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Virtual Reality in New Product Development: Insights from Pre-Launch Sales Forecasting for Durables

The document discusses the high failure rates in new product development (NPD), highlighting that 46% of resources are wasted on failed products and 72% of new products miss profit targets. It explores how virtual reality (VR) can enhance NPD by providing accurate feedback on user behavior during early stages and presents a new VR forecasting approach tested through several field studies. Results indicate that VR significantly improves pre-launch sales forecasts compared to traditional methods, enhancing perceived presence and decision-making convenience.

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Related topics:
Consumer Behavior• Marketing Research•
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Virtual Reality in New Product Development Insights from Pre-Launch Sales Forecasting for Durables From: Harz, Hohenberg, and Homburg (2021)
The (sad) reality in new product development (NPD) today From: Harz, Hohenberg, and Homburg (2021) 46% Waste of resources Furthermore, 46% of all resources allocated to new products is spent on failed products 72% Missed profit targets Approximately 72% of new products miss their profit targets 1 out of 3000 Studies found that it requires about 3000 ideas to produce 1 successful new product New product success 40-90% New product failure rates Evidence indicates that flop rates of new products range from 40% to 90% with innovative products more likely to fail
Can virtual reality (VR) help to improve durable producers’ NPD? From: Harz, Hohenberg, and Homburg (2021) IDEA LAUNCH Scoping Business Case Develop- ment Testing and Forecasting Accurate feedback on user behavior available Accurate feedback on user behavior needed
To examine this, we developed a new VR forecasting approach that can be applied in early NPD stages From: Harz, Hohenberg, and Homburg (2021) Behavioral data from VR simulation, e.g. • Information search behavior incl. visits, time and actions, e.g. -Local retailer -Online shop -Online magazine • Buying behavior VR: Consumer’s information search VR: Purchase / no-purchase decision Information from VR interventions in information search and purchase decisions can be used to improve sales forecasts for new and developing products.
We tested the new VR forecasting approach in two field studies with real-world innovations and one lab study From: Harz, Hohenberg, and Homburg (2021) GFK COLLABORATION 1 Model development Virtual reality programming Cooperation partner search for piloting the new virtual reality sales forecasting approach KITCHEN APPL. FIELD STUDY 2 Focus: Pre-launch sales forecasting Product category: kitchen appliance Validation: 12 months of actual real-world sales data GARDEN TOOL FIELD STUDY 3 Focus: Pre-launch sales forecasting Product category: gardening tool Validation: 12 months of actual real-world sales data LAB STUDY 4 Focus: Exploring explanations for VR effectiveness Product category: gardening tool
Field studies reveal VR enabled pre-launch forecast, much better than the strongest benchmark model From: Harz, Hohenberg, and Homburg (2021) 0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000 1 2 3 4 5 6 7 8 9 10 11 12 Sales Months from Introduction KITCHEN APPLIANCE FIELD STUDY Actual Sales Extended Macro-Flow Model, Original Pre-launch Forecast Benchmark Macro-Flow Model, Original Pre-launch Forecast 0 500 1000 1500 2000 2500 3000 3500 1 2 3 4 5 6 7 8 9 10 11 12 Sales Months from Introduction GARDEN TOOL FIELD STUDY Actual Sales Extended Macro-Flow Model, Original Pre-launch Forecast Extended Macro-Flow Model, Forecast with Actual Advertisement Spending for Months 9-12 Benchmark Macro-Flow Model, Original Pre-launch Forecast Benchmark Macro-Flow Model, Forecast with Actual Advertisement Spending for Months 9-12
Lab study findings show that VR creates advantages due to higher perceived presence and vividness From: Harz, Hohenberg, and Homburg (2021) VIRTUAL REALITY MECHANISMS INCREASED DECISION UNCERTAINTY The feeling as if being actually in the simulation INCREASED CONVENIENCE INCREASED VIVIDNESS INCREASED PRESENCE The feeling that the simulation is detailed and easy to imagine The feeling that the simulation as easy to use and useful The feeling that the purchase decision is difficult to make