[JM] Virtual Reality in New Product Development: Insights from Pre-Launch Sales Forecasting for Durables (2021)
Virtual Reality in New Product Development: Insights from Pre-Launch Sales Forecasting for Durables
6.24.2021 Nathalie Harz, Sebastian Hohenberg and Christian Homburg
Most new products fail. However, a new study in the Journal of Marketing shows that durable product manufacturers could reduce this economic risk by leveraging virtual reality. With this investigation, our research team provides one of the first business research articles on virtual reality.
In particular, we develop a new virtual reality forecasting approach that makes highly accurate monthly sales forecasts prior to the launch of a new durable. This approach includes a simulated purchase journey in virtual reality encompassing various touchpoints and information sources, which allows assessing realistic consumer behavior even before the product or prototype physically exists.
We tested the new forecasting approach in two field studies with two real-world innovations that our collaborating companies actually introduced—a new kitchen appliance and a new gardening tool. In total, a sample of 631 buyers participated.
Using one year of actual sales data provided by GfK, a leading European market research agency, we validated our pre-launch sales forecasts after the launch of the two new durables. Results show that the new pre-launch forecasting approach achieves a very high forecasting accuracy for the aggregated first-year sales forecasts and for the monthly sales forecasts. A comparison of our forecasts to the strongest benchmark model demonstrates that the new forecasting approach improves monthly forecasting accuracy by over 30%. In a supplemental analysis, we were able to approximate that a substantial part of this improvement can be attributed to the virtual reality feature.
To examine why virtual reality leads to advantages in sales forecasting, we conducted a controlled laboratory experiment. In this experiment, participants either experienced a simulated store visit in a lab virtual reality, an online virtual reality, or in a studio setting with the actual products. Results reveal that the forecasting advantages of virtual reality are because virtual reality participants on average behaved more consistently within the simulation than the studio test participants. Moreover, these differences can be explained by increased presence (i.e., the feeling of actually being in the simulation) and vividness (i.e., the feeling that the simulation is detailed and easy to imagine). Alternative explanations, such as decision uncertainty and convenience, did not apply.
Overall, our study contains actionable implications that fall into three categories: (1) application fields of virtual reality for new product development (NPD), (2) visualization mode selection, and (3) guidance for implementing virtual reality for NPD.
Application fields
Despite the increasing interest in virtual reality, many companies remain reluctant to use virtual reality because of the complexity and the costs of programming virtual reality environments. Moreover, companies experience challenges when implementing virtual reality in NPD due to a lack of knowledge within the company. Therefore, effective use cases for this technology remain scarce. We identified pre-launch sales forecasting as a promising application field for virtual reality. In addition, results hint at additional applications for virtual reality in NPD associated with its superior visualization capability: virtual reality is a great tool to showcase products, objects, and entire worlds. This insight guides finding further uses, such as virtual prototype testing, new product ideation, and point-of-sale optimization.
Visualization mode selection
Virtual reality can provoke large benefits, such as more flexible use throughout NPD or more accurate prognoses. However, results also reveal some limitations of virtual reality: programming virtual reality simulations can be expensive and virtual reality equipment has some use constraints when testing products that require touch and motion. We therefore present specific guidelines for managers on how to choose between lab virtual reality and online virtual reality as well as when not to use virtual reality. For instance, virtual reality is highly beneficial when early, detailed, and precise consumer information is needed. However, when managers only need high-level insights (e.g., a go/no-go decision), they should refrain from using virtual reality.
Guidance for implementing virtual reality for NPD
We recommend clearly defining the goals of using virtual reality and specifying a comprehensive implementation plan to ensure focus throughout the project. Our experience reveals that many companies get very excited about this technology, sometimes resulting in unrealistic expectations regarding simulation scope and length. Also, to avoid overburdening the virtual reality simulations, we recommend refraining from “all-in-one-solutions” and aim for one tool for one purpose (e.g., forecasting, prototype testing). Using virtual reality several times during NPD creates synergies because programming virtual prototypes or environments can be slightly adjusted to different tests and contexts.
Read the full article.
From: Nathalie Harz, Sebastian Hohenberg, and Christian Homburg, “Virtual Reality in New Product Development: Insights from Pre-Launch Sales Forecasting for Durables,” Journal of Marketing.
References: AMA(American Marketing Association)
https://www.ama.org/journal-of-marketing/
Virtual Reality in New Product Development: Insights from Pre-launch Sales Forecasting for Durables
Nathalie Harz, Sebastian Hohenberg, Christian HomburgFirst Published July 22, 2021 Research Article
https://doi.org/10.1177/00222429211014902
Article information
Article first published online: April 19, 2021
Nathalie Harz, Sebastian Hohenberg, Christian Homburg
Corresponding Author:
Nathalie Harz is a Research Assistant, Marketing Department, University of Mannheim, Germany (email: nathalie.harz@bwl.uni-mannheim.de). Sebastian Hohenberg is Assistant Professor, McCombs School of Business, University of Texas at Austin, USA (email: Sebastian.Hohenberg@mccombs.utexas.edu). Christian Homburg is Professor of Marketing, Chair of the Marketing Department, and Director of the Institute for Market-Oriented Management, University of Mannheim, Germany; and Distinguished Professorial Fellow, Alliance Manchester Business School, UK (email: homburg@bwl.uni-mannheim.de).
https://creativecommons.org/licenses/by-nc/4.0/This article is distributed under the terms of the Creative Commons Attribution-NonCommercial 4.0 License (https://creativecommons.org/licenses/by-nc/4.0/) which permits non-commercial use, reproduction and distribution of the work without further permission provided the original work is attributed as specified on the SAGE and Open Access pages (https://us.sagepub.com/en-us/nam/open-access-at-sage).
Abstract
This investigation examines how consumer durable goods producers can leverage virtual reality for new product development. First, the authors develop a prelaunch sales forecasting approach with two key features: virtual reality and an extended macro-flow model. To assess its effectiveness, the authors collect data from 631 potential buyers of two real-world innovations. The results reveal that the new approach yields highly accurate prelaunch forecasts across the two field studies: compared with the actual sales data tracked after the product launches, the prediction errors for the aggregated first-year sales are only 1.9% (Study 1a, original prelaunch sales forecast), .0% (Study 1b, forecast with actual advertisement spending), and 20.0% (Study 1b, original prelaunch forecast). Moreover, the average mean absolute percentage error for the monthly sales is only 23% across both studies. Second, to understand the mechanisms of virtual reality, the authors conduct a controlled laboratory experiment. The findings reveal that virtual reality fosters behavioral consistency between participants’ information search, preferences, and buying behavior. Moreover, virtual reality enhances participants’ perceptions related to presence and vividness, but not their perceptions related to alternative theoretical perspectives. Finally, the authors provide recommendations for when and how managers can use virtual reality in new product development.
Keywords
innovative durables, new product development, sales forecasting, virtual reality
Citation
Harz N, Hohenberg S, Homburg C. Virtual Reality in New Product Development: Insights from Pre-launch Sales Forecasting for Durables. Journal of Marketing. July 2021. doi:10.1177/00222429211014902
References: SAGE journals
https://journals.sagepub.com/doi/full/10.1177/00222429211014902
Trnaslation
본 연구는 소비자 내구재 생산자가 신제품 개발을 위해 가상 현실을 어떻게 활용할 수 있는지에 대하여 조사한다. 첫째, 저자는 가상 현실과 확장된 매크로 플로우 모델이라는 두 가지 주요 기능을 사용하여 출시 전 판매 예측 접근 방식을 개발한다. 그 효과를 평가하기 위해 저자는 2개의 실제 혁신 제품에 대한 631명의 잠재적 구매자로부터 데이터를 수집한다. 결과는 새로운 접근 방식이 두 가지 현장 연구에서 매우 정확한 출시 전 예측을 산출한다는 것을 보여준다. 제품 출시 후 추적된 실제 판매 데이터와 비교할 때 집계된 첫해 판매에 대한 예측 오류는 1.9%에 불과하다(연구 1a, 최초 출시 전 판매 예측), .0%(연구 1b, 실제 광고 지출 예측) 및 20.0%(연구 1b, 최초 출시 전 예측). 더욱이, 월간 판매에 대한 평균 절대 백분율 오류는 두 연구에서 모두 23%에 불과한 것으로 나타났다. 둘째, 가상 현실의 메커니즘을 이해하기 위해 저자는 통제된 실험실 실험을 수행한다. 연구 결과는 가상 현실이 참가자의 정보 검색, 선호도 및 구매 행동 간의 행동 일관성을 촉진한다는 것을 보여준다. 또한 가상 현실은 참가자의 존재 및 생생함과 관련된 인식을 향상하지만 대안적인 이론적 관점과 관련된 인식을 향상시키지는 않았다. 마지막으로 저자는 관리자가 신제품 개발에 가상 현실을 사용할 수 있는 시기와 방법에 대한 권장 사항을 제공한다.
Key Points
- NPD 관점에서 혁신제품에 대한 VR의 활용느 높은 수준의 예측률을 보이며 그 효과성을 입증함
- 실제 제품을 대상으로 한 현장연구에서는 높은 수준의 예측률과 낮은 에러률을 보이며 그 효과성을 검증함
- 이러한 결과가 나타나는 메커니즘을 규명하기 위한 실험연구에서 VR은 정보검색, 선호도, 구매행동과의 일관성을 촉진하는 것으로 나타남
- 다만, VR을 올인원 솔루션으로 판단하면 곤란하고 뚜렷한 하나의 목적을 달성하기에 적절함