Reference no: EM131049473

CASE

Using a new tool developed by Kimberly-Clark Corp., a woman stood surrounded by three screens showing a store aisle, a retina-tracking device recording her every glance. At Kimberly-Clark, innovation doesn't stop with developing more-absorbent diapers or stronger paper towels. The consumer-goods maker also is using IT to help retailers market and sell products-and not just the ones made by Kimberly-Clark. Virtual reality technology has found its footing in many industries and applications, including health care, automotive, and aerospace.

Now, consumer goods manufacturer Kimberly-Clark has incorporated proprietary virtual reality technology into its new Innovation Design Studio, and it expects big payback from its technological leap. Asked by a Kimberly-Clark researcher to find a big box of Huggies Natural Fit diapers in size three, the woman pushed forward on a handle like that of a shopping cart, and the video simulated her progress down the aisle. Spotting the distinctive red packages of Huggies, she turned the handle to the right to face a dizzying array of diapers. After pushing a button to get a kneeling view of the shelves, she reached forward and tapped the screen to put the box she wanted in her virtual cart. Kimberly-Clark hopes these virtual shopping aisles will help it better understand consumer behavior and make the testing of new products faster, more convenient, and more precise.

The mobile testing unit is usually based in a new high-tech studio that Kimberly-Clark completed in the basement of a nondescript office building in Appleton, Wisconsin. The cavernous room also features a U-shaped floor-to-ceiling screen that re-creates in vivid detail interiors of the big retailers that sell the company's products-a tool that the company will use in presentations to executives in bids to win shelf space. A separate area is reserved for real replicas of store interiors, which can be customized to match the flooring, light fixtures, and shelves of retailers such as Target Corp. and Walmart Stores Inc. As the fragmented television market raises doubts about the effectiveness of traditional ads and competition for shelf space increases, manufacturers and retailers are intensifying their focus on ways to get consumers' attention while they are in the store.

The efforts go well beyond the usual cardboard displays and sample handouts. A group including manufacturers Procter & Gamble Co., Coca-Cola Co., and General Mills Inc., and retailers Kroger Co. and Walmart announced the results of a test that tracked shoppers' movement in stores using a combination of infrared beams and human observation. Nielsen Co. plans to syndicate such data and sell it to clients, much as it does with television ratings. "By engaging ourselves and our customers in this virtual world, we can spark better ideas to improve the shopping experience and collaborate on new product concepts and innovations," says Ramin Elvaz, Kimberly-Clark vice president of North Atlantic Insight, Strategy and Growth.

Kimberly-Clark says its studio allows researchers and designers to get a fast read on new product designs and displays without having to stage real-life tests in the early stages of development. Doing the research in a windowless basement, rather than an actual test market, also avoids tipping off competitors early in the development process. "We're trying to test ideas faster, cheaper, and better," says Ramin Eivaz, a vice president at Kimberly-Clark focusing on strategy. Before, new product testing typically took eight months to two years. Now, that time is cut in half, he says. Projects that test well with the virtual-reality tools will be fast-tracked to real-store trials, Mr. Eivaz says. Once product design options have been determined, Kimberly-Clark brings retail executives into the studio so they can see how the new product would actually look on the shelf and fit in with the existing assortment-an important factor in decisions the retailers make on space. The company declined to reveal how much it spent to build the Appleton studio. "We made a significant investment in the studio and expect it will yield a positive return with our customers in the future," a spokesman says.

The battle for shelf space is accelerating as consumer products companies have introduced more and more new products. Meanwhile, retailers are churning out more of their own private-label products. The rate of new-product launches has grown steadily since 2000, with more than 40,000 new packaged-goods introductions in 2007, says Tom Vierhile, director of Product scan Online, market research firm Data-monitor's database of new products. However, Kimberly-Clark is particularly enthusiastic about how the design center can help its retail partners improve their in-store designs and merchandising.

For example, using the virtual reality technology and K-C Smart Station, the manufacturer can create store models, allowing retailers to envision hypothetical store designs and merchandising concepts. Likewise, eye-tracking technology in the high-tech kiosk allows the study of consumers' reactions in simulated shopping settings to determine how different environments or packaging affect buying decisions. Inside the center's virtual reality theater, visitors are surrounded by screens on which rear-projection equipment displays virtual images powered by applications running on eight Hewlett-Packard high-end rack-mount PCs. The system's 3-D capabilities were developed with Red Dot Square. Sensors embedded in the walls, ceilings, and floor detect the visitors' movements, track their locations, and can even tell exactly what they're looking at, says Kurt Schweitzer, director, IT business partner for marketing, strategy, and innovation. This allows the system to further immerse visitors by making things happen around them, such as opening a door near where they're standing or changing their perspective on what's going on, he says. The center lets store managers use "multiple senses and not just visualization" to assess product display effectiveness, Schweitzer says.

The front screen of the immersion center is more than 20 feet wide and is flanked by two side screens that rest at 45-degree angles, creating a wraparound effect. The wings can move inward to 90-degree angles, forming a three-sided box. "When you step into that 8-foot-high physical space, the word immersive takes on a whole new meaning," Schweitzer says. To sell retailers on new products, manufacturers are revealing more about their product pipelines to drum up interest early on. Over the past several months, Kimberly-Clark says it has brought in executives from major chains, including Target, Walmart and Kroger, to see the Appleton facility. Kimberly-Clark uses the data from its virtual-reality tests with consumers to tout how products in development perform. "It no longer works to show up on a retailer's doorstep with your new product and say, ‘Isn't this pretty?'" Mr. Eivaz says. "We need to be an indispensable partner to our retailers and show we can do more for them." When grocery chain Safeway Inc. asked its major manufacturers for display suggestions to lift traffic through its center aisles in late 2005, Kimberly-Clark used an early version of the virtual-reality modeling technology it was developing for the new studio to pitch for more room for its Huggies diapers and other baby products.

The company created three-dimensional models of a store display that resembled a nursery, complete with a giant, colorful bathtub. The company had consumers navigate the store virtually, testing how easily they could find certain items in the area. "We hadn't seen that type of technology applied to that type of traditional merchandising and store decor before," says Michael Minasi, Safeway's president of marketing. When it tested the display inside its stores, sales of items in that section increased. Nevertheless, in the end, reality set limits. "Some of the decor and decoration components were easier to do virtually than they were to do in the real world, mostly from a cost and implementation standpoint," Minasi says. However, a version of Kimberly-Clark's concept was put in place at a handful of Safeway stores. In the store-model section of its new studio, Kimberly Clark goes to elaborate lengths with its re-creations aimed to impress retail executives. Once, the company readied the studio for visitors from Target. The store's branded shopping carts were lined up at the doorway, next to a stand holding recent Target sales fliers and a faux ATM. Standing behind a pharmacy counter was a Kimberly-Clark employee outfitted in a lab coat with a Target logo. Target's standard white tiles covered the floor, its beige light fixtures hung above, and Target store shelves were fully stocked with diapers and other baby products made by Kimberly-Clark and its competitors. "What if you just spent a lot of money on a package's shade of red but it doesn't look good in their store?" says Don Quigley, president of Kimberly-Clark's consumer sales and customer development, North America. "This is where you can spot that, before you ship a single case of product."

CASE STUDY QUESTIONS

1. What are the business benefits derived from the technology implementation described in the case? Also discuss benefits other than those explicitly mentioned in the case.

2. Are virtual stores like this one just an incremental innovation on the way marketing tests new product designs? Or do they have the potential to radically reinvent the way these companies work? Explain your reasons.

3. What other industries could benefit from deployments of virtual reality like the one discussed in the case? Leaving aside the cost of the technology, what new products or services could you envision within those industries? Provide several examples.