A Comprehensive Framework: Capability Maturity Model for CRM

Service Quality

Operational Approach to CRM

Creating Economic Value

How Buying Behaviour is Influenced

CRM Process Capability Framework ("CRM-CMM")

Moving Beyond Ad-hoc Approach

Repeatable capability

Organization-wide standards

Managing by Metrics

Continuous Improvement

Successful Practices

Customer Equity metrics

Appraisal Process

Sustainable Competitive Advantage

The following contains excerpts from Building the CRM Foundation: A Process Capability Framework for Customer Relationship Management, used under license from author .

Copyright © 2007,

CRM is the operational component of managing shareholder value [by maximizing short and long term returns from the customer base]. CRM practice involves understanding the customer, understanding the organization, and continuously improving service quality. Done well, the firm acquires, retains, and nurtures the right customers based on an understanding of their needs and their long-term value to the firm. Increased value of the customer base reflects in increased shareholder value.

Most managers would not undertake manufacturing or accounting without formal processes and systems because they recognize that leads to quality failures, higher costs, and increased risk. Yet too many growing organizations have an ad hoc approach to the front office of the business. Instead, a short-term focus on financial results that actually destroys economic value pervades many organizations. Much has been written about new customer relationship marketing, e-business and customer loyalty strategies. It is far more difficult to find specifics on how to determine organizational CRM competencies, then link strategy, technology, processes and employees in an integrated customer-oriented structure. This study was conducted to help close that gap.

There are 13 stages in the Customer Resource Life Cycle through which a customer transitions in a buying cycle. At each stage the firm influences future customer buying behaviour through both visible cues and the impact of the less-visible supporting functions of the firm. CRM requires an enterprise-wide approach to customer care that involves an integration of the front and back office through revamped business processes.

The CRM Process Capability Framework, developed from the established CMMI® model from another service quality management discipline, identifies five levels of capability:

• CRM Level 1 is the lowest and is characterized by ad hoc customer relationship processes where success often depends on individual heroics. It may well be profitable, but the firm is reactive and frequently wrestles with emergencies. Technology in Level 1 firms typically consists of silos of disconnected tools.
• CRM Level 2 capabilities emerge from standardized, repeatable transactional CRM processes where employees understand their role in the process and are accountable to standards, where dependencies such as suppliers are recognized, and where technology coordinates transactional processes.
• CRM Level 3 capabilities add an organization-wide dimension where a library of standards and approved meta-processes exist and where transactional processes are developed by tailoring standardized processes along guidelines. Risks, customer requirements, and dependencies are actively managed. CRM technology is integrated enterprise-wide to support collaboration and performance metrics.
• CRM Level 4 capabilities implement management by quantitative CRM metrics and controls that employ standards and baselines that are aligned with business objectives.
• CRM Level 5 denotes an organization that regularly analyzes CRM data, metrics, controls and performance at senior levels, and then takes action to improve processes, to innovate, and to capitalize on emerging opportunities.

This CRM Process Capability Framework includes specific practices, documentation, reports and other evidence that CMMI authors identified in firms that have successfully achieved a characteristic level of process maturity. The Framework recommends specific metrics which a firm should monitor to improve CRM competency and economic value. These metrics include a “customer equity” balance sheet and cash flow that provide visibility and accountability for long-term economic value created or destroyed in the current period.

The Framework specifies an appraisal methodology applied by seeking this evidence in one’s own firm, objectively rating the capability, and identifying gaps, improvements, and progress over time. The Framework also includes several tools for the firm to prioritize CRM investments.

By following the recommendations of the CRM Process Capability Framework, CRM champions should be able to objectively appraise, propose and implement improved CRM capability using terms that are familiar to most managers. Ultimately, when the organization improves process capability in Customer Relationship Management, they have improved their ability to consistently meet commitments and created sustainable competitive advantage. It is a win-win situation for forward-thinking organizations, their shareholders and their customers alike.

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