Flevy Management Insights Q&A

What metrics should executives use to measure the ROI of AR initiatives in their organizations?

     David Tang    |    Augmented Reality


This article provides a detailed response to: What metrics should executives use to measure the ROI of AR initiatives in their organizations? For a comprehensive understanding of Augmented Reality, we also include relevant case studies for further reading and links to Augmented Reality best practice resources.

TLDR Executives should measure the ROI of AR initiatives through metrics like Revenue Enhancement, Cost Reduction, Customer Engagement (CSAT, NPS), Operational Efficiency, and Employee Performance, to inform Strategic Decisions and foster Innovation.

Reading time: 5 minutes

Before we begin, let's review some important management concepts, as they relate to this question.

What does Revenue Enhancement and Cost Reduction mean?
What does Customer Engagement and Satisfaction mean?
What does Operational Efficiency and Employee Performance mean?


Augmented Reality (AR) initiatives are becoming increasingly crucial for businesses looking to innovate and enhance their operational efficiency, customer experience, and training programs. Measuring the Return on Investment (ROI) of these initiatives is essential for executives to understand their value, make informed decisions on future investments, and strategize their Digital Transformation efforts. The metrics to evaluate the ROI of AR initiatives should be comprehensive, encompassing both quantitative and qualitative aspects.

Revenue Enhancement and Cost Reduction

The primary objective of any investment, including in AR, is to either enhance revenue or reduce costs. AR initiatives can drive revenue growth by improving customer engagement and creating new revenue streams. For example, AR can be used in retail to provide customers with virtual try-on experiences, leading to higher conversion rates and reduced return rates. A study by Gartner predicted that by 2020, 100 million consumers would shop using AR technology. Although this is a forward-looking statement, it underscores the potential of AR to significantly impact consumer behavior and sales metrics.

On the cost reduction side, AR can streamline operations and improve efficiency. For manufacturing and maintenance, AR can provide workers with real-time, hands-free access to information and guidance, reducing the time it takes to complete tasks and minimizing errors. For instance, Boeing utilized AR to guide technicians in the complex wiring processes of aircraft, which resulted in a 25% reduction in production time and a significant decrease in error rates. These improvements directly contribute to cost savings and enhanced productivity, which are critical metrics for calculating ROI.

When measuring ROI, executives should look at the increase in sales or market share attributable to AR initiatives and the reduction in costs associated with operations, training, and customer service. These metrics are tangible and can be directly linked to AR investments, providing a clear picture of financial return.

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Customer Engagement and Satisfaction

Enhancing customer experience is a strategic priority for many organizations. AR offers unique opportunities to engage customers in novel ways, making experiences more interactive and personalized. Metrics to measure the impact of AR on customer engagement include customer satisfaction scores (CSAT), Net Promoter Score (NPS), and engagement rates on digital platforms where AR experiences are offered. A report by Deloitte highlighted how AR could be used to enrich the customer experience by blending digital information with the physical environment, thereby increasing engagement and satisfaction.

For example, IKEA's AR app, IKEA Place, allows customers to visualize how furniture would look in their homes before making a purchase. This not only enhances the shopping experience but also reduces the likelihood of returns, indirectly affecting the company’s bottom line. Tracking changes in customer satisfaction and engagement metrics before and after the implementation of AR initiatives can provide insights into their effectiveness and impact on customer loyalty and brand perception.

Moreover, AR can significantly enhance the customer service experience by providing more immersive and interactive support options. Metrics such as average resolution time, first contact resolution rate, and customer effort score can be used to assess improvements in service efficiency and effectiveness as a result of AR initiatives.

Operational Efficiency and Employee Performance

AR technology can also play a pivotal role in enhancing operational efficiency and employee performance. Metrics such as time to completion for tasks, error rates, and employee productivity before and after the deployment of AR tools can provide valuable insights into the ROI of these initiatives. For example, DHL has implemented AR in their warehouses to assist employees with picking processes, which resulted in a 15% increase in operational efficiency.

Training and development is another area where AR can have a significant impact. By providing immersive, hands-on training experiences, AR can reduce the time required for employees to become proficient in their roles. Metrics to measure the impact of AR on training include the time and cost to train employees, the retention rate of training information, and the improvement in performance post-training.

It’s also important to consider the impact of AR on safety and compliance, especially in industries such as manufacturing, healthcare, and construction. AR can provide workers with real-time information and guidance, reducing the risk of accidents and ensuring adherence to safety protocols. Metrics related to safety incidents, compliance rates, and insurance costs can further elucidate the ROI of AR initiatives in these contexts.

In conclusion, measuring the ROI of AR initiatives requires a multi-faceted approach that considers financial metrics, customer and employee engagement, and operational efficiency. By carefully selecting and monitoring these metrics, executives can gain a comprehensive understanding of the value AR brings to their organization, enabling informed strategic decisions and fostering continuous innovation.

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Augmented Reality Case Studies

For a practical understanding of Augmented Reality, take a look at these case studies.

Augmented Reality Integration for Aerospace Maintenance

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Augmented Reality Deployment in Construction

Scenario: A mid-sized construction firm specializing in large-scale commercial projects is facing challenges integrating Augmented Reality (AR) into their workflow to enhance precision and efficiency.

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Augmented Reality Deployment for Industrial Equipment Manufacturer

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Healthcare Provider Innovates Patient Engagement and Training with Augmented Reality

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Related Questions

Here are our additional questions you may be interested in.

What are the key challenges in scaling AR solutions across different departments within an organization?
Scaling AR solutions involves overcoming Technological Integration challenges, executing effective Change Management, and ensuring Scalability and Performance Management to drive innovation and efficiency. [Read full explanation]
How can companies ensure data privacy and security when implementing AR technologies?
Companies can ensure data privacy and security in AR technologies through Strategic Planning, Risk Management, implementing a robust data privacy framework, advanced security measures, and enhancing user awareness and control. [Read full explanation]
How does AR technology improve field service operations and maintenance tasks?
AR technology boosts Operational Excellence in field service by improving efficiency, accuracy, reducing errors, enhancing customer satisfaction, and driving innovation through real-time data and remote assistance capabilities. [Read full explanation]
What emerging AR applications are poised to disrupt traditional business models in the next decade?
Emerging AR applications are set to revolutionize Retail and E-Commerce, Manufacturing and Supply Chain, and Healthcare by improving customer experiences, operational efficiency, and patient care. [Read full explanation]
How are AI and machine learning being integrated with AR for smarter, more adaptive applications?
Integrating AI and ML with AR is transforming industries by revolutionizing customer engagement, operational efficiency, and driving Innovation, offering significant Strategic and competitive implications for organizations. [Read full explanation]
How can AR be leveraged to train workers on new technologies and processes in the context of the Fourth Industrial Revolution?
Augmented Reality (AR) significantly improves workforce training in the Fourth Industrial Revolution by enhancing learning retention, customizing experiences, providing real-time feedback, and enabling scalable, cost-effective training solutions across industries. [Read full explanation]

 
David Tang, New York

Strategy & Operations, Digital Transformation, Management Consulting

This Q&A article was reviewed by David Tang. David is the CEO and Founder of Flevy. Prior to Flevy, David worked as a management consultant for 8 years, where he served clients in North America, EMEA, and APAC. He graduated from Cornell with a BS in Electrical Engineering and MEng in Management.

To cite this article, please use:

Source: "What metrics should executives use to measure the ROI of AR initiatives in their organizations?," Flevy Management Insights, David Tang, 2025




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