Annual contribution per customer, revenue less cost of goods less cost to serve, times expected remaining life from the company's own churn by segment and tenure, discounted at a stated rate and reported as a range. Not revenue, not one churn rate, not an infinite horizon.
Two customers at similar revenue can differ fivefold in lifetime value because of what they cost to serve.
Expected life is an expectation over a distribution. A point estimate is read as a promise.
Annual contribution per customer, meaning revenue less cost of goods less cost to serve, multiplied by expected remaining life from the company's own retention by tenure, and discounted.
A customer contributes $14,000 a year. Customers of its tenure and segment stay a further six years on average. Discounted at 8 percent, lifetime value is about $65,000.
Built on revenue and an assumed lifetime. It produces a large, flattering number that nobody can check.