Virtual Reality in New Product Development: Insights from Prelaunch Sales Forecasting for Durables

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.