Contemporary writers on marketing are emphasizing on the need of a methodology to compute customer equity, i.e., the return which the company gets from investing its resources on a customer. The emphasis is shifting from managing brand equity to managing customer equity. If this is calculated successfully, it will help the company in finding out its `profitable customers' for efficient resources allocation. This article introduces the concept of customer equity and its basic tenets. The article also talks about the drivers of customer equity and the major challenges of customer equity management. It ends with a note on the options available for the firm to enhance customer equity.

“The customer is a financial asset that companies and c should measure, manage and maximize just like any other asset.”, is the rationale behind Customer Equity Management (CEM). Customer Equity Management helps to strike a balance between cost management and revenue growth, keeping in mind the Return on Marketing Investment
(ROMI). The customer centric view point of marketing activities is not new. In the scholarly works of Sevin (1965) and Kotler (1967), we find the roots of customer equity concept. In fact, Sevin (1965) came up with a method for calculating profitability of an individual customer. However, late 1990s and early 2000s have seen a lot of scholarly work in this area (Pepper and Rogers 1993, Blattberg and Deighton 1996, Rust, Zeithmal and Lemon 2000, Hansotia 2004). One of the reasons for the popularity of the concept is the support provided by information technology. Information Technology has contributed a lot in the development of consumer data bases and formulation of metrics to calculate
customer equity.

So, CEM can be defined as “a dynamic, integrative marketing system that uses financial valuation techniques and data about customer to optimize the acquisition of, retention of, and selling of additional products to firm customerss and that maximizes the value to the company of the customer relationship throughout its life cycle”.

Customer Equity Management, resources, profitable customers, resources allocation, financial asset, Marketing Investment, customer centric view, information technology, marketing activities, integrative marketing system, financial valuation techniques.