Value Capture
Value Capture
The portion of the Value created that the business ultimately captures, principally through Price and the rest of the offer economics.
Value Creation determines how large the spread is; Value Capture determines how that spread is divided between customer and business. Capturing a larger share is not automatically more profitable: volume, conversion, retention and referrals all respond to how much Value is left with the customer, and the profit-maximizing Price is ultimately set by demand.
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Related concepts
Value Creation
The process of producing Value for the customer at a Cost that creates a favorable Value Margin.
Value Margin
The spread between Value and Cost: Value − Cost.
Price
The monetary consideration the customer is asked to pay, and the terms on which they pay it.
Value
The value created and realized for this customer by the offer: the Promise discounted by Credibility and diminished by Toll.
Market of One
A Market of One exists when an offer is sufficiently distinct in the customer's decision that no readily substitutable alternative provides the same relevant configuration of Value.
How this concept behaves
Qualitative relationships from the framework registry. None of these are formulas.
Value Creation · distinct from · Value Capture
Value Creation produces the spread from which capture becomes possible; Value Capture decides how that spread is divided between customer and business. Creating a large Value Margin does not by itself determine the division.
Value Margin · distinct from · Value Capture
Value Margin is the spread between Value and Cost. Value Capture is the portion of that Value the business keeps, principally through Price. Creating the spread and choosing the capture are separate decisions.
Price · captured through · Value Capture
Price is the principal mechanism of Value Capture: it is what the customer pays, and therefore how the business retains a portion of the Value created.
Value Capture · captured through · Value Margin, Price
Value Capture is the share of the created economic value the business retains, expressed principally through Price. It follows Value Creation and is distinct from the margin itself.
Market of One · unlocks pricing basis · Value Capture
Value is necessary but not sufficient for value-based pricing. Without Value there is nothing to capture; without a Market of One, readily substitutable alternatives constrain how much of that Value can be captured.
Where this concept is treated at length
Market of One: The Gate to Value-Based Pricing
A Market of One exists when no readily substitutable alternative provides the same relevant configuration of Value. How reducing substitutability lets Value, rather than category Price, become the basis of the customer's choice and of pricing.
Exclusivity
Shutting out the comparison by limiting the availability or practical accessibility of substitutable alternatives.
What Makes an Offer Valuable?
Value is customer-side: a Promise, discounted by Credibility and diminished by Toll, including why choosing which customer receives the Promise is itself a way to increase its value.
Value Creation: Why Adding Value Is Not Enough
Value Creation has two halves: first imagine Value for the customer unconstrained by Cost, then engineer and select against Cost using Value Margin, where the design test is whether a change increases Value by more than it increases Cost.
Value Margin: Create More Value Than It Costs to Deliver
Value Margin is the spread between Value and Cost. A canonical treatment of why adding value is not enough, how Value Margin governs the engineering phase of Value Creation, and the levers that widen the spread.
Price
Price is the final stage in Offer Physics, set only after Market of One, Value, and Value Margin are established. A canonical treatment of why price trails value, the floor and ceiling that bound it, and the most common pricing failure modes.
Where to use this
Value Margin
Interactive treatment of Value, Cost, Value Margin and Value Capture.