Evaluating the effects of Customer Relationship Management using modelling and simulation techniques

There has been widespread acceptance and adoption of customer relationship management (CRM) since the late 1990s. Although some organisations have realised benefits from CRM, many problems persist. A key issue has been the development of methodologies to measure its effects. Most current measurement approaches apply financial indices such as ROI but research has suggested that results from these approaches do not directly reflect the impacts of CRM and are disconnected from the ongoing performance measurement process. The ability to directly monitor the effects of the implementation of CRM is an important factor in organisational strategy decision making. In particular, if the potential impacts of CRM can be simulated prior to and during its implementation, organisations can make more informed decisions from a management point of view. A key difficulty with CRM measurement has been a lack of clarity and agreement on what CRM is and how it should be viewed. However, what is not in doubt is that the implementation of CRM generally impacts the way organisations interact with their customers. On this basis, many practitioners and researchers view CRM as a 'process', potentially enabling the application of process measurement and management tools and methodologies. By adopting a process view of CRM, the research presented in this paper uses the 'Witness' modelling and simulation software to demonstrate a novel method for measuring CRM. The process chosen was the customer order process of a case study organisation considering various options for CRM development. The process commenced from the processing of a new order and ended at the shipment of goods to the customer. Four different scenarios involving different actors were identified as follows: center dot The existing order processing procedure, center dot The existing procedure with e-business improvements, center dot A new procedure with the addition of a Customer Service Manager within the company, and center dot A new procedure with the addition of a Customer Service Manager alongside the chief executive Four each of these models, a process map was drawn and the processing time ranges of each of the activities on the map identified on the basis of the company's experience. This data was then fed into the 'Witness' programme and run for 365 days. For each of the models, the experiment determined the success rate of order processing, the numbers of orders shipped to customers and the active periods for each of the actors in the order processing activity. Using this data, it was possible for the company to have a clear idea of the impacts that each of their options would have on a variety of outputs such as customer satisfaction, logistics efficiency and the return on investments for the four options. The implications of the findings are that organisations can clearly determine the potential efficiencies of activities and players in the CRM process. Consequently, direct attribution to costs can be made through more conventional indices such as ROI and employee resource analysis. In conclusion, the research has demonstrated the novel applicability of simulation to the measurement of process CRM effectiveness and provides valuable new insight into the development of the concept and practice of customer relationship management.