Today, absorbing external knowledge is becoming indispensable for the creation of successful innovations (Cohen and Levinthal, 1990; Sawhney and Prandelli, 2000; Chao-Ton et al., 2006). In the era of “open innovation”, researchers as well as consultants ask for more active engagement of customers into new product development than traditional market research allows (Kambil et al., 1999; Sawhney and Prandelli, 2000; Vandenbosch and Dawar, 2002; von Hippel, 2002; Chesbrough, 2003; Prahalad and Ramaswamy, 2004; Hobo et al., 2006). To sustain the pace of innovation resulting from fast changing technologies and customer needs, Leonard-Barton (1996), Teece et al. (1997), and Lengnick-Hall (1996), among others, suggested integrating customers into value creation and absorbing customers’ knowledge to strengthen a company's core competencies (Cohen and Levinthal, 1990) and to discover their needs (Dahan and Hauser, 2002a). As a consequence, new methods are needed that allow active engagement of customers into new product development (Lilien et al., 2002). Only by experiencing a new product and its features, will customers be able to realistically assess whether they like it and whether the new product idea fulfils a latent—hitherto unknown—need.
The Internet as an interactive and multimedia-rich technology with low costs of mass communication (Dahan and Hauser, 2002a and Dahan and Hauser, 2002b; Dahan and Srinivasan, 2000; Urban and Hauser, 2004) allows consumers to virtually experience new products and offers new, simplified modes of large-scale interaction between producers and consumers. In literature, a number of new tools to interact virtually with customers can be found (von Hippel, 2001; von Hippel and Katz, 2002). However, it lacks some case studies shedding light on how to virtually integrate customers in practice. The information missing in detail is: how to identify qualified customers on the Internet, how to motivate them and how to interact with them. Under which conditions are users willing and able to share their knowledge with producers?
In this paper, we show that virtual product experiences enable customers to express their latent, so far unknown, needs. Producers with access to this information obtain a chance to develop customer-centred, really new products. Further, the virtual product experience empowers customers to participate in the creation of new products much more actively. Customers become known as co-creators and are recognised as valuable resources for new product development (Kambil et al., 1999; Prahalad and Ramaswamy, 2000 and Prahalad and Ramaswamy, 2002; Chesbrough, 2003). To use the customer knowledge available on the Internet to a larger extent, producers have to know how to create a virtual product experience that motivates customers to fiddle around with new products, honestly state their preferences, contribute their know-how, and share their ideas with producers.
This paper is structured as follows. First, we give an overview of the problems associated with too closely listening to the voice of the customer. Second, we argue that by means of virtual product experiences, customers can get their hands on innovations long before they really exist, thereby building sound judgments and enabling them to express their former unknown needs and desires through trial and error loops. Third, we introduce the concept of customer integration along a three-stage innovation process. Fourth, we present a detailed explorative case study to demonstrate how to virtually integrate customers into new product development in practice. Finally, we discuss the results and summarise their implications.
