Strategic value is the total profit a firm could realize from a customer if it developed a strategy or took some marketing initiative with that particular customer. Strategic value represents the customer's potential business, much of which may never be realized. To understand the difference between actual and strategic value, imagine that you run a retail bank and that you have a banking customer who has a checking account, savings account and car loan with you. This customer provides a certain regular profit to your bank each month, generated by transaction fees and the investment spread between what your borrowing and lending rates are and the rates the customer pays you. You have modeled your customers and expect this one to remain with your bank for a number of years, thereby giving you a continuing income stream. The net present value of this continuing income stream represents that customer's LTV--the lifetime value loss you would suffer if that customer defected to another bank.

Suppose that in addition to the accounts at your bank, this customer also has a home mortgage at a competitive bank. For your competitor, the profit on the home loan represents the customer's actual value. However, to you, it is only an unrealized potential. The expected profit from that home loan represents one aspect of this customer's strategic value to you.

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