Economic value estimation (EVE) works out what your product is worth to a specific customer compared with that customer's next best alternative. You start from what the alternative costs, add the value your product creates that the alternative does not, and subtract any costs your product adds. The result is the most a rational buyer should pay.
Many companies set price without it. When Kyle Poyar's 2026 State of B2B Monetization survey asked what drove AI pricing decisions, 54% of respondents named internal costs and margins and 36% named competitor pricing. Only 30% named the productivity gains their customers actually get. In my experience across more than a hundred pricing engagements, the companies that can say what they are worth to a given customer, and show how they know, are the ones that hold price.
What does economic value mean in B2B pricing?
Economic value is an amount of money, specific to one customer or segment, and always relative to an alternative. Two principles follow from that:
Value is specific. The same product is worth more to a company with a large problem than to one with a small problem. A single value number for every customer is an average, and an average is rarely right for the deal in front of you.
Value is relative. A buyer never compares your product with nothing. They compare it with what they would do instead: a competitor, an internal build, a spreadsheet, or doing nothing at all. Your value is the difference you make against that alternative.
Economic value is not the same as willingness to pay. Economic value is what the product is worth to the customer. Willingness to pay is what the customer believes it is worth and will actually pay. Pricing decisions are made in the gap between the two.
How do you estimate economic value step by step?
Estimating economic value takes four steps, and each one is a question you can answer with the customer.
Name the next best alternative. What would this customer do if your product did not exist? Write it down, including "do nothing" if that is the honest answer.
Price the alternative. What would the customer pay for that alternative over the same period? This is the baseline. If the alternative is doing nothing, its price is zero, but its cost may not be.
Add what you do better. Quantify each way your product creates more value than the alternative: revenue it adds, costs it removes, capital it frees up, risk it reduces, options it opens. Each one is a value driver, with an equation behind it.
Subtract what you cost the customer that the alternative does not. Switching costs, training, integration work and any value the alternative delivers that you do not.
Economic value is the alternative's price, plus what you add, minus what you cost. If the net of steps 3 and 4 is negative, the customer is better off with the alternative, and no amount of selling will change that.
What are the six types of value driver?
The Value Project, an open standard for machine-readable value and pricing models initiated by valueIQ, which anyone can implement, groups value drivers into six categories.
Category | What it means for the customer | Example |
|---|---|---|
Revenue enhancement | More revenue or more margin on the revenue they have | Higher conversion, faster time to revenue, larger deals |
Cost reduction | Lower operating cost | Hours saved, fewer tools, less rework |
Operating capital reduction | Less cash tied up in running the business | Lower inventory, faster collection |
Capital investment reduction or deferral | Less spent on, or later spending on, capital assets | A data centre build avoided or pushed out |
Risk reduction | A lower chance or cost of something going wrong | Fewer compliance failures, less downtime |
Option expansion | New choices the customer did not have before | Entering a new market, launching a product faster |
A product rarely creates value in all six. Revenue and cost drivers are usually the easiest to quantify. Risk and option drivers are usually the hardest to defend, so they need the most careful sourcing.
What does an economic value estimate look like?
Here is an illustrative example. The figures are invented to show the arithmetic, and none is a benchmark.
A mid-sized company uses a tool that costs $60,000 a year. A new product would replace it.
Step | Figure | How it was reached |
|---|---|---|
Price of the next best alternative | $60,000 | The incumbent tool's annual price |
Cost reduction | + $90,000 | Hours saved each year, at the customer's loaded cost |
Risk reduction | + $30,000 | Fewer compliance errors, at the customer's average cost per error |
Switching and training cost | − $20,000 | Migration and training, spread over the first year |
Economic value | $160,000 | The most a rational buyer should pay this year |
The arithmetic is ours: $60,000 + $90,000 + $30,000 − $20,000 = $160,000.
In a real estimate, the figures in the last column are where the argument happens. A buyer will not accept "hours saved" without the number of people, the hours each and the loaded cost, and they will want to confirm the inputs that describe their own business.
How does economic value turn into a price?
Economic value sets the ceiling on price. The alternative's price is a sensible floor: price below it and you give away value the customer would have paid for anyway. Price sits somewhere between the two, and where it sits is a choice.
Two measures make that choice visible.
Value surplus is economic value minus price: what the customer keeps. In the example, a price of $100,000 leaves the customer $60,000 better off than the alternative. A buyer needs that surplus to say yes.
Value capture is price as a share of economic value. At $100,000 against $160,000, value capture is 62.5%.
Kyle Poyar estimates, from his own experience rather than a study, that subscription SaaS products capture about 10-15% of the estimated economic value they claim to deliver.
A price set this way can be defended. When a buyer says a competitor is cheaper, the answer is the comparison of what each option is worth, not a discount. I made that argument at length in Cheaper Isn't an Argument.
What are the most common mistakes in estimating economic value?
Five mistakes account for most of the estimates that fall apart in a finance review.
Comparing with nothing. Leaving out the next best alternative inflates the value and invites the buyer to do the comparison for you.
Valuing revenue at the top line. New revenue is worth its margin, not its full amount, to the customer.
Counting the same gain twice. Several drivers that act through the same outcome, such as faster onboarding and higher productivity, can stack on one base and overstate the total.
Leaving out what you cost. Switching, training and integration are real, and the buyer will add them back if you do not.
Presenting a point instead of a range. Every assumption has uncertainty. A range, with the assumptions that move it, is more believable than a single precise number.
How does valueIQ help estimate economic value?
valueIQ, the value intelligence software we build, generates a value model for each product: the value drivers, an equation for each one, and a cited benchmark behind each assumption. On a deal, the seller replaces defaults with the customer's own figures, and the customer can confirm the inputs that describe their business.
valueIQ also builds value models for the competitors in a deal and compares them driver by driver, so the next best alternative is modelled rather than assumed. Every business case calculates value capture and the value surplus the customer keeps at the quoted price, after adjusting each driver for the risk that it won't be realized, so the numbers rest on expected value rather than an unadjusted total. Our guide to value selling software shows where this sits next to your CRM and quoting tools.
Frequently asked questions
What is economic value estimation (EVE)?
Economic value estimation (EVE) is a method for working out what a product is worth in money to a specific customer, compared with the customer's next best alternative. It takes the price of that alternative, adds the extra value the product creates and subtracts any extra costs it adds. The result is the most a rational buyer should pay, and so the ceiling on price.
What is the next best alternative?
The next best alternative is what a customer would do if your product did not exist: buy a competitor, build something internally, keep a manual process, or do nothing. Economic value is always measured against it. Choosing the wrong alternative is the most common reason an economic value estimate overstates or understates what a product is worth.
How is economic value different from willingness to pay?
Economic value is what a product is objectively worth to a customer in money. Willingness to pay is what the customer believes it is worth and will actually pay, which is often lower because the buyer cannot see all the value. Pricing work closes that gap by making the value visible and credible.
How many value drivers should an estimate include?
Include every driver that is material and that you can source, and check that no two drivers count the same gain. More drivers do not make an estimate more convincing. Drivers that overlap or rest on weak evidence make it easier for finance to discount the whole case.
How does value selling use economic value?
Value selling puts the economic value estimate in front of the buyer, built from the buyer's own figures and measured against their real alternative. It turns the price conversation into a conversation about what the customer gains and keeps, which is how a seller holds price without conceding it.
Know the number before the buyer asks
Before your next pricing review, pick one customer segment and write down three things: its next best alternative, the value drivers that separate you from it, and what each driver is worth. If you cannot fill in that table, that is the work to do before anyone touches the price.
Give us 25 minutes and we'll show you a value model for your product: the value drivers, the equation behind each one, and the benchmark behind every assumption.
Find out where your own company stands. Take the free 3-minute self-assessment on the valueIQ Value Intelligence Maturity Model™.
Sources
Kyle Poyar, The state of B2B monetization in 2026, Growth Unhinged, 13 May 2026.
Kyle Poyar, From selling access to selling work (and what it means for you), Growth Unhinged, 30 October 2024.
Steven Forth, Cheaper Isn't an Argument, valueIQ, 14 May 2026.
The Value Project, thevalueproject.org.
About the author. Steven Forth is a co-founder of valueIQ and has spent more than fifteen years advising over a hundred B2B companies on pricing and value. He is co-author, with Michael Mansard and Wolfgang Ulaga, of Pricing for the Agent Economy, now available for pre-order.
About valueIQ. valueIQ is value intelligence software that helps B2B software and AI companies define, quantify, price, communicate and prove the value they bring to their customers. Revenue teams use it for value selling, value management and pricing: it generates value models, executive-ready business cases, competitor value models and pricing analysis. valueIQ is the creator of the valueIQ Value Intelligence Maturity Model™. The Value Project (thevalueproject.org), an open standard for machine-readable value and pricing models, was initiated by valueIQ. valueiq.ai
