Why Digital Goods are Valued Less Than Physical Goods

Perceived Value Pricing
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Chloe Xu
Director, Australia

Why Digital Goods are Valued Less Than Physical Goods

The digitization of goods has benefits for our lives as consumers. A wide range of products, including books, documents, music, images, and videos is now digitized. We can now buy and consume digital goods at anytime and anywhere, without worrying about their depreciation or loss. However, despite the various benefits of digital products, physical products seem to remain greater allure. A series of experiments by Atasoy and Morewedge (2018) shows that people typically value physical goods over their digital version.

WHY THERE IS VALUE DIFFERENCE
Some people view digital products as unstable, quick and transient; others feel they are less tangible, less intimate and incapable of expressing personal memories. Atasoy and Morewedge's study indicates that people's preference for physical over digital goods is largely driven by 'psychological ownership'.
Physical products are tangible and material. They can be directly held, touched, manipulated, and thus we establish control over them, which is a key antecedent of psychological ownership. Once psychological ownership is established, an attachment to that object is formed and the object is associated with and incorporated into people's self-concept. As people tend to have a positive view about themselves, their association with an object leads to an increase in the perceived value of that object. Due to their capability of establishing psychological ownership, physical goods benefit more from this self-enhancing effect than their digital version.

FACTORS THAT MITIGATE THE PERCEIVED VALUE DIFFERENCE
Digital goods are not always valued less than the physical ones. The research pinpoints three conditions that moderate the above perceived value difference:
  1. EXPECTED OWNERSHIP. The difference in value between a physical good and its digital version should be smaller if people do not expect to own or keep a good.
  2. IDENTITY RELEVANCE. As psychological ownership is based on an association between self and a good, goods that are easier to incorporate into the self-concept should have greater perceived value than those that are not.
  3. PSYCHOLOGICAL CONTROL. The greater value of physical than digital goods should be diminished when people do not care that much about having control over their external world.
IMPLICATIONS FOR MARKETING STRATEGY
Given the growing market for digital goods, the study proposes several interesting recommendations for marketers:
  • Firms offering subscription or rental-based products may not be perceived by customers to create the same value as offering products in both physical and digital forms.
  • The perceived lower value of digital goods may lead customers to view breaching digital privacy and intellectual property as less harmful.
  • The strengthening of psychological ownership is a potential means to increase the valuation of digital goods. When designing a digital product and its user interfaces, companies should add elements that generate a feeling of ownership to improve the product's desirability and value.
  • The perception of different value on physical and digital goods may differ from culture to culture, and market to market. The disparity in product value may be smaller in cultures with fewer self-enhancing tendencies than in cultures where self-enhancing is more prevalent.
Source: Atasoy, O. and Morewedge, CK., "Digital Goods Are Valued Less Than Physical Goods", Journal of Consumer Research, Volume 44, Issue 6, April 2018, pages 13431357.

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