Convert more customers with Product Qualified Leads

Feb 13, 2013

Table of contents:

1. What is a Product Qualified Lead
2. How does it work?
3. How Buffer uses the Product Qualified Lead strategy
4. How to implement the Product Qualified Lead strategy
5. Conclusion

Last week I talked about pre-qualifying your traffic for better conversion rates. By introducing the benefits of your product to your target audience before they reach your website, you can create a more compelling and higher converting landing page.

An interesting alternative to pre-qualifying your traffic is the Product Qualified Lead. This is where your user has been engaging with the product over a predetermined period of time or has made the required activations in order to be deemed as “qualified”.

A number of online products are using this technique as an extension of the Freemium model as a series of stepping stones to convert a higher number of users to the paid plans of the service.

In this post I will talk about the Product Qualified Lead, what it is, what are the benefits to this strategy and how you can implement it too.

What is a Product Qualified Lead

A Product Qualified Lead is where a user of a product has hit the required milestones to be deemed as “qualified”. The product usually starts out as a Freemium model, and only when the user is determined to be qualified are the Premium plans introduced.

Each type of a Product has a tipping point of engagement. For example, it was found that Facebook only became sticky to new users once they had a minimum number of friends, a Twitter user needed to be following a minimum number of people and DropBox users had to be storing a minimum number of files.

How does it work?

Once a user of the service has met this generalised minimum level of engagement, it becomes a better time to introduce premium or active user options.

When a user begins using a product, the product has to prove itself as being able to effectively complete the job the user requires of it. Even if the product is free to begin with, it still requires an investment of time.

When you first start using DropBox, you might not fully appreciate why you would want to start paying for more space. After you have been using the service for a couple of weeks and you are reaching the limits of the free plan, you are likely going to be already sold on the benefits of the premium plan because you are actively using the product and you are invested in it.

Evernote is a freemium cross platform service for storing documents, notes and pictures. From studying their user’s cohort analysis, they found that once a user had been using the product for a number of months, they were far more likely to upgrade to a premium plan and to stay with the service over the long term.

At the beginning of a user-product relationship, it is unlikely that the user will sign up to a premium plan straight away unless they have a deep understanding or prior experience with the product. Freemium reduces to the barrier of entry to a new product to essentially zero. With cohort analysis, user engagement tracking and a deep understanding of your product, you can find a better opportunity to upgrade the active users to a premium plan.

How Buffer uses the Product Qualified Lead strategy

Buffer take an interesting approach to the Product Qualified Lead strategy in that they don’t mention the premium plans of the service at all. I’m not even sure if you can sign up straight to a premium plan without activating it through active engagement through the free plan.

I’m not sure how the benefits of this approach play out, but it’s an interesting line to take. Whilst services like Dropbox and Evernote are clearly taking advantage of the same tactic, both services allow you to go straight to a premium plan. I’m also not sure how the unwitting users who think that Buffer is an all you can eat free service take it when they realise they will eventually hit an upper boundary of the free plan.

How to implement the Product Qualified Lead strategy

The key to implementing the Product Qualified Lead strategy is an intimate knowledge of your product and your customer. You need to completely understand your customer’s pain points and which parts of your service you can set a restriction on that will be surpassed through active usage.

There’s no point in restricting an unwanted feature or focusing on a metric that does not show real engagement because in the long run it won’t work. You need to understand how your users engage with your product and how you can make them want to give you their money to get more access or premium features.

For this to work, I would focus on a single feature that you are going to make available on the premium plan. When you start listing off premium features it can be overwhelming or the focus on the most important feature gets lost in translation. By focusing on a single feature and a single metric to analyse the usage of that feature, you will simplfy your product and make the decision easier and less complicated for your user.

Conclusion

The Product Qualified Lead is an interesting strategy to take for online products. By offering your product as freemium, you will capture a larger number of users who start using your product because it is free. Once those users become actively engaged with your product, you are more likely to convert them to paying users because they already understand the value your product gives them.

Of course, the Product Qualified Lead is certainly not a new strategy. Companies have been using this tactic to increase the number of converting users for years. But the wide spread reach and the maturity of the Internet and the deep analytics you can draw make this an attractive, yet often over-looked strategy.