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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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Physical or Digital Goods: Which one do you value the most?

Against all the expectations people had in the past few years, digital goods have not taken the place of physical goods. Despite the advantages of having a digital library in your pocket to be consumed immediately, people do not seem to let go off the concept of psychological ownership.

  Even tough digital goods are easily bought online, they are consumed immediately after the purchase and can be used without the worry of their degradation or loss; the down side of it is apparently weighing the scale negatively. The incapacity of expressing personal memories, the transient nature and lack of intimacy makes digital goods less valued than their physical correspondent.

  The capacity of developing a social identity with the owner gives the physical good a leverage against the digital one. Tangible things have a legacy potential and serve as a reminder of a past self that people usually likes to hold on to. The perception of the self is usually overestimated and unrealistic, and holding on to whatever is linked to that ideal self is reason enough to increase the willingness to pay more for it and to want to hold it close.

In order to demonstrate that people value physical goods more than digital goods, two marketing researchers – Ozgun Atasoy and Carey K. Morewedge – developed a study between 2015 and 2017 to illustrate and test differences in valuation. Applied in Boston, the study illustrated how the feeling of ownership impacts the perceived value of physical and digital goods, creating new insights into the relationship between consumers and their possessions. Let's take a deeper look into it.

Four Features that Impact the Value of a Physical or Digital Good

Source: https://www.tharawat-magazine.com/attachment-it-is-mine-psychological-ownership-and-the-next-generation-issue-16/#gs.n5lIG2Y

The digitalization of goods is an excitement in our daily activities and have escalated widely. They play an important role in our modern world, making things more liquid and experiential based on the idea of having a product right away in our hands or right away in a screen. However, and regardless the resale value or production costs, people are still willing to pay more for a physical good. And here we present four features that impact the value ascribed to a good:

1) Psychological ownership

Since physical goods are material goods, they are easier to hold and manipulate, thus establish control over than immaterial goods. This sensation of perceived control is a key antecedent to what is called psychological ownership, where someone has the feeling or perception to have ownership over something, even though it legally does not belong to them. Psychological ownership has a big significance in the effect of product format and on the willingness to pay. That said, differences in psychological ownership for physical and digital goods are directly related to their value.

2) Expected Ownership

The expected ownership of a good is critical to define the difference in the value associated to physical and digital goods. In other words, if someone expects to possess a good in the future, it is more likely that this person would pay more to have it in its physical format than in its digital. Practically, this suggests that consumers may not be willing to pay more for a physical good in a situation where they will not own the good in the future, such as rentals or subscriptions.  

3) Association between a good and a person's identity

Although personal taste varies from one individual to another, it is more likely that consumers intend to buy physical goods when they are considered to be more relevant to their identity than others. As our psychological ownership mechanism determines the value attributed to a physical or a digital good, we can say that the more relevant a good is for the buyer, the greater value is ascribed to the physical good.

4) Need-For-Control as a process moderator

A stage before the psychological ownership comes the need-for-control and, because being able to control one's environment is more important for some people than for others, it is expected that differences in this need would influence the difference in psychological ownership. This perceived control is easier for consumers to establish for physical than for digital goods and, in the end, they are willing to pay significantly more for a printed version than for a digital book, for example.  

Exemplo de material purchases vs experimental purchases (achei engraçado :D)

Source:

https://image.freepik.com/free-vector/buying-renting-a-new-or-used-speedy-sports-car_3446-651.jpg

https://www.vectorstock.com/royalty-free-vector/man-sleeping-and-dreaming-vacation-on-beach-vector-13466117

Marketing Opportunities

Digital goods are here to stay due to their practicality and lower cost, but they have yet to replace physical goods. Due to the growing marketing of digital products, retailers that offer both material and digital goods may not create more value for consumers since there is a big disparity in the consumers' mind when evaluating both type of goods. However, there are opportunities to strengthen psychological ownership of digital goods through skeuomorphism, a strategy which adds characteristics of its physical counterpart, thus increasing its perceived value and desirability of adoption.

There is still the issue of digital goods being viewed as a less valued service, leading consumers to digital piracy and not realizing that the damage they inflict to companies is as bad as stealing something physical, which is a problem that should be addressed between companies and government, so that new policies can be implemented. There is also a connection between goods and self-enhancement, that is, people may have preference for physicals good rather than digital goods or vice versa depending in which culture they are integrated.

The Future: Physical or Digital?

Digital goods have a big potential when it comes to improve our lifestyle, should it be through productivity, accessibility, cost-reduction or reducing pollution. We live in a world where more and more people are connected to technology 24/7, where everything must be available in “clicks”, where mobile platforms increase, and a liquid world is forming. Still, there is some reluctance when adopting this type of mindset of consumers since there is still a difference in the perceived value of physical and digital goods, as in the type of consumers.

What about you? How do you feel about physical and digital goods?

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This post is based on the Article “Digital Goods Are Valued Less Than Physical Goods” and was written by Camilla Wanick, Catarina Matos, Manuel Pais, Marcela Ghidelli and Mariana Carvalhal. It is also currently published on NOVA IMS' Digital Marketing Magazine.

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