A target value capture ratio, sometimes called a target value ratio, is the share of the value you create for a customer that you plan to capture in price. If you don't set one, each deal sets it for you, at whatever point the negotiation happened to stop.
I first wrote about this ratio five years ago. The idea has held up, but three things have changed. AI products cost more to deliver, which leaves less room for error. Pricing is moving away from seats: in Kyle Poyar's 2026 survey, hybrid pricing is now the most common model, at 37%, up from 25% a year earlier, and the model you choose changes how much value a price can capture. And value can now be modelled deal by deal, so the ratio no longer has to be estimated once a year and filed away.
What is a value capture ratio?
A value capture ratio compares two numbers that should be kept separate: what your product is worth to a customer, and what the customer pays for it. Divide the price by the economic value and you get the share of the value you are charging for. What the customer keeps is the value surplus.
Say a product is worth $400,000 a year to a customer, after adjusting for risk, and the price is $80,000. The value capture ratio is 20%, and the customer keeps $320,000 of value surplus.
The ratio comes in two versions, and they answer different questions.
Share of total value. Price divided by the full economic value. It tells you how much the customer keeps. This is the version valueIQ reports as value capture.
Share of your advantage. The part of your price above the alternative's, divided by how much more you are worth than the alternative, net of any costs you add. It tells you how much of your edge over a competitor you are charging for.
The two can look very different for the same price. Suppose a competitor costs $50,000, and your product is worth $150,000 more than the competitor to this customer. Charge for 30% of that advantage and your price is $50,000 + $45,000 = $95,000. The customer's total economic value is $50,000 + $150,000 = $200,000, so the same $95,000 is 47.5% of total value. Always say which version you mean.
What should your target value capture ratio be?
It depends on your pricing strategy, the maturity of the market and the competition. The ranges below are the starting points I have used for many years. They are rules of thumb from my own work, not benchmarks, and they measure the share of your advantage, not the share of total value.
Pricing strategy | Share of your advantage claimed in price |
|---|---|
Premium | Around 30%. As high as 50% is possible, but aggressive |
Market following | Price set within about 10% either side of the alternative's price |
Penetration | Can be negative: price set below the alternative's |
The ratio matters most when you are pursuing a premium strategy. Within a premium strategy, the target moves as the market matures.
Market stage | Share of your advantage claimed in price |
|---|---|
Early adopters | 10% to 20%, lower to reflect the buyer's risk |
Early mainstream | 20% to 30% |
High growth | 10% to 20%, lower because market share matters most |
Mature | 30% to 50% |
End of life | Depends on the goal: migrating customers, harvesting profit or supporting a legacy base |
For the share of total value, 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, and that products with success-based billing capture closer to 20-30%.
Why does the target matter more for AI products?
Price has to sit between what it costs you to deliver and what the product is worth to the customer. For AI products that window is narrower. In Kyle Poyar's 2026 State of B2B Monetization survey, the median target gross margin on AI products was about 50%, against 70-80% or more for classic SaaS.
When the cost floor rises and the value cap stays where the customer puts it, a target set by habit can leave too little room for margin. You cannot see whether there is room without knowing the value.
The pricing model changes the picture too. Poyar puts the higher figure for success-based billing down to a more direct link between the product and the result. An outcome-based model can support a higher value capture ratio than a flat subscription for the same product, provided the outcome can be measured and attributed.
How does the value capture ratio change over the life of a contract?
There are two ways to look at it over time: the snapshot and the film. The snapshot is the ratio at the moment you set a price, based on the value you expect to deliver. It is a hypothesis. The film is the ratio over the life of the customer, based on the value you actually deliver.
In this illustrative example, with figures invented to show the arithmetic, a customer pays $80,000 a year and value builds as adoption grows.
Year | Value delivered | Price | Value capture that year |
|---|---|---|---|
Year 1 | $200,000 | $80,000 | 40% |
Year 2 | $400,000 | $80,000 | 20% |
Year 3 | $450,000 | $80,000 | 17.8% |
Three years | $1,050,000 | $240,000 | 22.9% |
The arithmetic is ours: $240,000 ÷ $1,050,000 = 22.9%.
The ratio is worst in the first year, exactly when the customer is deciding whether the purchase was worth it. Work out the ratio for each period as well as cumulatively, and ask:
Do I deliver value upfront, or does it take time to build?
Does the growth in value slow down after a while, and what would change that?
How does the ratio move from year to year, and where are the renewals in that curve?
A rule of thumb I have used for years is to deliver at least three times the value you charge for over the life of the customer, a lifetime value capture ratio of a third or less. Customers care less about the value you delivered last year than about the value you deliver now and will deliver next.
How do you set and track a target value capture ratio?
Model the value for each segment, against the real alternative. A ratio is only as good as the value estimate under it.
Choose a target for each segment and write it down. Base it on your pricing strategy, the market stage and the competition, and say which version of the ratio you are using.
Check every deal against the target. If one customer's ratio is much higher or lower than another's, ask whether that was intentional or an accident. When a buyer says a competitor is cheaper, the comparison of what each option is worth is a better answer than a discount, as I argued in Cheaper Isn't an Argument.
Track the delivered ratio through the contract, and bring it to the renewal. The renewal conversation should start from the value the customer actually received.
How does valueIQ track the value capture ratio?
valueIQ, the value intelligence software we build, reports the share of total value as value capture on every business case, along with the value surplus the customer keeps at the quoted price. Each value driver is adjusted for attribution and for the risk that it won't be realized, so the snapshot rests on expected value rather than an unadjusted total.
The film uses the same model. After the deal closes, the business case stays with the account. Customer success teams record measured results as the contract runs, and valueIQ recalculates realized value against the original business case using the same equations, so the value you sold on and the value you delivered can be compared driver by driver. Connecting customers' own data sources so results flow in automatically is coming soon.
Frequently asked questions
What is a value capture ratio?
A value capture ratio is the share of the economic value a product creates for a customer that the seller captures in price. A target value capture ratio, sometimes called a target value ratio, is the share the seller plans to capture. It can be measured against the total value or against the value above the customer's next best alternative. Setting it on purpose makes price a strategic choice rather than the outcome of each negotiation.
What is a good value capture percentage for SaaS?
There is no universal figure. Kyle Poyar estimates, from his own experience, that subscription SaaS products capture about 10-15% of the economic value they claim to deliver, and success-based billing closer to 20-30%. The right target depends on pricing strategy, market maturity and the competition.
How is a value capture ratio different from value surplus?
The value capture ratio is a share: price divided by economic value. The value surplus is an amount: economic value minus price, which is what the customer keeps. A $80,000 price against $400,000 of value is a 20% value capture ratio and a $320,000 value surplus.
Should the value capture ratio be the same for every customer?
No. Customers in different segments get different value from the same product, so the same price produces different ratios. Set a target for each segment, and treat a deal far from its target as a question to answer, not a number to ignore.
How does value selling use the value capture ratio?
Value selling shows the buyer what the product is worth to them, so the price is judged against the value surplus they keep. Knowing the target value capture ratio tells the seller how much room there is before a discount starts giving away value the customer would have paid for.
Know your number before the next pricing review
Pick one segment and one recent deal. Write down the economic value, the price and the ratio between them, then decide whether that ratio was a choice. If you cannot fill in the numbers, that is the work to do first.
Give us 25 minutes and we'll show you a value model for your product, and how much of that value your price is capturing.
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.
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
