Customer lifetime value
Five or ten years of profit from the account, after the cost to serve, discounted into today's money and risk-adjusted. The smaller number is the one a board believes.
Customer lifetime value is what a key account is worth over the length of the relationship: five or ten years of profit, after the cost to serve, discounted into today’s money. The book insists on building it risk-adjusted, with retention probabilities attached, because the smaller, discounted number is the one a board believes, and the larger one gets the whole case dismissed.
The sensitivity is the lesson. On the worked example, a £1.53m base moves between £0.77m and £1.90m depending on the retention rate, and barely moves at all when the time horizon changes. Retention dominates everything. Which means that the value ledger, the proof that the promise was kept, is not a service function’s paperwork. It is the single largest lever on what the account is worth.
Set out in full in: Creating Customer Value Propositions with AI (Kogan Page, 2027), chapter 8.
Related terms
A market segment of one
Treat the key account as a market: the wallet is the market size, your current sales are your share, and the gap is the prize.
Share of wallet
Everything a customer spends, could spend or should spend on your category, in four parts: with you, with your competitors, themselves, and what they should do but do not.
Value capture
Proving the value landed, in both directions: in the customer's KPIs and in your own board's numbers.
See the method run on one real account in three days: the One Page Proposition.