Augmenting The Eye of The Beholder: Exploring The Strategic Potential of Augmented Reality To Enhance Online Service Experiences

J. of the Acad. Mark. Sci.
DOI 10.1007/s11747-017-0541-x
ORIGINAL EMPIRICAL RESEARCH
Augmenting the eye of the beholder: exploring

the strategic potential of augmented reality to enhance online
service experiences
Tim Hilken 1 & Ko de Ruyter 2 & Mathew Chylinski 3 & Dominik Mahr 1,4 &
Debbie I. Keeling 5
Received: 30 June 2016 / Accepted: 21 April 2017

# The Author(s) 2017. This article is an open access publication
Abstract Driven by the proliferation of augmented reality presence on utilitarian value perceptions is greater for cus-
(AR) technologies, many firms are pursuing a strategy of ser- tomers who are disposed toward verbal rather than visual in-
vice augmentation to enhance customers’ online service expe- formation processing, and the positive effect on decision com-
riences. Drawing on situated cognition theory, the authors fort is attenuated by customers’ privacy concerns.
show that AR-based service augmentation enhances customer
value perceptions by simultaneously providing simulated Keywords Augmented reality . Online service experience .
physical control and environmental embedding. The resulting Service marketing strategy . Situated cognition . Spatial
authentic situated experience, manifested in a feeling of spa- presence
tial presence, functions as a mediator and also predicts cus-
tomer decision comfort. Furthermore, the effect of spatial
Introduction
With the steadily increasing prevalence of online business, firms

* Tim Hilken
t.hilken@maastrichtuniversity.nl face formidable challenges with regard to providing compelling
customer experiences at the online organizational frontline.
Ko de Ruyter Customer satisfaction with—and trust in—privacy safeguards
Ko.De-Ruyter.1@city.ac.uk remains low, as do conversion rates (McDowell et al. 2016).
Mathew Chylinski Virtual shopping cart abandonment and product return rates con-
m.chylinski@unsw.edu.au tinue to rise, partly because of the limited service scope of online
retailers (Janakiraman et al. 2016). As online shopping is consid-
Dominik Mahr
d.mahr@maastrichtuniversity.nl ered to be a service experience (e.g., Dabholkar and Bagozzi
2002), developing an innovative, distinctive service strategy to
Debbie I. Keeling
D.I.Keeling@lboro.ac.uk
tackle these challenges is crucial for driving firm value (Dotzel
et al. 2013). Such a strategy must acknowledge that many online
1
Department of Marketing and Supply Chain Management,
customers find it hard to visualize how products fit into their
Maastricht University, Tongersestraat 53, 6211 personal environments or get a feel for a service experience
LM Maastricht, The Netherlands (Cadirci and Kose 2016). To enhance customer affinity for online
2
Cass Business School, City University London, 106 Bunhill Row, offerings and facilitate online decision making, many firms (e.g.,
London EC1Y 8TZ, UK IKEA, L’Oreal, De Beers, Westpac, UPS, American Apparel,
3
UNSW Business School, University of New South Wales, Volvo, Marriott) have adopted a strategy of service augmentation,
Sydney, NSW 2052, Australia focusing not on the core product but on the interaction between
4
Service Science Factory, Maastricht University, Tongersestraat 6, customers and the organizational frontline (Grönroos 1990). To
6211 LM Maastricht, The Netherlands simulate aspects of service that normally are reserved for in-store
5
School of Business and Economics, Loughborough University, shopping experiences, they leverage augmented reality (AR) ap-
Ashby Road, Loughborough LE11 3TU, UK plications (Brynjolfsson et al. 2013) that contextualize products
by embedding virtual content into the customer’s physical envi- strategy to enhance the customer’s ability to interact with on-
ronment, interactively and in real-time (Azuma et al. 2001). line offerings in two interrelated ways: (1) environmentally
According to Apple CEO Tim Cook, AR-based experi- embedding the offering in a personally relevant context
ences allow for Ba more productive conversation^ (CNBC (e.g., projecting a visualization of sunglasses on the cus-
2016). Apple refers to AR as a core technology and actively tomer’s face or furniture items into their home) and (2) simu-
pursues an AR-related acquisition strategy. With AR, cus- lating physical control over the offering (e.g., being able to
tomers can dynamically engage with goods and services, for perform natural movements to adjust the sunglasses or furni-
example by virtually placing an IKEA sofa in a real-time view ture). The lack of these capabilities to personally experience
of their living room, changing the Dulux color of their wall- an offering traditionally has made it difficult for customers to
paper, or trying on the latest style of sunglasses, clothing, or engage in effective, enjoyable online shopping (Childers et al.
makeup in a virtual mirror. Thus AR helps customers see how 2001). In line with contemporary services theorizing (e.g.,
products fit them personally or in their environments, while Dabholkar and Bagozzi 2002), we view online shopping as
still maintaining the convenience of online purchasing. From a a technology-based service experience and assess whether the
service augmentation perspective, AR is a Bsmart^ technology AR-enabled interaction effect of simulated physical control
(Marinova et al. 2017), set to enhance online service experi- and environmental embedding positively influences cus-
ences through a more intuitive, context-sensitive interface that tomers’ utilitarian and hedonic value perceptions of the online
aligns with the ways customers naturally process information. service experience.
Such an advanced frontline interface can improve service Second, we examine the influence of this interaction by
quality and offer customers more effective, enjoyable online conceptualizing and empirically assessing the mediating role
shopping (Huang and Liao 2015). of spatial presence. When a customer senses spatial presence,
A recent industry report forecasts that investments in AR- the online service experience becomes Breal.^ He or she ne-
enabled service augmentation will exceed $2.5 billion in 2018 glects the technology-mediated nature of the experience
(ABI Research 2013). However, due to inflated expectations (ISPR 2000; Lombard and Snyder-Duch 2001). The strength
there are concerns about the business reality of these market of this feeling is jointly determined by the possibilities for
projections (Gartner 2015). Customers expect AR to deliver action that a technology offers and how well these possibilities
experiential benefits while also reducing their decision- are integrated into the person’s immediate environment
making uncertainty (Dacko 2016), but most extant research (Carassa et al. 2005; Schubert 2009). The concept of spatial
into AR is limited to a focus on generic technology acceptance presence thus captures customers’ convictions that they are
models (e.g., Rese et al. 2016). Furthermore, compound an- experiencing an authentic, situated experience, in which vir-
nual growth rates for AR are estimated primarily using device tual content is located in their physical reality and available for
types and industry segmentation, rather than specific online interaction (Wirth et al. 2007). In other words, the online ser-
customer needs (e.g., visualization of offerings) and concerns vice experience is enhanced and decision comfort increases
(e.g., privacy). Therefore, these projections may not be a bell- when customers forget about the role of AR and believe they
wether for sustained success; firms face a clear risk of building are really trying on and interacting with an Bactual^ pair of
AR solutions that customers will not embrace. Service man- sunglasses, a new makeup look, or clothing from next sea-
agers need a more in-depth understanding of which customers son’s fashion line. Spatial presence sheds light on the process
are likely to engage with this new technology, what makes for through which AR-based service augmentation translates into
a compelling experience, and how AR can improve decision favorable customer evaluations of the online service experi-
making. The paucity of knowledge on these matters also re- ence, in terms of both perceived value and decision comfort.
veals the strong managerial need to understand how the de- Third, we propose two important customer-related bound-
ployment of AR can transform online shopping into a value- ary conditions for deploying AR as a service augmentation
added service experience. By addressing three critical issues, strategy: (1) style of information processing and (2) privacy
this article contributes to emerging research on the methods concerns. Previous research shows that the effectiveness of
available to enhance online service experiences. visual product representations depends on individual prefer-
First, we draw on situated cognition theorizing (Robbins ences for visual versus verbal processing (Wyer et al. 2008).
and Aydede 2009) to show that customers’ information pro- Jiang et al. (2007) demonstrate for example that adding a
cessing is embedded in their physical environment and em- visual representation to a verbal description of an offering
bodied through physical simulations and actions. That is, sit- has little impact on the offering’s evaluation for visualizers,
uated cognition enables customers to learn more about the because they rely predominantly on their own mental imagery.
value of an offering when the associated service experience We anticipate that the spatial presence offered by AR may
enables them to link abstract Bfacts^ with a real-time context have a stronger impact on the value perceptions of those
and physical interaction (e.g., trying on or trying out a prod- who are inclined to rely on semantic processing (i.e., verbal-
uct). We conceptualize AR-based service augmentation as a izers), such that AR-enabled visualizations might complement
their verbal processing style. Because AR technologies also the customer’s face, projecting a sofa into their living room). We
record personal data (e.g., facial recognition), customer con- conceptualize this aspect of AR as environmental embedding,
cerns about privacy are another pertinent issue (Dacko 2016). defined as the visual integration of virtual content into a person’s
Perceptions of risk and vulnerability are associated with data real-world environment. Services researchers have emphasized
privacy (Martin et al. 2017) and could interfere with the that enabling customers to mentally grasp the qualities and ben-
comforting effect of spatial presence for customer decision efits of an offering (e.g., through enhanced visualization) re-
making. Noting the significant differences in the degree to duces perceived risk (Laroche et al. 2004). Mentally picturing
which customers expect transparency and disclosure of how how furniture from an online shop fits with the existing decor or
their data is collected and used, we assess whether customers’ how sunglasses look when worn may be too complex for cus-
concerns about their awareness of a firm’s privacy practices tomers. Environmental embedding relieves customers of this
attenuate the impact of spatial presence on decision comfort. mental burden and provides enhanced information about how
an offering relates to the context in which customers use it.
Second, embodiment implies that customers’ information pro-
Conceptual framework cessing is tightly coupled with their experience of bodily simula-
tions, states, and actions (Barsalou 2008; Niedenthal 2007).
Various academic disciplines address AR, including informa- Accordingly, the importance of perceived control in service expe-
tion systems (e.g., Milgram and Kishino 1994), education riences is well acknowledged (Zhu et al. 2007); research has
(Dunleavy et al. 2009), and psychology (Riva et al. 2016). shown that particularly physical interaction with an offering
Within the marketing domain, substantial research has fo- evokes affective reactions in form of pleasure and improves the
cused on customer acceptance modeling, though a growing customer’s ability to evaluate the offering (Grohmann et al. 2007).
research stream also recognizes the potential of AR to enhance We thus propose that AR enables an embodied online service
customer service experiences in a multichannel environment. experience by allowing customers to control a virtual product
In Table 1 we summarize selected relevant literature, revealing using the same physical movements they would use for an actual
common research themes and gaps. In particular, recent re- product (Rosa and Malter 2003). We conceptualize this ability of
search emphasizes that AR is able to deliver a compelling user AR to simulate physical control over an offering (e.g., moving,
experience (e.g., Poushneh and Vasquez-Parraga 2017), and rotating) as embodiment, labeled simulated physical control.
AR is also expected to benefit customer decision making In sum, we discern the simultaneous provision (i.e., conjunc-
(Dacko 2016). Many studies share an appreciation for AR’s tion) of environmental embedding and simulated physical
ability to embed virtual content into reality and enable inter- control as the unique property of AR-based service augmenta-
actions with the content. However, despite initial research ef- tion. AR thus provides highly situated experiences that likely
forts (Javornik 2016b), a substantive conceptualization and outperform current online service experiences with 360-degree
empirical investigation of these AR features is lacking. product rotations or photo-based try-on, as these only partially
Furthermore, there is limited insight into AR-specific process fulfill customers’ needs for embodiment and embedding.
variables or relevant boundary conditions. Following Grönroos (1990), in our conceptualization, AR-
Addressing these research gaps is important to differentiate based service augmentation seeks to enhance not only the
the AR value creation process from that of other interactive product offering but also the interaction between customers
technologies. We draw on emerging theories of situated cogni- and the online organizational frontline. For customers, this
tion to explain how AR-based service augmentation aligns cus- means that AR may provide a context-sensitive interface with
tomer online interactions with natural information processing to enriched information (Yaoyuneyong et al. 2016) and a differ-
influence decision making. A situated cognition perspective im- ent form of interaction compared with current technologies
plies that information processing occurs within (i.e., is embed- (Javornik 2016b). Traditional (in-store) shopping allows for
ded in) and actively exploits (i.e., embodies) a person’s environ- personal examination of offerings (Childers et al. 2001), and
ment, rather than taking place as an abstract activity in the mind AR-based service augmentation brings this service aspect to
(Robbins and Aydede 2009; Semin and Smith 2013). the online environment. Specifically, customers can virtually
First, with regard to embedding, research has shown that view a product at home, use it in another environment, or even
customers not only mentally picture themselves trying out an try it on virtually (Kim and Forsythe 2008). Such Bsmart^
offering (e.g., Escalas 2004) but also use their immediate envi- frontline interactions allow customers to engage in more pro-
ronment to facilitate such visualization. For example, customers ductive inquiry and action, resulting in enhanced service ex-
often lay out the parts of self-assembly furniture in the correct periences and decision making (Marinova et al. 2017).
spatial proportions (Wilson 2002). As such, we propose that AR As part of an innovative service strategy, AR-based service
facilitates situated information processing by providing cus- augmentation offers firms the means to achieve favorable custom-
tomers with a service to embed a product in a personally relevant er behavioral outcomes (e.g., purchase behavior, word-of-mouth)
context (e.g., fitting a virtual image of sunglasses or makeup on and enhance their bottom lines (Dacko 2016). It is a readily
Table 1 Selected augmented reality (AR) literature per strategic services marketing theme
Study Context and method Theory base AR variable(s) Process variables Boundary Dependent variables Key findings
conditions
Theme: Gaining customer acceptance of new service technologies

Hopp and AR advertising for an Novelty effects, Novelty Attitude toward Technological Attitude toward brand Novelty is negatively related to attitude toward AR.
Gangadharbat- automobile brand; self-efficacy AR self-efficacy High technological self-efficacy individuals also
la (2016) quasi experimental beliefs beliefs transfer these negative evaluations to the brand.
study
Huang and AR for online Technology Presence Ease of use, Cognitive Sustainable relationship Presence predicts technology acceptance and
Liao (2015) clothing retail; acceptance usefulness, innovativeness behavior intentions experiential value variables. The effects on
online experiment model aesthetics, behavioral intentions vary across levels of
(TAM), service individual cognitive innovativeness.
experiential excellence,
value playfulness
Javornik Consumer responses Media Interactivity, Flow - Affective, cognitive, Flow mediates the positive effect of augmentation
(2016b) to AR media characteris- augmentation behavioral responses on consumers’ affective, cognitive and
characteristics; lab tics behavioral responses.
experiments
Rese et al. Consumer Technology Informativeness, Usefulness, - Intention to use The TAM model predicts acceptance of AR
(2016) acceptance of AR acceptance enjoyment, attitude towards applications.
applications; lab model ease of use using
experiments (TAM)
Rese et al. User acceptance of Technology Informativeness, Usefulness, - Intention to use The TAM model predicts acceptance of AR
(2014) AR applications; acceptance enjoyment, attitude towards applications. Online reviews can be used to
online model ease of use using model TAM constructs.
ratings/reviews, (TAM)
lab experiments
Spreer and AR for book Technology Usefulness, - - Assessment of information Users assess AR-enabled information more
Kallweit retailing; field acceptance enjoyment, offer, information positively and more complete. AR reuse
(2014) study model ease of use completeness, intention to intentions are driven by perceived usefulness and
(TAM) reuse enjoyment.
Yaoyuneyong AR hypermedia print Relationship - - - Attitude toward the ad, AR print ads are rated more positively in terms of
et al. (2016) ads, online and lab and informativeness, preference, informativeness, novelty, and
experiment experiential entertainment, irritation, effectiveness compared to QR and traditional
marketing, ad value, time-effort, print ads.
interactive novelty, ad effectiveness
advertising
Theme: Enhancing customer service experiences in a multichannel environment
Beck and Crié AR virtual fitting Intrinsic and - Perpetual-specific - Purchase intention AR use increases online and offline purchase
(2016) rooms for on- and extrinsic curiosity, intentions through perceptual specific curiosity
offline retail, motivation patronage and patronage intentions.
online experiments intention
Dacko (2016) Mobile AR Experiential - - - Experiential shopping AR is expected to provide more efficient and
applications for value benefits, behavioral entertaining shopping experiences, more
smart retail; survey intentions, perceived complete information, and more decision
drawbacks certainty, resulting in positive behavioral
Table 1 (continued)
Study Context and method Theory base AR variable(s) Process variables Boundary Dependent variables Key findings
conditions
intentions. Privacy concerns are considered as a

drawback of AR use.
Olsson et al. Mobile AR services User - - - - AR services are expected to provide efficiency,
(2013) for shopping experience, empowerment, and increased awareness and

centers; central user knowledge. Emotionally, AR services are
semi-structured requirements expected to offer stimulating and pleasant
interviews experiences.
Poncin and AR in physical retail; Store - Store atmosphere, - Satisfaction, patronage AR positively affects store atmospherics, perceived
Mimoun field study atmospherics perceived intention value, and positive emotions. Perceived value
(2014) value, positive and positive emotions mediate the effect of store
emotion atmospherics on satisfaction, which also
promotes repatronage intention.
Poushneh and Impact of AR on User experience Interactivity User experience Trade-off Willingness to buy, AR positively influences the user experience. This
Vasquez-Parr- retail customer between price satisfaction promotes user satisfaction and willingness to
aga (2017) experiences; lab and value, buy.
experiment user’s
information
privacy control
This study Strategic potential of Situated Simulated Spatial presence Style Utilitarian and hedonic The AR-enabled interaction of simulated physical
AR for online cognition physical of-processing, value perceptions, control and environmental embedding positively
service theory control, awareness of decision comfort, WOM affects customer value perceptions of the online
experiences; lab environmental privacy and purchase intentions service experience. Spatial presence functions as
experiments and embedding practices a mediator and also predicts decision comfort.
survey Customer value perceptions and decision
comfort translate into positive behavioral
intentions. Customers’ style-of-processing and
privacy concerns are relevant boundary
conditions.
adoptable technology that works on existing (customer-owned) (Bauer et al. 2006; Babin et al. 2005), where the former cap-
devices (McKone et al. 2016), and AR-enhanced online service tures the performance-related effectiveness and the latter the
experiences may help deliver on services marketing imperatives experiential enjoyment provided in a service experience. For
(Berry 2016): competing on value, meeting or exceeding custom- example, Childers et al. (2001) demonstrate that customers as-
er expectations, saving customers time and effort (including en- sess both the usefulness and enjoyment of an online grocery
hancing decision making ability), and being generous. For cus- shopping service. Recent studies suggest that the use of AR in a
tomers, AR’s enrichment and enhancement of online interactions retail context enhances customer perceptions of both these val-
offers a close alignment with their natural information processing, ue dimensions in the holistic shopping experience (e.g., Poncin
so it can provide a sense of comfort in online decision making. and Mimoun 2014). The ability of AR to let customers virtually
For example, customers perceive AR-enhanced advertisements as try on (i.e., environmentally embed) online offerings provides
more informative and effective than their print counterparts enhanced information (Poushneh and Vasquez-Parraga 2017)
(Yaoyuneyong et al. 2016). The potential of AR-based service and a visually appealing experience (Huang and Liao 2015); it
augmentation to offer hedonic value, such as entertainment and relieves customers of the mental burden of imagining how, for
shopping enjoyment, also should lead to higher customer satis- example, a pair of sunglasses would look when worn. The
faction (Childers et al. 2001). Finally, AR-based service augmen- accompanying form of (simulated physical) control offered
tation addresses customers’ Bpain points^ (e.g., travel, time con- by AR differs from traditional web-based user control
straints) while still offering personalized experiences (e.g., virtual (Javornik 2016b); it allows customers to physically evaluate
applications that learn and apply customers’ preferences; and playfully interact with a virtual offering, even though the
McKone et al. 2016). Because AR-based service augmentation offering is not physically present (Rosa and Malter 2003). In
may lead to more enjoyable, effective online shopping and more sum, AR should promote an effective, enjoyable online service
comfortable decision making, it should increase perceived service experience because the interaction of environmental embed-
quality and conversion rates, while reducing the likelihood of ding and simulated physical control aligns with customers’ nat-
product returns. Considering the strategic potential of AR-based urally embedded and embodied way of processing information.
service augmentation, we develop testable hypotheses of its im- Whilst there may be individual effects of enabling an embodied
pact on marketing-relevant outcome variables. or embedded online service experience, our theory-based pre-
diction is that it is through their joint effect that AR makes
online service experiences more effective and enjoyable for
Hypotheses development the customer. We therefore postulate:
What is unique about the situated cognition perspective on AR- H1: Simulated physical control and environmental embed-
based service augmentation is the interdependence of environ- ding have a positive interaction effect on customers’
mental embedding and simulated physical control. Effective en- utilitarian and hedonic value perceptions of the online
vironmental embedding depends on embodied actions to alter the service experience.
immediate environment in a strategic manner (Robbins and
Aydede 2009). The value of environmentally embedding a pair The AR-enabled interaction of simulated physical control
of sunglasses on a customer’s face depends on the ability to and environmental embedding provides customers with the
perform and register physical movements in such a way that the means to engage in a situated online service experience. The
customer can view the glasses from different angles and develop a authenticity of this service experience—that is, how well AR
feel for the offering. Images of models wearing the sunglasses or a simulates trying on a pair of sunglasses in a physical store—is
photo-based try-on cannot provide such an embodied online ser- reflected in customers’ feelings of spatial presence. Spatial
vice experience. In turn, possibilities for embodied action arise presence describes a distinct psychological state in which a
from a dynamic relation between a person and his or her environ- person neglects the role of technology in an experience (ISPR
ment (Clancey 2009; Gibson 1979). Therefore, embodied action 2000; Lombard and Snyder-Duch 2001); he or she conse-
becomes meaningful for customers only if it is embedded in their quently feels physically situated in a different location and
immediate physical environment. Without such embedding in the perceives possibilities for action (Wirth et al. 2007). Spatial
relevant context, simulated physical control is less effective (i.e., presence is conceptually distinct from constructs such as in-
online service experiences with 360-degree product rotation only volvement (Schubert et al. 2001; Wirth et al. 2007) and trans-
partially fulfill customers’ cognitive needs). In contrast, AR pro- portation (Lombard and Snyder-Duch 2001). A feeling of
vides a service experience that enables customers to exert physical presence can be achieved in augmented environments; its lev-
control over offerings in their immediate environment, resulting in el is contingent on the person’s control over at least one sense
a more natural way of processing information about the offering. and the ability to alter the environment (Riva et al. 2016).
It is broadly acknowledged that customers evaluate service Accordingly, the situated view of presence holds that for a
experiences in terms of both utilitarian and hedonic value person the sense of Bbeing there^ requires the ability for them
to Bdo there^ (Schultze 2010; see also Sanchez-Vives and information. After all, most AR platforms overlay virtual content
Slater 2005), and AR-based service augmentation offers this in a customer’s visual field through a computer screen, such as
ability. The interaction of simulated physical control and en- seeing a virtual pair of sunglasses on one’s own face.
vironmental embedding provides opportunities for action and Irrespective of domain-specific processing abilities,
the meaningful integration of these actions into the environ- Childers et al. (1985) show that customers differ in their pref-
ment, which in turn elicits a strong sensation of spatial pres- erence for a visual versus verbal style-of-processing.
ence for a person (Schubert 2009; Schultze 2010). Visualizers prefer to process information through the construc-
However, an AR setting demands modification to our under- tion of visual images, whereas verbalizers prefer semantic pro-
standing of spatial presence (Schubert 2009). Rather than feel- cessing without forming images. Drawing on evidence that
ing present in wholly artificial environments (e.g., virtual shop- object evaluations are negatively influenced by the associated
ping mall), customers should sense that virtual products are processing difficulty (Winkielman et al. 2003), Wyer et al.
present and can be interacted with in their real world. In that (2008) contend that the effectiveness of product visualization
respect, AR spatial presence is consistent with conceptualiza- depends on a customer’s dispositional style-of-processing.
tions of object presence (Stevens et al. 2002) or Bit is here^ Adding pictures to verbal descriptions of familiar products thus
presence (Lombard and Ditton 1997). Using spatial presence has less effect on product evaluations for visualizers than for
as the metric of success for AR-based service augmentation thus verbalizers (Jiang et al. 2007), because they already mentally
requires replacing a person’s feeling of Bself-location^ with a form visual images of described products, so the pictures con-
feeling of Bobject-location^ in the physical reality. Spatial pres- vey little additional information. In contrast, verbalizers derive
ence is a consciously experienced cognitive feeling that varies in additional information from pictures. Thus, in online service
intensity and has informative value and positive valence; the experiences, customers who are verbalizers likely use the en-
opposite state (not feeling present) is manifested as a negative hanced visualization experienced during spatial presence (i.e.,
state of disorientation (Schubert 2009). As such, spatial presence feeling that products are situated in reality and available for
intensifies media effects (Wirth et al. 2007) and can explain the interaction). Accordingly, we posit that verbalizers derive more
effect of AR-based service augmentation on customer value utilitarian value from improved possibilities for engaging in
perceptions of the online service experience. Customers become better product evaluation—and thus experience more effective
convinced of the authenticity of the situated service experience online shopping—but they also experience greater hedonic val-
and feel that they are actually trying on, for example, a pair of ue due to reduced processing difficulty. Formally:
sunglasses as in a physical service encounter. In support of this
hypothesizing, Klein (2003) demonstrates positive effects of a H3: The positive relationship between spatial presence and
sense of presence on the strength of customers’ beliefs about customers’ utilitarian and hedonic value perceptions of
product attributes and attitudes toward products. Moreover, the online service experience is stronger for verbalizers
Fiore et al. (2005) find a significant effect on customer percep- than for visualizers.
tions of instrumental and experiential value. Therefore:
Extant research has shown that customers expect not only
H2: The positive interaction effect of simulated physical con- experiential benefits from AR use for online shopping but also
trol and environmental embedding on customers’ utili- reduced decision uncertainty (Dacko 2016). In support of this
tarian and hedonic value perceptions of the online service view, many service delivery models emphasize the importance
experience is mediated by spatial presence. of achieving consumer comfort in service interactions (Spake
et al. 2003). The concept of decision comfort, defined as the
Although the success of AR-based service augmentation like- degree to which customers feel at ease or contented with a specific
ly relates to the aspects that align with a customer’s natural, decision, has been introduced as an important element of a cus-
situated information processing and the resulting feeling of spa- tomer’s decision experience (Parker et al. 2016). Decision comfort
tial presence, it is unlikely that all customers realize these benefits constitutes a soft-positive affective response that can account for
equally. Previous research investigates the influence of divergent variations in customers’ overall evaluations of a decision experi-
personal traits, such as trait absorption, emotional involvement ence, beyond generic affect and decision confidence. The latter
(Wirth et al. 2012), and mental imagery ability (Weibel et al. reflects the level of certainty about making the best choice (based
2011), on the emergence of spatial presence. But a paucity of on a cognitive assessment of the pros and cons of a decision), but
knowledge describes individual differences in the value derived decision comfort is an affect-based sense of ease related to the
from spatial presence. Insight into which customers find AR- process of making the choice. Parker et al. (2016) thus argue that a
based service augmentation valuable is important for service customer’s decision comfort is driven by affect-laden cues. AR-
managers. Because the predominant modality of AR is visual, based service augmentation is deployed to enhance the customer
customers’ responses to AR-based service augmentation are decision process through spatial presence, which is an affect-
likely influenced by idiosyncrasies in how they process visual based cue. Spatial presence thus should be conducive to an
experience that promotes ecological validity for the customer, informed about the associated privacy practices— that
marked by positive affect. Schubert (2009) argues that as a result, is, how their images in a virtual mirror or pictures of
customers’ perceptions of assurance grow, because customers their homes are collected, processed, and used.
regard the attributes of virtual objects as if they were real. This Previous research, however, has shown that consider-
sense of a first-hand experience with online offerings, approxi- able differences exist in the extent to which customers are
mating a real-world service experience, allows customers to feel concerned about their awareness of privacy practices. On
at ease with a decision. Therefore: the one hand, many customers do not make the effort to
read privacy policies or find privacy statements too diffi-
H4: There is a positive relationship between spatial presence cult to understand fully (Tsai et al. 2011). On the other
and decision comfort. hand, for some customers it is important to be highly
cognizant of firm privacy practices. Although we expect
Customer concerns about marketers collecting and an inverse relationship between customers’ concerns
using personal information continue to be a pertinent about their awareness of privacy practices and decision
issue (Martin et al. 2017), particularly in relation to comfort, our focus is on testing these privacy concerns
AR technologies (Dacko 2016). The failure of Google as a boundary condition for the impact of spatial presence
Glass (an early entrant into the AR market) may have on decision comfort. We posit that the more customers are
been due to concerns about its privacy implications concerned with being fully aware of the privacy practices
(Downes 2013). Because AR technologies record per- associated with using, for example, an AR virtual mirror,
sonal data by employing facial recognition or spatial the more likely these concerns are to interfere with their
tracking functionalities, perceptions of risk and vulnera- immersion in the mediated experience (Draper et al.
bility are considerable and could have negative ramifi- 1998). Associated perceptions of risk and vulnerability
cations for the application of AR in online service ex- may cast doubt on the nature of the authentic, situated
periences. Customers’ general information privacy con- experience offered by AR and attenuate the comforting
cerns relate to their subjective perception of the fairness effects of spatial presence for customer decision making.
of the way their personal information is treated; though Therefore:
opinions about what is fair differ among customers. We
contend that a specific dimension of privacy concerns H5: The positive relationship between spatial presence and
related to customers’ concerns about their awareness of decision comfort is attenuated by customers’ concerns
privacy practices used by firms is pertinent to the use about their awareness of a firm’s privacy practices.
of AR. These concerns about awareness are based on a
sense of interactional and informational justice, related
to transparency and disclosure of how a firm collects
and uses personal information (Malhotra et al. 2004). Research model and empirical studies
Since AR technology makes use of novel information
collection methods, customers are likely to be concerned We conducted a series of studies to test our hypotheses empir-
about transparency (Downes 2013) and being adequately ically (see Fig. 1 for an overview). Studies 1, 2, and 3 explore
Fig. 1 Overall research framework with all hypotheses

the potential of AR to enhance the online service experience in Table 2 Study 1: Regression results
terms of utilitarian and hedonic value. Specifically, in Study 1, Independent variables Utilitarian Hedonic
participants tried out the AR virtual mirror of the largest value value
European online eyewear retailer (Mister Spex; https://www.
Constant 3.64** 3.43**
misterspex.co.uk) and evaluated the experience (H1). In Study (.13) (.11)
2, we used L’Oreal’s AR virtual mirror for makeup (Makeup Simulated physical control .09 −.04
(.18) (.15)
Genius; http://www.loreal-paris.co.uk/make-up/makeup- Environmental embedding −.11 .13
genius) to investigate the mediating role of spatial presence (.17) (.15)
(H2). In Study 3, we examined customers’ processing style as Simulated physical control × environmental .50* .63**
embedding (.24) (.21)
a boundary condition (H3); we also analyzed whether the R2 .08 .18
benefits of AR-based service augmentation translated into MSE .57 .42
F 4.45** 11.19**
positive behavioral intentions. Then in Study 4, we extend df 3, 152 3, 152
our analysis to investigate the role of AR for customer deci-
sion making. We varied the study design so that participants The numbers in parentheses are standard errors. Unstandardized coeffi-
cients are shown. Significance based on two-tailed test.
made a purchase decision and subsequently rated their asso-
** p < .01. * p < .05
ciated decision comfort (H4) and behavioral intentions. We
also investigated their privacy concerns as a boundary condi-
B). To avoid confounding effects, we designed the application
tion (H5).
for each condition so that it accurately resembled an existing
online service.1 Participants provided with the full AR virtual
mirror application could see the sunglasses fitted to their face
Study 1
in real time (high environmental embedding) and could move
the sunglasses through head movements (high simulated
Design and procedure
physical control). Participants in the high EE–low SPC con-
dition received an application resembling a photo-based try-
In Study 1, we tested the prediction in H1 that simulated
on, in which they could see the sunglasses on their face but did
physical control and environmental embedding (SPC × EE)
not have physical control over them. For the high SPC–low
have a positive interaction effect on customers’ utilitarian and
EE condition, we created a 360-degree product rotation,
hedonic value perceptions of the online service experience. To
which allowed participants to control the sunglasses physical-
ensure that we tested an appropriate target group, we recruited
ly (with hand movements, consistent with the physical control
176 participants between 17 and 31 years of age from a large
participants have when examining a real pair of sunglasses,
public university. According to recent market surveys
without a means to try them on) on a decontextualized white
(Nielsen 2014, 2015), this generation of digital natives is ad-
background. Participants in the control group (low EE–low
ept at and keen to use technology for online shopping. All
SPC) viewed a static image of the sunglasses on the white
participants received course credit for attending a lab session
background of the online retailer’s website.
in which they sat at desktop computers equipped with front-
facing webcams. We presented participants an image of the
Mister Spex online shop and tasked them with trying out and Measures
evaluating an application that was to be added to the website.
Depending on the assigned condition, each participant then To measure customers’ utilitarian and hedonic value percep-
tried one version of the AR virtual mirror and completed a tions of the online service experience, we adapted two con-
survey. Across all studies, we applied the same set of structs by Childers et al. (2001). Specifically, we employed a
prespecified quality criteria and excluded participants from three-item measure (α = .85) that asked participants to rate the
further analysis if they experienced technical difficulties effectiveness of the technology-assisted shopping experience
(13), indicated that they did not understand the instructions with the provided application. We assessed hedonic value per-
(3), or provided incomplete responses (2). We also identified ceptions (i.e., customers’ enjoyment of the technology-assisted
and removed two univariate outliers (1.1%). This resulted in a
1
final sample of 156 participants (79 women, 77 men) in a 2 To ensure that our manipulations of simulated physical control and environ-
mental embedding did not create confounds of perceived technological func-
(low versus high SPC) × 2 (low versus high EE) between- tionality, we conducted an additional study (n = 195), in which we allowed
subjects design. participants to try the AR virtual mirror for eyewear with the same manipula-
To create the desired experimental manipulations, we rep- tions as in Study 1. We asked them to rate its functionality, on an adapted 5-
item measure (Lin and Hsieh 2011; α = .67). The regression analysis revealed
licated the Mister Spex AR virtual mirror and altered the ex- that the functionality measure did not respond to SPC (β = .10, p = .43), EE
tent to which it provided simulated physical control and envi- (β = −.22, p = .08), or their interaction (β = .17, p = .31), thus ruling out
ronmental embedding across conditions (see also Appendix potential confounding effects.
Fig. 2 Study 1: Effects of Low environmental embedding

simulated physical control with 5 5
High environmental embedding
high or low environmental
embedding on utilitarian and 4.11 4.14
hedonic value perceptions of the 4 4
Mean Utilitarian Value

3.72
Mean Hedonic Value

online service experience 3.64 3.53 3.55
3.43 3.38
3 3
2 2
1 1
Low simulated High simulated Low simulated High simulated
physical control physical control physical control physical control
shopping experience) with a four-item measure (α = .90). in utilitarian or hedonic value between the high and low EE
Participants responded to all measures on five-point Likert (SPC) conditions (Fig. 2). However, in the high SPC condition,
scales (Bstrongly disagree^ = 1 to Bstrongly agree^ = 5). We participants with high (versus low) EE reported significantly
provide the items for all constructs in Appendix A. higher utilitarian (M HighEE = 4.11, M LowEE = 3.72,
t(152) = 2.29, p = .023) and hedonic (MHighEE = 4.14,
Results MLowEE = 3.38, t(152) = 5.19, p < .001) value. Similarly, in
the high EE condition, participants with high (versus low) SPC
Manipulation checks To assess the success of our manipula- reported significantly higher utilitarian (MHighSPC = 4.11,
tions, we asked participants to rate two single-item measures MLowSPC = 3.53, t(152) = 3.49, p < .001) and hedonic
(SPC: BI was able to move the sunglasses around^; EE: BI was (MHighSPC = 4.14, MLowSPC = 3.55, t(152) = 4.09, p < .001)
able to see how the sunglasses look on my face^) on a five- value.
point Likert scale (Bstrongly disagree^ = 1 to Bstrongly
agree^ = 5). As intended, participants in the high SPC condi- Discussion
tion perceived significantly greater simulated physical control
than those in the low SPC condition (MHighSPC = 4.37, The results of Study 1 provide evidence of the benefits of AR-
MLowSPC = 2.71, t(134) = −10.48, p < .001). The measure based service augmentation. Specifically, and consistent with
for environmental embedding also yielded significant differ- our prediction, customers’ value perceptions of the online ser-
ences in the anticipated direction between the high and low EE vice experience—underpinned by situated cognition—are
conditions (MHighEE = 3.95, MLowEE = 2.21, t(154) = −10.83, highest under the AR-enabled condition of high simulated
p < .001). physical control and high environmental embedding.
Although this combination aligns with customers’ natural in-
Moderation analysis To investigate H1, we used the formation processing, we further theorize that customers must
PROCESS macro (Hayes 2013, Model 1) with a simple effects be convinced that AR provides an authentic situated experi-
parameterization and individually regressed utilitarian and he- ence, in which the virtual content leveraged by AR is actually
donic value on SPC, EE, and their interaction (low SPC embedded in the physical reality and allows for embodied
(EE) = 0, high SPC (EE) = 1).2 We found support for H1, with action (H2). We therefore turn to an investigation of spatial
a significant SPC × EE interaction effect on utilitarian (β = .50, presence as an underlying process variable in Study 2.
p = .041) and hedonic (β = .63, p = .003) value. No significant
effects of SPC or EE emerged (Table 2), revealing that in the
low SPC (EE) condition, there were no significant differences
Study 2
2
Throughout our studies we used PROCESS because it let us analyze the
hypothesized conditional effects (H1, H5) and conditional indirect effects
To investigate H2, we conducted a study with an application
(H2, H3) with a consistent method of analysis and allowed for bootstrap-
based inference. PROCESS produces equivalent results to an ANOVA for similar to the previously employed AR virtual mirror, though
our focal interaction; however, it does not allow for multivariate analysis. we varied the product stimuli (makeup instead of sunglasses).
We therefore conducted MANOVAs with utilitarian and hedonic value per- We also sought to rule out an alternative mediation account.
ceptions as a combined dependent variable in Studies 1, 2, and 3; the multi-
variate test results are consistent with the results obtained from our analysis Previous research has identified psychological ownership as a
with PROCESS. focal driver of customer product valuations (e.g., Peck and
Shu 2009) that can be elicited through the ability to control an had shifted into the environment of the presentation^ to BIt
object physically (Pierce et al. 2003) or vividly imagine own- was as though the true location of the product had shifted into
ership (Peck and Shu 2009). the real world environment.^ The adapted scale exhibited
good internal consistency (α = .92). We included the utilitar-
Design and procedure ian (α = .90) and hedonic (α = .87) value measures from Study
1, as well as a three-item measure of psychological ownership
We used L’Oreal’s AR virtual mirror for makeup in the (α = .92) by Peck and Shu (2009). Participants responded to
same 2 (low versus high SPC) × 2 (low versus high EE) all item batteries on five-point Likert scales (Bstrongly
between-subjects design as in Study 1. We gathered our disagree^ = 1 to Bstrongly agree^ = 5). The items for all mea-
sample from AR’s main target group and recruited 197 sures are in Appendix A.
female participants between 18 and 25 years of age from
an undergraduate business course. Extra credit served as Results
an incentive for participation. The experimental procedure
was equivalent to that in Study 1, though participants used Manipulation checks Participants answered two single-item
a tablet PC to try one version of L’Oreal’s AR virtual measures (SPC: BI was able to move the lipstick around^; EE:
mirror for a lipstick product. To create the desired manip- BI was able to see how the lipstick looks on my face^) on a
ulations, we replicated the original application and altered five-point Likert scale (Bstrongly disagree^ = 1 to Bstrongly
the extent to which it provided simulated physical control agree^ = 5). These manipulations worked as intended.
(SPC) and environmental embedding (EE) across condi- Participants in the high SPC condition reported significantly
tions (see also Appendix B). Participants who used the greater SPC than those in the low SPC condition
full AR virtual mirror application were able to see the (M HighSPC = 3.69, M LowSPC = 2.61, t(164) = −6.63,
lipstick applied to their face in real time (high EE) and p < .001), and participants in the high EE condition indicated
control the presentation with head movements (high SPC). significantly greater EE than those in the low EE condition
Participants in the high EE–low SPC condition were able (MHighEE = 4.27, MLowEE = 3.28, t(140) = −5.80, p < .001).
to see a static photo of themselves with the lipstick ap-
plied. For the high SPC–low EE condition, we used var- Moderated mediation analysis The regression results are in
ious angle images of a model wearing the lipstick and Table 3. The SPC × EE interaction predicted spatial presence in
merged them into a 360-degree product rotation. the mediator model (β = .50, p = .047); spatial presence also
Participants could physically control the presentation (high predicted utilitarian (β = .44, p < .001) and hedonic (β = .27,
SPC) but could not see the lipstick personally applied p < .001) value in the respective dependent variable models. In
(low EE). We excluded participants who did not try out support of H2, our bootstrapping procedure with 5000 samples
the application (12) or experienced technical difficulties and bias-corrected confidence intervals (CIs) (Hayes 2013,
(10). We also removed two multivariate outliers (1.0%), Model 8) yielded a significant indirect effect of SPC through
leaving a final sample of 173 participants. spatial presence on utilitarian value (UV) and hedonic value
(HV) in the high EE condition (UV β = .27, 95% CI = .12 to
.46; HV β = .16, 95% CI = .06 to .33) but not in the low EE
Measures
condition. Furthermore, EE had a positive indirect effect
through spatial presence on utilitarian and hedonic value in the
In line with previous conceptualizations of spatial presence in
high SPC condition (UV β = .29, 95% CI = .14 to .52; HV
an AR context (e.g., Schubert 2009), we adapted the eight-
β = .18, 95% CI = .07 to .37) but not in the low SPC condition.
item spatial presence measure by Vorderer et al. (2004) by
reversing the logic of the items, from feeling present in anoth-
Psychological ownership In further support of H2, we did not
er environment to feeling that a virtual object was present in
find strong evidence for psychological ownership as an alterna-
the immediate physical environment.3 For example, we
tive mediator. Specifically, the SPC × EE interaction did not
adapted the original item, BIt was as though my true location
predict psychological ownership in the mediator model.
3
The spatial presence measure by Vorderer et al. (2004) consists of two sub- Although psychological ownership had a significant effect on
scales. However, the situated perspective on presence (Carassa et al. 2005) and hedonic value (β = .16, p = .007), bootstrapping with 5000
previous research (Weibel et al. 2011) support a unidimensional measure. In
samples did not yield significant indirect effects for SPC on
Study 2, principal components analysis pointed to a single-factor solution that
explains 64.14% of the variance in the items (KMO measure of sampling hedonic value, in either the low or high EE condition.
adequacy = .89; Bartlett’s test of sphericity χ2(28) = 940.55, p < .001). Furthermore, EE had no significant indirect effect on hedonic
Velicer’s minimum average partial test and parallel analysis confirmed a value in the low SPC condition; the effect was significant in the
single-factor solution. The same analysis consistently supported unidimen-
sionality in Studies 3 and 4. We therefore collapsed the two subscales into high SPC condition though (β = .07, 95% CI = .00 to .19).
one overall spatial presence measure. Thus, there is some evidence that when participants have
Table 3 Study 2: Regression

results Independent variables Spatial Psychological Utilitarian Hedonic
presence ownership value value
Constant 2.92** 2.66** 2.15** 2.49**

(.14) (.18) (.24) (.22)
Simulated physical control .11 −.12 .09 −.16
(.18) (.24) (.17) (.15)
Environmental embedding .17 .05 .08 −.02
(.18) (.23) (.17) (.15)
Simulated physical control × environmental .50* .38 .05 .29
embedding (.25) (.32) (.23) (.20)
Spatial presence -- -- .44** .27**
(.09) (.08)
Psychological ownership -- -- .09 .16**
(.07) (.06)
2
R .13 .02 .29 .27
MSE .65 1.10 .54 .43
F 8.45** 1.31 13.86** 12.55**
df 3, 169 3, 169 5, 167 5, 167
The numbers in parentheses are standard errors. Unstandardized coefficients are shown. Significance based on
two-tailed test
** p < .01. * p < .05
simulated physical control, adding environmental embedding Design and procedure

creates a sense of psychological ownership, which elicits he-
donic value. We reflect on this finding in the general discussion. We used the experimental procedure and manipulations from
Study 1. The between-subjects design also was the same 2
Discussion (low versus high SPC) × 2 (low versus high EE) as in our
previous studies. The 359 participants, aged between 16 and
We provide evidence for H2 by demonstrating that the AR- 25 years, fit the description of digital natives and completed
enabled interaction of SPC and EE provides customers with the study in exchange for university course credit. We omitted
an authentic situated experience. Participants experienced a participants from further analysis if they did not try out the
heightened feeling of spatial presence and reported increased application (11), experienced technical difficulties (7), indicat-
utilitarian and hedonic value perceptions of the online service ed they did not understand the instructions (7), or provided
experience. We do not find strong support for an alternative, incomplete responses (6). We also removed six univariate
underlying process through psychological ownership. That is, (1.7%) and one multivariate (0.3%) outliers. The final sample
AR’s benefits appear to stem from its ability to align with the consisted of 321 participants (174 women, 147 men).
inherently situated nature of customers’ information process-
ing. We next delve deeper into identifying a boundary condi-
Measures
tion to our findings (H3).
We measured utilitarian value (α = .89), hedonic value
(α = .85), and spatial presence (α = .90) with the item batteries
Study 3 and scales from our previous studies. We sought to substanti-
ate the mediating role of spatial presence, by ruling out the
In Study 3 we investigated whether verbalizers derive possibility that participants provided with SPC and EE simply
more value from a feeling of spatial presence than visu- felt more involved with the application and thus reported per-
alizers (H3). In line with previous research (Parasuraman ceptions of greater value. Previous research has suggested that
and Grewal 2000), we also sought to provide evidence involvement is a prerequisite for spatial presence (Wirth et al.
that customer value perceptions affect post-consumption 2007) but constitutes a conceptually distinct construct
behavioral intentions. In an online setting, word-of-mouth (Schubert et al. 2001). We therefore controlled for partici-
(WOM) referral is particularly valued as a driver of new pants’ involvement in trying out the application with a four-
customer acquisition (Wangenheim and Bayón 2007). item involvement measure (α = .73) developed by Vorderer
Moreover, self-reported purchase intentions help approxi- et al. (2004). We assessed participants’ disposition toward
mate actual bottom-line sales (Taylor et al. 1975). To test visual versus verbal information processing with the 22-item
our predictions, we made use of the Mister Spex AR vir- style-of-processing scale (α = .65) developed by Childers et al.
tual mirror for eyewear with the same manipulations used (1985). Participants responded to all style-of-processing items
in Study 1. on a four-point scale (Balways true^ to Balways false^). High
values correspond to a visualizer disposition, and a low score effect of SPC through spatial presence, but only for the high
implies a verbalizer disposition. Finally, we asked participants EE condition (Table 5). We analyzed this conditional indirect
to rate their WOM intentions (α = .81) with three items and effect at three style-of-processing values: the mean (2.59), one
their purchase intentions (r = .52) with two items (Zeithaml standard deviation below the mean (2.32), and one standard
et al. 1996), using five-point Likert scales (Bstrongly deviation above the mean (2.86). The bootstrap CIs indicated
disagree^ = 1 to Bstrongly agree^ = 5). The items for all con- significant effects at all three levels, though it grew weaker at
structs are in Appendix A. higher style-of-processing values (Table 5). We obtained the
same pattern of results for the conditional indirect effects of
EE (Table 5), in support of our conjecture that verbalizers
Results
(versus visualizers) derive more (versus less) utilitarian value
from spatial presence arising from both SPC and EE.
Manipulation checks Both manipulations were successful. In
the high SPC condition, participants perceived significantly
greater SPC than in the low SPC condition (MHighSPC = 4.49,
WOM and purchase intentions We used the PROCESS mac-
MLowSPC = 2.56, t(247) = −18.04, p < .001). Participants in the
ro (Hayes 2013, Model 6) to test whether spatial presence,
high EE condition indicated significantly greater EE than those
followed by utilitarian and hedonic value, sequentially mediat-
in the low EE condition (MHighEE = 3.94, MLowEE = 2.24,
ed the effects of the SPC × EE interaction on WOM and pur-
t(317) = −15.04, p < .001).
chase intentions. We found a significant indirect path through
SPC × EE ➔ spatial presence ➔ utilitarian value ➔ WOM
Moderated mediation analysis The regression results for this (β = .16, 95% CI = .10 to .25) and purchase intentions
study are in Table 4. The analysis revealed significant effects (β = .13, 95% CI = .07 to .21), as well as through SPC × EE
of the SPC × EE interaction (β = .98, p < .001) and involve- ➔ spatial presence ➔ hedonic value ➔ WOM (β = .13, 95%
ment (β = .22, p < .001) on spatial presence. In partial support CI = .08 to .22) and purchase intentions (β = .10, 95% CI = .05
of H1, we found a negative effect of the style-of-processing × to .18), after controlling for SPC, EE, style-of-processing, and
spatial presence interaction on utilitarian value (β = −.46, involvement. Thus, we find support for our conjecture that
p = .034), after controlling for involvement (β = .19, positive behavioral intentions arise from the increased utilitari-
p = .003). This interaction effect did not emerge with regard an and hedonic value perceptions of an AR-enhanced online
to hedonic value. To test for conditional effects with both first- service experience.
and second-stage moderation, we employed the PROCESS
macro by Hayes (2013, Model 22) and bootstrapped with Discussion
5000 draws. An investigation of the conditional indirect ef-
fects further supported H3 for utilitarian value. Consistent The results of Study 3 reconfirm that a compelling situated
with our previous studies, we found a significant indirect experience, in the form of spatial presence and resulting
Table 4 Study 3 regression

results Independent variables Spatial presence Utilitarian value Hedonic value
Constant 1.81** −1.00 2.81*

(.19) (1.46) (1.16)
Simulated physical control −.13 .34** −.18
(.11) (.13) (.10)
Environmental embedding −.40** −.19 −.16
(.11) (.13) (.10)
Simulated physical control × environmental embedding .98** −.23 .42**
(.16) (.19) (.15)
Spatial presence -- 1.61** .18
(.56) (.44)
Style-of-processing -- 1.20* −.17
(.56) (.44)
Style-of-processing × spatial presence -- −.46* .07
(.22) (.17)
Involvement .22** .19** .13*
(.06) (.06) (.05)
R2 .21 .24 .26
MSE .51 .64 .40
F 21.60** 13.97** 15.82**
Df 4, 316 7, 313 7, 313
Table 5 Study 3 moderated mediation analysis results
Utilitarian value Hedonic value
Conditional indirect effect (IE) of simulated physical control for

Style-of-processing Boot IE Boot SE 95% LCI 95% UCI Boot IE Boot SE 95% LCI 95% UCI
Low environmental embedding 2.32 −.07 .06 −.19 .04 −.04 .04 −.13 .02
2.59 −.05 .05 −.15 .03 −.05 .04 −.14 .03
2.86 −.04 .04 −.13 .02 −.05 .05 −.15 .03
High environmental embedding 2.32 .45 .09 .29 .64 .29 .07 .16 .44
2.59 .34 .07 .21 .50 .30 .06 .19 .43
2.86 .24 .09 .07 .42 .32 .08 .18 .48
Conditional indirect effect (IE) of environmental embedding for

Style-of-processing Boot IE Boot SE 95% LCI 95% UCI Boot IE Boot SE 95% LCI 95% UCI
Low simulated physical control 2.32 −.21 .06 −.36 −.11 −.14 .05 −.24 −.06
2.59 −.16 .05 −.28 −.08 −.14 .04 −.24 −.07
2.86 −.11 .05 −.23 −.03 −.15 .05 −.27 −.07
High simulated physical control 2.32 .30 .08 .17 .47 .19 .06 .10 .33
2.59 .23 .06 .13 .37 .20 .05 .11 .32
2.86 .16 .07 .05 .31 .21 .07 .10 .35
The numbers in parentheses are standard errors. Unstandardized coefficients are shown. Significance based on two-tailed test.
** p < .01. * p < .05
customer value perceptions of the online service experience, is choose their sunglasses, and subsequently complete our sur-
driven by an interaction effect of SPC and EE. In support of vey. We included the manipulation check questions from the
H3, customers with a disposition toward verbal (versus visual) previous studies and established that participants perceived
information processing derive greater utilitarian value from this condition as high SPC and high EE (MSPC = 4.04,
AR-induced spatial presence. Finally, our results indicate that SD = .55; MEE = 4.08, SD = .58). We sampled from the target
enhanced value perceptions of AR-based service augmenta- group for AR and recruited 106 participants between 18 and
tion translate into marketing-relevant behavioral responses in 29 years of age from an undergraduate business course, then
the form of WOM and purchase intentions. excluded 6 reporting technical difficulties. Participants did not
receive any compensation for completing the study. Of the
remaining 100 participants, 38 were women and 62 were men.
Study 4
Measures
Design and procedure
We used the same eight-item spatial presence measure (Vorderer
With Study 4, we investigated H4, regarding the positive re-
et al. 2004; α = .93) from our previous studies. For the depen-
lationship between spatial presence and decision comfort, and
dent variable, we used the five-item decision comfort scale
H5, pertaining to the potential attenuation of this relationship
(Parker et al. 2016), with questions that referred to the selected
by customers’ concerns about their awareness of privacy prac-
sunglasses (e.g., BI am comfortable with choosing these
tices. We also sought evidence that increased decision comfort
sunglasses^; α = .89). For the moderator, we used the three-
results in positive behavioral intentions (Parker et al. 2016).
item scale for the dimension labeled BAwareness of Privacy
We employed a survey method in which participants faced an
Practices^ (APP) of the Information Privacy Concerns scale
online decision making situation; they were tasked with
(Malhotra et al. 2004). This dimension specifically refers to
accessing an online store, exploring the available options,
the Bdegree to which a (customer) is concerned about his/her
and choosing a pair of sunglasses they would purchase. All
awareness of information privacy practices^ (Malhotra et al.
participants used the AR virtual mirror for eyewear from
2004, p. 339). We slightly adapted the questions to fit the study
Study 1 to make a decision. To focus on the decision making
context (e.g., BCompanies using this online try-on tool should
effects and concerns about awareness of privacy practices re-
disclose the way the personal information and images are col-
lated to AR-based service augmentation, we did not manipu-
lected, processed, and used^); the scale showed good internal
late SPC or EE as in our previous studies. All participants
consistency (α = .84). Participants also rated their WOM inten-
were thus able to see the glasses on their face in real time (high
tions (α = .85) with the three-item measure from Study 3.4 All
EE) and control the presentation with head movements (high
SPC). Participants were given guidance on how to use the AR 4
Participants were instructed to choose a pair of sunglasses they would actu-
virtual mirror, and then used a laptop to explore the site, ally purchase, so we only asked them to rate their WOM intentions.
Fig. 3 Study 4: Attenuation of 3.75

Awareness of
the effect of spatial presence on privacy practices
decision comfort by customers’ 2.87
concerns about their awareness of 3.75
privacy practices 3.50
4.62
Decision comfort
3.25
3.00
2.75
2.50
2.00 2.50 3.00 3.50 4.00
Spaial presence
item batteries used five-point Likert scales (Bstrongly presence on WOM intentions through decision comfort
disagree^ = 1 to Bstrongly agree^ = 5), as detailed in (β = .05, 95% CI = .00 to .13) at the mean value of aware-
Appendix A. ness of privacy practices. This finding supports our conjec-
ture that the decision comfort provided by AR-based service
Results augmentation translates into positive behavioral intentions.
We first regressed decision comfort on spatial presence

(R2 = .26, F(1, 98) = 34.32, p < .001). In support of H4, we General discussion
found a significant positive effect of spatial presence (β = .43,
t(98) = 5.86, p < .001). By providing a novel, context-sensitive interface for cus-
tomers to interact with the online organizational frontline,
Moderation analysis To investigate H5, we regressed deci- AR offers firms the means to pursue an innovative service
sion comfort on spatial presence, awareness of privacy prac- augmentation strategy. Against the backdrop of situated cog-
tices, and their interaction (R2 = .39, F(3, 96) = 20.07, nition theory, we demonstrate that (utilitarian and hedonic)
p < .001). In support of H5, we found a significant negative customer value perceptions of the online service experience
spatial presence × awareness of privacy practices interaction are driven by an AR-enabled interaction effect of simulated
effect on decision comfort (β = −.13, t(96) = −2.14, p = .035); physical control and environmental embedding (Study 1).
spatial presence and awareness of privacy practices, as expect- This effect is produced by customers’ convictions that they
ed, retained significant positive and negative effects, respec- are experiencing an authentic situated experience, manifested
tively (βSP = .32, t(96) = 4.21, p < .001; βAPP = −.24, in a feeling of spatial presence (Study 2). The effect of spatial
t(96) = −3.18, p = .002). For the conditional effects, we presence on utilitarian value perceptions is more pronounced
bootstrapped with 5000 samples and calculated bias- for customers who prefer verbal information processing
corrected CIs (Hayes 2015). We found positive effects of spa- (Study 3). We also find that spatial presence provides cus-
tial presence on decision comfort at low (β = .47, 95% tomers with greater decision comfort; however this effect is
CI = .28 to .67) and medium (β = .32, 95% CI = .17 to .45) attenuated by customers’ concerns about being aware of the
awareness of privacy practices levels, but not at high levels privacy practices associated with AR-based service augmen-
(β = .16, 95% CI = −.01 to .33). Figure 3 illustrates this tation (Study 4).
gradual attenuation, by customers’ concerns about their
awareness of privacy practices, on the effect of spatial pres- Implications for theory
ence on decision comfort.
We contribute to contemporary knowledge on services mar-
WOM intentions We used the PROCESS macro (Hayes keting strategies in three related ways. First, as research inter-
2013, Model 7) and found a positive indirect effect of spatial est in technology-empowered frontlines increases (Marinova
et al. 2017), we advance a situated cognition perspective on leveraging customer data to enhance service effectiveness
the design of the interfaces through which customers interact (Marinova et al. 2017); our results reveal an important bound-
with firms. By framing customers’ cognition as an inseparable ary condition for theory on technology-empowered frontline
coupling of environmental stimuli (i.e., embedding) and phys- interactions. In particular, we demonstrate that for customers
ical interaction (i.e., embodiment), we conceive of how value with relatively strong concerns about being adequately aware
is co-created by the customer and the online service environ- of a firm’s privacy practices, the effect of spatial presence on
ment. Crucially, AR-based service augmentation integrates decision comfort becomes attenuated.
the touch-and-feel sensory richness of the physical world with
the online marketplace (Brynjolfsson et al. 2013). It thus re- Strategic implications for service managers
sults in a highly context-sensitive interface that aligns with
customers’ natural processing of information and offers them Traditionally, online channels function to reduce costs and
effective, enjoyable online service experiences. Accordingly, aggregate assortment. Yet, they continue to be perceived
we contribute to understanding customer empowerment in as low in service (Verhoef et al. 2007). This research
services experiences (Berry et al. 2010), and particularly addresses the need to understand online shopping as a
how emerging smart technologies, such as AR, empower cus- service experience and develop more innovative service
tomers through frontline interactions that co-create value strategies (Dotzel et al. 2013). Emerging frontline inter-
(Marinova et al. 2017). face technologies, such as AR, enable firms to enhance
Second, we establish spatial presence in online service ex- service experiences and promote value co-creation (Singh
periences as the mediating mechanism by which AR simulates et al. 2017). By deploying a strategy of AR-based service
aspects of service that are traditionally reserved for in-store augmentation, firms can redefine their interactions with
experiences. We therefore contribute to a growing research customers at the organizational frontline in several ways.
stream emphasizing that frontline technologies (ranging from First, this research introduces AR-based service aug-
AR to service robots) should be assessed in light of the feel- mentation as part of a broader services marketing strategy.
ings of presence they elicit within a service experience Challenged by customer estrangement when moving be-
(Rafaeli et al. 2017; van Doorn et al. 2017). Though we do tween channels, managers aim to provide customers with
not find strong support for an alternative mediation by psy- a more seamless omnichannel experience. In this effort,
chological ownership, our findings may point to a more intri- AR can help service managers synchronize their online
cate process underlying customers’ hedonic value percep- and offline service experiences by enabling customers to
tions. It seems that when simulated physical control is virtually embed an offering in a personally relevant envi-
complemented with the means to environmentally embed, ronment and feel a sense of physical control. The real-
customers not only derive enjoyment from an authentic situ- time, virtual enhancement of the physical reality em-
ated experience, but also from a sense of ownership of the powers customers to shape their experiences and improve
examined offering. More research is thus needed to identify their decision making (Rafaeli et al. 2017). The resulting
when the enjoyment benefits of AR-based service augmenta- positive WOM and purchase intentions likely benefit on-
tion stem from an enhanced service experience and when they line conversion rates, prevent virtual shopping cart aban-
are due to customer attachment to a specific offering. donment (Janakiraman et al. 2016), and counter
Third, by investigating customer heterogeneity in the con- webrooming (i.e., when customers gather information
text of emerging frontline technologies, we learn why spatial online before buying offline; Verhoef et al. 2015).
presence created through AR-based service augmentation in- Second, AR-based service augmentation provides a lower
creases value perceptions and decision comfort for some cus- cost alternative to current product trial services (e.g., sam-
tomers more than others. Previous research indicates that the pling, free return policies) and allows customers to develop
effectiveness of visual product representations depends on a feel for offerings in an online environment. This benefit is
individual preferences for visual versus verbal information especially relevant for customer interactions with experiential
processing (Childers et al. 1985; Wyer et al. 2008). offerings, such as cosmetics, apparel, or furniture, that get
Consistent with this finding, our results indicate that verbal- evaluated mainly on the basis of fit and feel characteristics
izers derive more utilitarian value from spatial presence than (Rosa et al. 2006). Managers must realize that service aug-
visualizers. Accordingly, AR may provide enjoyment benefits mentation relies on spatial presence; it should be a metric for
to a broad customer audience; however, it would increase the successful AR-based service augmentation. In this respect,
effectiveness of online service experiences more for cus- AR outperforms current online service experiences, such as
tomers less prone to use visualization skills. In particular, vi- those that offer stand-alone 360-degree product rotation. By
sualizers may rely more on their own mental imagery and thus convincing customers that they are truly able to try out a
derive less utilitarian value from AR-based service augmenta- product offering, AR provides utilitarian and hedonic value
tion. Services research increasingly emphasizes collecting and in online service experiences. The two value perceptions are
complementary, and though their individual importance may with a relevant target group, we focused on digital na-
differ across customer segments and shopping contexts tives. We consider our findings generalizable, but further
(Childers et al. 2001), they jointly determine the holistic cus- research is needed to confirm these findings for other
tomer experience. generations. Relatedly, future research could identify fur-
Third, AR-based service augmentation provides cus- ther relevant customer traits that may account for varia-
tomers with a sense of comfort in the crucial post-deci- tion in the value derived from AR-based service augmen-
sion/pre-outcome decision making stage. Providing ser- tation. For example, customers with a high need-for-touch
vice comfort (Spake et al. 2003) and connecting emotion- may especially value simulated physical control over an
ally with customers (Kumar and Pansari 2016) are key offering embedded in their immediate environment. Our
managerial concerns. We show that using service augmen- predictions for the effects of visual and verbal processing
tation to help customers feel comfortable with a decision, style also are based on evaluations of familiar products.
irrespective of its optimality, also promotes positive Although such familiarity is reasonable in our research
WOM intentions. setting, additional research could test the effects for high-
Fourth, we studied two main classes of customers, ver- ly specialized or newly developed products, for which
balizers and visualizers, to understand whether customers customers rely less on existing evaluation methods; AR-
respond differently to AR-based service augmentation. based service augmentation might even have a more pro-
Although verbalizers derived greater utilitarian value from nounced effect in these settings.
spatial presence, the visualizers did not respond negative- Additional research could investigate the nature of the
ly. Accordingly, AR-based service augmentation may pro- body movements involved in simulated physical control
vide greater returns on the investment for a predominantly too. Extant embodiment research emphasizes the influ-
verbalizer segment, but service personalization (Rust and ence of (in-) congruence on customers’ perceptions (e.g.,
Huang 2014) would have little advantage over a broad Elder and Krishna 2012). The (in-) congruence between
application. We recommend providing customers with an the physical control naturally elicited by a product (e.g., a
option to self-select, for example, an AR virtual mirror cup elicits a grasping motion) and the simulated physical
from a firm’s online service portfolio to enhance decision control afforded by AR technology (e.g., a virtual cup
making. Moreover, the effects of situationally induced cannot be grasped, only moved with a touchscreen)
processing styles on customer evaluations may rival those should be modeled to determine the impacts on customer
of a chronic disposition (Jiang et al. 2007). Therefore, perceptions of the online service experience. Embodied
AR-based service augmentation may prove particularly incongruence could be an important boundary condition,
relevant in contexts where the nature of the offering re- beyond privacy concerns.
quires firms to use detailed verbal information (e.g., ex- Although social effects are beyond the scope of this
tensive measurement specifications for furniture, technical research, they could influence our findings, especially as
information for automobiles). social media become increasingly integral to customer–
Fifth, the adoption of new technology is often fraught firm interactions (Rapp et al. 2013). An extension of our
with pitfalls, so managers should give careful consider- research could explore how AR-based service augmenta-
ation to those aspects of the technology that enhance tion can leverage social content to identify further inno-
customer value and those that detract from it. The Bshiny vations for service strategy. Previous research indicates
new object syndrome^ has led prior AR investments, that the lack of social connectivity is a limiting factor
such as Google Glass, to be overwhelmed by customers’ for AR (Javornik 2016a). If customers could share live
privacy concerns. Similarly, we show that high levels of feeds of their virtual mirrors with others to obtain ratings
concern about awareness of a firm’s privacy practices and reviews, it might set the stage for tests of social con-
among customers temper the positive effects of AR tech- nectivity effects. Socially situated cognition (Semin and
nology. Service managers, thus, should ensure a clear Smith 2013) and social presence (Schultze 2010) theoriz-
and conspicuous disclosure of how AR-based service ing may serve as valuable conceptual backdrops.
augmentation makes use of customer information (e.g., As advances in information technology continue to
informing customers upfront that facial recognition in a give rise to new service marketing strategies (Rust and
virtual mirror only serves fitting purposes and that no Huang 2014), opportunities for research will increase.
images are saved). This article offers a first step toward a theoretical under-
standing of AR-based service augmentation as a means
Limitations and further research to enhance online service experience. We call for a fur-
thering of the research agenda for such technology-
This research is subject to several limitations that provide enabled service augmentation at the organizational
opportunities for further research. To test our predictions frontline.
Appendix A
Table 6 Overview of constructs and measurement items Table 6 (continued)
Construct Items Construct Items
Hedonic value adapted from Childers et al. (2001) I would consider [the online retailer] as one of my first choices to buy [product]
The online shopping experience with the app makes me feel good. online.
The online shopping experience with the app is boring. (R) I would do more business with [the online retailer] in the next few years.
The online shopping experience with the app is exciting. Involvement Vorderer et al. (2004)
The online shopping experience with the app is enjoyable. I thought most about things having to do with the web app.
Utilitarian value adapted from Childers et al. (2001) I thoroughly considered what the things in the web app had to do with one
Using the app improves my performance in evaluating the product during another.
online shopping. The web app activated my thinking.
I find the app to be useful for online shopping. I thought about whether the web app could be of use to me.
Using the app enhances my effectiveness in online shopping. Decision comfort Parker et al. (2016)
Functionality adapted from Lin and Hsieh (2011) I am comfortable with choosing this [product].
I can get my product evaluation done with the online retailer’s app in I feel good about choosing this [product].
a short time. I am experiencing negative emotions about choosing this [product].
The product evaluation process with the online retailer’s app is clear. Whether or not it is Bthe best choice,^ I am okay with choosing this [product].
Using the online retailer’s app requires little effort. Although I don’t know if this [product] is the best, I feel perfectly comfortable
I can get my product evaluation done smoothly with the online retailer’s app. with the choice I made.
Each function of the app is error-free. Awareness of privacy practices adapted from Malhotra et al. (2004)
Spatial presence adapted from Vorderer et al. (2004) Companies using this online try-on tool should disclose the way the personal
I felt like the [product] was actually there in the real world. information and images are collected, processed, and used.
It was as though the true location of the [product] had shifted into the A good consumer online privacy policy to accompany this online try-on tool
real world environment. should have a clear and conspicuous disclosure.
I felt like the [product] meshed with the real world surroundings. It is very important to me that I am aware and knowledgeable about how my
It seemed as if the [product] actually took part in the action in the real world. personal information and images will be used.
I had the impression that I could be active with the [product] in the real world.
I felt like I could move the [product] around in the real world. (R) Reverse-coded item
The [product] gave me the feeling I could do things with it.
It seemed to me that I could do whatever I wanted with the [product].
Psychological ownership Peck and Shu (2009)
I feel like this is my [product].
I feel a very high degree of personal ownership of the [product].
I feel like I own this [product].
Style-of-processing Childers et al. (1985)
I enjoy doing work that requires the use of words. (R)
There are some special times in my life that I like to relive by mentally
Bpicturing^ just how everything looked.
I can never seem to find the right word when I need it.
I do a lot of reading. (R)
When I’m trying to learn something new, I’d rather watch a demonstration than
read how to do it.
I think I often use words in the wrong way.
I enjoy learning new words. (R)
I like to picture how I could fix up my apartment or a room if I could buy
anything I wanted.
I often make written notes to myself. (R)
I like to daydream.
I generally prefer to use a diagram rather them a written set of instructions.
I like to Bdoodle^ (i.e., draw pictures or patterns while thinking about something
else or when I am bored).
I find it helps to think in terms of mental pictures when doing many things.
After I meet someone for the first time. I can usually remember what they look
like, but not much about them.
I like to think of synonyms for words. (R)
When I have forgotten something I frequently try to form a mental Bpicture^ to
remember it.
I like learning new words. (R)
I prefer to read instructions about how to do something rather than have
someone show me. (R)
I prefer activities that don’t require a lot of reading.
I seldom daydream. (R)
I spend very little time attempting to increase my vocabulary.
My thinking often consists of mental Bpictures^ or images.
Word-of-mouth (WOM) intentions adapted from Zeithaml et al. (1996)
I would say positive things about [the online retailer] to other people.
I would recommend [the online retailer] to someone who seeks my advice.
I would encourage friends and relatives to do business with [the online retailer].
Purchase intentions adapted from Zeithaml et al. (1996)
Appendix B
Overview of stimulus materials and manipulations
Studies 1, 3, and 4
Study 2
Open Access This article is distributed under the terms of the Creative and situational factors. Journal of the Academy of Marketing
Commons Attribution 4.0 International License (http:// Science, 30(3), 184–201.
creativecommons.org/licenses/by/4.0/), which permits unrestricted use, Dacko, S. G. (2016). Enabling smart retail settings via mobile augmented
distribution, and reproduction in any medium, provided you give appro- reality shopping apps. Technological Forecasting and Social
priate credit to the original author(s) and the source, provide a link to the Change. Available online 14 October 2016, In press. doi:10.1016/
Creative Commons license, and indicate if changes were made. j.techfore.2016.09.032.
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Augmenting The Eye of The Beholder: Exploring The Strategic Potential of Augmented Reality To Enhance Online Service Experiences

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J. of the Acad. Mark. Sci.

ORIGINAL EMPIRICAL RESEARCH

Augmenting the eye of the beholder: exploring

Received: 30 June 2016 / Accepted: 21 April 2017

With the steadily increasing prevalence of online business, firms

Theme: Gaining customer acceptance of new service technologies

intentions. Privacy concerns are considered as a

(2013) for shopping experience, empowerment, and increased awareness and

Fig. 1 Overall research framework with all hypotheses

Fig. 2 Study 1: Effects of Low environmental embedding

Mean Utilitarian Value

Mean Hedonic Value

Table 3 Study 2: Regression

Constant 2.92** 2.66** 2.15** 2.49**

simulated physical control, adding environmental embedding Design and procedure

Table 4 Study 3 regression

Constant 1.81** −1.00 2.81*

Table 5 Study 3 moderated mediation analysis results

Utilitarian value Hedonic value

Conditional indirect effect (IE) of simulated physical control for

Conditional indirect effect (IE) of environmental embedding for

Fig. 3 Study 4: Attenuation of 3.75

We first regressed decision comfort on spatial presence

Table 6 Overview of constructs and measurement items Table 6 (continued)

Construct Items Construct Items

Overview of stimulus materials and manipulations

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Constant 2.92 2.66 2.15 2.49