Luxury brands’ use of NFTs as digital twins may undermine the perceived value of physical products, study finds

In an era where technology and luxury converge, NFTs (Non-Fungible Tokens) have increasingly become part of the marketing strategies for high-end brands. Many luxury companies have adopted digital twinning, linking NFTs to their physical products in an effort to create a seamless connection between the tangible and the digital.

While this practice has been shown to be effective in promoting NFTs, a new study from the School of Business Administration at Bar-Ilan University in Israel and the School of Business and Law at the University of Agder in Norway has revealed surprising results: these digital twins may actually undermine the perceived luxury of the physical products they are tied to.

In a series of eight experiments involving over 2,300 participants, the researchers investigated how the launch of NFTs as digital twins affected the perceptions of the physical luxury products they were associated with. The findings suggest that, while NFTs may elevate the digital product itself, they can harm the perceived value of the physical counterpart. Specifically, the research indicates that linking a luxury item to an NFT may introduce a sense of “temporariness” to the product, diminishing its image of timelessness—an essential aspect of luxury.

“This study challenges the use of digital twins in the luxury sector. Our findings suggest not only that digital twins fail to enhance the perceived value of the physical product, but also that linked NFTs may introduce a sense of novelty, digitalization, and impermanence that undermines traditional perceptions of luxury,” said Raz Henkin, a Ph.D. student at Bar-Ilan University and the lead researcher of this study.

“Luxury brands, which have long been known for their ability to convey exclusivity, timelessness, and tradition, now face the challenge of striking the right balance between maintaining their heritage and embracing innovation,” added Prof. Tobias Otterbring, from the University of Agder. Findings of the research showed that the connection between NFTs and luxury items, while innovative, can disrupt this delicate balance and ultimately affect consumer perceptions.

The study’s findings were recently published in a special issue of the Journal of the Association for Consumer Research focused on Metaverse, Consumer Behavior, and Well-Being.

Early insights from a preliminary follow-up study suggest that NFTs not only raise concerns around the perception of temporariness, but also, among consumers unfamiliar with the technology, they can be seen as lacking authenticity. This further erodes the luxury status of the linked physical products.

Despite these concerns, the researchers are not advising luxury brands to abandon digital twins entirely. Rather, they emphasize the importance of careful planning and strategic integration when marketing NFTs. By ensuring that NFTs are part of a broader strategy that reinforces the timeless status and the authenticity of their products, luxury brands can mitigate the potential risks of devaluing their physical items.

“We believe that while NFTs have their place in the marketing and digital engagement strategies of luxury brands, their application must be approached with caution,” added Dr. Dikla Perez, from the School of Business Administration at Bar-Ilan University.

“Brands should focus on protecting the core values of authenticity, exclusivity and timelessness while incorporating these new technologies in ways that don’t undermine them.”