New research led at the University of Edinburgh Business School finds that when brands launch new products in both digital and physical formats, people feel less motivated to buy and value the digital version less. It shows that consumers respond more positively to digital-only products than to those launched in both physical and digital formats, challenging the growing trend of so-called phygital campaigns, which merge physical and digital experiences.
person sat on bed reading e-book

Brands investing in virtual goods may be undermining their own success when they also release a physical version, according to new research from the University of Edinburgh Business School.

The study, published in the Journal of Retailing, was led by Dr Hua Fang and Dr Khloé Qi Kang during Khloé’s time as a visiting PhD student under the supervision of Professor Ben Marder, with co-authors including the Business School's Dr Jennifer A Yule and Prof Rob Angell from the University of Stirling.

As brands continue to explore opportunities in the metaverse, the research offers insight into how consumers perceive value in digital environments, and how marketing strategies developed for the physical world do not always translate online.

Across six online experiments, the research team tested how people evaluate Unique Digital Assets (UDAs), such as digital artwork, avatar clothing, and collectables traded as non-fungible tokens (NFTs). These are blockchain-backed digital certificates that prove ownership of a one-of-a-kind item online.

When the same product was available both virtually and in the real world, people were less likely to buy the digital version and, in some cases, valued it less. The team calls this the cross-format dilution effect, a decline in perceived ownership and uniqueness when physical and digital versions of the same product coexist.

Ownership is what makes digital assets, such as handbags or trainers for a person’s online avatar, so appealing. People collect and display them to express identity and taste, much as they would with limited-edition fashion or art. The UDA is the asset itself, while the NFT adds a digital certificate of authenticity that proves who owns it.

"Because they are scarce, verifiable and tied to identity, they carry status and a sense of belonging within online communities. But when a matching physical version is also available, that feeling of exclusivity fades, and people are less motivated to buy the digital one.
Dr Jennifer A Yule

How brands can protect digital value

The study offers two practical ways to avoid this effect:

  • Keep physical items for display only. Consumers can see them but not buy them, which preserves the digital item's exclusivity.
  • Launch digital first. When the unique digital asset is the original, it retains its uniqueness and appeal.
Jennifer Yule

Jennifer Yule is our Senior Lecturer in Marketing.