest (or Intent). The traditional criteria for these looked like this:
Company "Fit". There are actually two questions we are looking to answer when doing this Fit assessment.
Interest. Traditionally, we measured interest based on a buyer's interaction with our marketing assets. And, as you can imagine, this is the biggest difference between the traditional and the product-led qualification measure.
Fit vs Interest in a product-led business looks like this:
In this world, the most important factor in determining a prospect's interest in buying your product is their actual usage of your product - thus the basis for the Product Qualified Lead (PQL). But as the above image shows Interest alone does not define a Sales Qualified Lead. You need to include the "Fit" piece as well. This is what it looks like in the trial qualification process:
If a lead meets both criteria, they move to SQL status. And that can kick off a sales process that can lead to new, bigger, and successful customers.
At the same time, those trials that don't meet the Fit criteria can move forward toward a self-serve conversion.
Viola! A simple, high-level, modern Product-Led journey that combines a sales-assisted motion.
But there is more work to be done when it comes to actually operationalizing this qualification model. And for that, I have used, what I refer to as, the Product-Led Qualification Matrix.
If you love a good 2x2 matrix, then you are going to love this! (even if you don't, I think you'll like this one)
For this matrix, we plot Customer Fit on one axis against Product Engagement on the other.
Per the last section, SQLs live in the top-right of the matrix. High engagement, high customer fit. Giddy-up!
That's an easy one. As is the bottom-left quadrant - low engagement, low fit.
I say ignore here, but I don't mean fully ignore. You should have product and message automation that helps to drive these prospects into higher engagement, but operationally, your team should not be spending time with these trials.
And this leads us to the more difficult quadrants. Top-left (high engagement, but low fit) and the bottom-right (high fit, but low engagement).
The bottom-right quadrant - I call these the Heartbreakers.
We all know these. A massive company signs up for a trial, your Slack channels light up with emojis and GIFs, champaign corks fly, your CEO immediately slaps the logo into her board slides - you pretty much have the money spent!
But the reality is that many times, this signup is coming from someone at a company without much real interest. And how do you know he or she isn't interested? Because they have little to no engagement with the product since signing up - that's how!
And despite the 27 emails, calls, LinkedIn connection requests from your sales team...these rarely turn into real deals. More often than not, these just break your heart.
On the flip side, the top-left quadrant - I call Opportunities.
These are those accounts who don't meet the fit criteriato become Sales Qualified but are using the hell out of the product. I call these Opportunities for a couple of reasons. It might be a chance to rethink your "Fit" criteria. Here are a group of users who clearly understand, want, and are getting value from your product. Maybe you missed something - some attribute - that they have in common that could help you broaden your Fit definition. Secondly, if you are a product-led business - and want the scale that the model represents - then the majority of your monthly conversions (like 70%+) must come from this quadrant. These are your best opportunities for self-serve conversion.
This is where the practice of building a Product-Led Operation is evolving very quickly.
And you should do both of those.
But there is also another option for these quadrants - build a team to help push trials toward Activation and, ultimately, conversion. There are many options for what this team can be called, but for the sake of this post, we'll call it an Activation team.
The goal of this post is not to go into detail of an Activation team - we'll do that in a later post (or you can read this awesome post from the great Rob Falcone) - but it's important to introduce the concept here. An Activation team is a team that is charged with supporting your trial accounts - helping them overcome product hurdles, nudge them toward Activation (value), and then helping them more easily convert to a paid account. This team can also help qualify any prospects for sales if/when you perhaps missed qualified with your automated Fit data (I know, I know...that never happens) or when they just present a bigger opportunity than originally thought.
The Activation team is a low-touch team of product experts that help grease the wheels of your product-led engine. It will help ensure that you are taking full advantage of those top-left Opportunities (those have to convert at a very high rate!), help turn a few more of those bottom-right Heartbreakers into legit potential deals, and see offering a light human touch the whole funnel will rise to a new level.
If you remember the Qualification journey from earlier:
This section is where your sales team will operate:
And this is where your Activation team will operate:
Again, this post is not meant to provide a full debate or discussion about the nature of this specific team, but it is very important to introduce it as an important potential element of your product-led operation (and one that becomes very obvious when you think more holistically about your qualification process).
This is a framework I have used as the basis for building a product-led sales operation. I have found it simple enough for communicating up to an executive team, while at the same time logical enough for the operating teams that need to act against leads. The goal is to combine your product-led and sales motions into one seamless operation that not only makes sense for your business but - more importantly - is consistent with the way your prospects want to buy.
At the very least, I hope this post and Product-Led Qualification Matrix helps you to think through this modern challenge. At most, I hope it can provide a basis for your operation going forward.
The product-led model has changed the way the SaaS world operates. Unlike previous sales-led models, it relies on making a great product and letting people try all (or part) of it before paying. But when most of your conversions happen without a Sales touch, how do you forecast monthly revenue?