Digital products have a large number of advantages over their physical counterparts. They are typically more accessible (e.g., ownership of a game, movie, or song can often allow you to play the media on any compatible device). They are portable (e.g., an Amazon Kindle can store upwards of thousands of titles, and the same applies to digital music). There is also usually a decreased risk of losing or breaking your product, as you can simply retrieve a song or game from your account. Despite all these features, a variety of sources indicate that a large number of people still prefer physical copies of products, regardless of type.
Even amongst 16-24 year-olds, who you might expect to be most receptive to non-material products, there are sizable portions who prefer physical copies (Bury, 2013). A survey revealed that this preference was highest for books (62%), but was considerably large for other product categories such as movies (48%), newspapers and magazines (47%), and even video games (31%). Why might people value physical objects more, even when digital variants offer such a range of advantages? In this article, I want to explore some of these reasons and review recent empirical work on the subject.
Getting to the bottom of the riddle
The reasons for why people value physical products more than digital ones have been the subject of speculation for many years. One key reason is that people can use physical goods for purposes of social visibility (Siddiqui & Turley, 2006). As a personal example, I know that I prefer physical books for the shameful reason that my bookshelf allows me to show off all the books I pretend to have read. A survey conducted in 2013 by Worldpay with over 11’000 respondents found a variety of self-reported reasons for preferring physical products, including self-expression, lower likelihood of losing if a device breaks, the ability to touch the product, and a greater feeling of ownership (Worldpay, 2013). However, are some factors more predictive of preferences than others?
In a recent paper published in the Journal of Consumer Research, researchers tested the idea that psychological ownership is one of the key reasons why people prefer physical products (Atasoy & Morewedge, 2017). Psychological ownership refers simply to the feeling that one possesses something (typically something like a product; Shu & Peck, 2011). Far from being an objective state, psychological ownership can vary with a variety of factors. For example, researchers have found that touching products that one does not yet own can actually increase feelings of psychological ownership (Peck & Shu, 2009).
These feelings of ownership consequently increase the value we place upon objects. This finding is known as the ‘endowment effect’, and refers to the fact that people sometimes ascribe more value to objects merely because they own them (Kahneman, Knetsch, & Thaler, 1990). Which brings us nicely to the topic of digital versus physical products. Can feelings of psychological ownership differ for the (ostensibly) same product in different mediums?
How much would you pay for a photograph?
The researchers tested this question with a series of clever experiments. They began with a simple study: taking photos for tourists in exchange for donations. A research assistant photographed tourists visiting the Old North Church in Boston, Massachusetts, using either a digital or an instant camera (similar to a Polaroid). The research assistant then gave tourists the photo, either digitally via email or by handing over the instantly generated photo. The assistant then provided the tourists an opportunity to pay whatever they wanted for the photo. As a control, the assistant also asked participants how much they thought the costs of the materials and time were. People may value physical objects more than digital simply because they associate them with higher production costs.
As the researchers predicted, the tourists were indeed willing to pay more for a physical copy of the photograph. However, the researchers could not attribute this preference to production estimates: there were no significant differences in people’s estimates of costs behind each photo.
What about books and movies?
While interesting, the study above is specific to photography and fails to rule out alternative explanations. Maybe people simply enjoy physical products more or believe they will last longer. In their next experiment, the researchers attempted to address these shortcomings. In this experiment, the researchers offered participants the choice of a digital/physical book (Harry Potter) or movie (The Dark Knight).
The researchers then asked participants how much they thought they would enjoy the product, their feelings of ownership of it, their willingness to pay, and the permanence (i.e. how long they expected the product to last). Again, the analyses revealed that regardless of whether it was a book or movie, people were willing to pay more for a physical copy. They also expressed greater feelings of ownership, as well as expectations that the physical variant would last longer. Interestingly, there were no differences in expected enjoyment.
Restoring ownership to digital
In subsequent experiments, the researchers also found strong evidence that this preference for digital goods is based on ownership: having a physical product makes it feel as though it is ‘ours’. This finding may help to explain nostalgic consumption, such as the recent increase in demand for vinyl albums. As music becomes increasingly digital (e.g., the dominance of Spotify), people seem to search for ways to recapture feelings of ownership. However, regressing to pre-digital technologies is not the only way that firms can restore feelings of ownership. Below are three alternative solutions that have surfaced in recent years.
One example of firms reacting to this is the advent of ‘toys-to-life’ video games such as such as Amiibo, Skylanders, Lego Dimensions, or Disney Infinity. In these games, in-game characters have physical counterparts (mini-figures or statues) that once purchased, unlock the character in-game. Thus, these companies have done a great job of providing consumers (in this case, children) with a digital product, but packaging it with a physical complement. This satisfies the advantages of the digital format, while simultaneously meeting the psychological needs of a physical possession.
Admittedly, publishers have canceled or put on hiatus three of these franchises, but some attribute this to factors beyond the innovative potential (e.g. high costs of add-ons). Moreover, Amiibo is still going strong, and although on hiatus, Skylanders was once so popular it earned 1 billion USD in revenue after just 15 months.
2. Physical tokens
Another approach is to ground digital phenomena in physical tokens. Unlike the first example, the physical token offers little in the way of functionality and instead serves to provide a physical reminder of the digital good. A perfect example of this can be found in the domain of currency.
As I have written about before, people behave much differently when using mobile payments than paying with cash. Although researchers attribute this to ‘payment transparency’, or the resemblance of a currency to cash, the research discussed above raises the possibility that people may also feel less attached to mobile currency. Without coins or bills to hold and move around, people may feel as if they are not fully in possession of their money, which could indeed explain why people are so much more generous when tipping with their phone. Innovative efforts, such as the design of a coin-like device to execute mobile payments, are one way to remedy this disconnect between cash and payment.
Another example that falls within the spectrum of tokens is the release of collector’s editions for video games. Nowadays, it’s incredibly popular for big releases to also offer a collector’s edition, which typically features a variety of physical keepsakes (the $250 Destiny 2 collector’s edition came with a solar panel USB charger, a backpack, and a steel case for the game, amongst other trinkets; Business Insider, 2017). Although these items may sometimes be useful in and of themselves, I would argue they also serve a symbolic function. With so many game sales now shifting online, these efforts may grant fans a sense ownership that a download fails to provide.
Whereas the previous two examples still relied upon some form of physical counterpart, personalization is a great way to increase feelings of ownership. A perfect example of this is Netflix, which uses a sophisticated system of machine learning and data science to provide the best possible viewing experience for their users.
When users log into their account, they do not find a fixed selection of content. Instead, Netflix presents users with a series of rows containing movies and series that they are (hopefully) most likely to enjoy. While such an approach is obviously beneficial for Netflix (keeping users engaged longer, greater consumption of content, etc), it also has the added benefit of granting feelings of ownership. After a sufficient time to dial in preferences and viewing habits, accounts soon come to reflect customers’ tastes.
Consistent with this approach, research shows people place more value on products they have designed (Franke, Schreier, & Kaiser, 2010), and suggests that customization may help to offset reduced feelings of ownership. Although Netflix is a form of passive customization (based on experience, rather than active input), one would expect a similar effect to take place.
Conclusion and looking ahead
While technology may charge ahead, digitizing products and objects wherever possible, human attitudes are often far less dynamic. Therefore, companies need to ensure that technology is compatible with consumers’ preferences. In this article, I described three ways in which firms can address the difficulties faced by the shift to digital. However, time may reveal other solutions.
In particular, one promising avenue is virtual and augmented reality. Vendors are already looking at ways to bring online shopping a sense of immersion with virtual reality. However, firms can apply the same logic to products people already own. A great example of this is the Oculus Rift library, which allows users to navigate through and select their products in virtual space. This additional level of immersion may make digital products feel more tangible, thereby increasing the value placed on them.
Atasoy, O., & Morewedge, C. K. (2017). Digital Goods Are Valued Less Than Physical Goods. Journal of Consumer Research.
Bury, Liz, 2013. Young adult readers ‘prefer printed to e-books, https://www.theguardian.com/books/2013/nov/25/young-adult-readers-prefer-printed-ebooks
Smith, Dave, 2017. Here is everything you get inside the $250 Collector’s Edition box set for ‘Destiny 2’. http://uk.businessinsider.com/destiny-2-collectors-edition-unboxing-photos-2017-9?r=UK&IR=T#the-destiny-2-collectors-edition-comes-inside-a-massive-box-1
Franke, N., Schreier, M., & Kaiser, U. (2010). The “I designed it myself” effect in mass customization. Management Science, 56(1), 125-140.
Kahneman, D., Knetsch, J. L., & Thaler, R. H. (1990). Experimental tests of the endowment effect and the Coase theorem. Journal of Ppolitical Economy, 98(6), 1325-1348.
Peck, J., & Shu, S. B. (2009). The effect of mere touch on perceived ownership. Journal of consumer Research, 36(3), 434-447.
Siddiqui, S., & Turley, D. (2006). Extending the self in a virtual world. ACR North American Advances.
Shu, S. B., & Peck, J. (2011). Psychological ownership and affective reaction: Emotional attachment process variables and the endowment effect. Journal of Consumer Psychology, 21(4), 439-452.
Worldpay, 2013. The Download on Digital Report. http://www.worldpay.com/sites/default/files/WorldPay%20DownloadOnDigital%20Report.pdf