Let's (NOT) get Physical: Cross-format dilution when launching physical counterparts with unique digital assets

Abstract

As brands seek new revenue streams in the metaverse, selling unique digital assets (UDAs)—like virtual sneakers, artwork, or clothing—represents a promising opportunity. But does offering both digital and physical versions help or hurt in driving favorable consumer responses (e.g. intention to purchase, willingness to pay)? Across six experiments, we find that digital-only UDAs generate stronger purchase interest than those paired with a physical counterpart. This happens because also adding a physical version of the asset reduces the sense that the digital item is truly unique—making it feel less special and less “yours” to the individual. We label this a cross-format dilution effect. Nonetheless, brands can choose to sidestep this by limiting access to the physical version (e.g., display-only) or by releasing the digital item before the physical one.