- Researchers advocate a judicious approach characterised by strategic planning and deliberate integration.
- Brands must meticulously curate the narrative that frames their NFT offerings, ensuring that these digital collectibles echo the qualities that have traditionally defined luxury: rarity, craftsmanship, and a narrative of enduring value.
- The essence of luxury—its timelessness, authenticity, and exclusivity—must remain sacrosanct even as brands innovate.
The convergence of technology and luxury has led many high-end brands to embrace NFTs as a tool for enhanced marketing and consumer engagement.
As luxury companies increasingly adopt the concept of digital twinning—pairing NFTs with physical products to establish a seamless connection between tangible and virtual assets—this practice has been lauded for its potential to broaden consumer engagement and enhance brand prestige within an increasingly digitised consumer landscape.
However, a recent empirical investigation conducted by scholars at the School of Business Administration at Bar-Ilan University, Israel, and the School of Business and Law at the University of Agder, Norway, presents an intriguing counterpoint to prevailing enthusiasm.
The research reveals that the linkage of NFTs to physical luxury items may, paradoxically, detract from the perceived luxury of the very products they intend to elevate.
Complex narrative
The study, comprising eight rigorous experiments with a substantial sample size of over 2,300 participants, scrutinises the nuanced effects that launching NFTs as “digital twins” exerts on consumer perceptions of physical luxury goods.
Contrary to the intuitive assumption that the innovative appeal of NFTs invariably augments product desirability, the findings conveyed a more complex narrative. While NFTs themselves garnered enhanced perceptions of value in their digital realm, their association with physical products introduced an unintended diminution of the products’ perceived worth.
The core issue identified lies in the introduction of a “sense of temporariness” associated with the NFT linkage, a characteristic fundamentally at odds with the traditional attributes of luxury—timelessness, authenticity, and exclusivity.
“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, digitalisation, and impermanence that undermines traditional perceptions of luxury,” Raz Henkin, lead researcher and PhD candidate at Bar-Ilan University, said.
The assertion resonates profoundly within the luxury sector, where the intrinsic value of products is anchored not only in craftsmanship or rarity but also in enduring symbolic meaning that transcends fleeting trends.
Competing imperatives
Professor Tobias Otterbring of the University of Agder eloquently added that luxury brands, historically celebrated for their embodiment of heritage and timelessness, confront a daunting challenge as they strive to harmonise innovation with preservation.
The research unearths a critical tension between these competing imperatives—between the drive to modernise marketing paradigms through cutting-edge technology and the imperative to maintain the storied legacy that underpins consumer loyalty and brand equity.
The “delicate balance,” as Otterbring terms it, is at risk of being disrupted, resulting in consumer perceptions that potentially recalibrate the status of luxury items downwards as mere transient novelties rather than enduring symbols of prestige.
A compelling follow-up study conducted by the same research team elucidates an additional facet of consumer reception: unfamiliarity with NFT technology often invites scepticism, with consumers perceiving these digital twins as inauthentic or contrived extensions of the product’s value proposition.
Such perceptions could amplify the erosion of the luxury aura, compounding the risk of alienating both traditional luxury consumers and potential digital-savvy clientele who value authenticity above novelty.
Despite these cautions, the researchers do not advocate a wholesale abandonment of digital twins or NFTs by luxury brands. Instead, they advocate a judicious approach characterized by strategic planning and deliberate integration.
Evolving cultural meanings
Dr. Dikla Perez of Bar-Ilan University underscores the necessity for luxury brands to preserve and protect the foundational values of authenticity, exclusivity, and timelessness even as they embrace technological innovation.
“NFTs and digital twins, if employed thoughtfully within a coherent and comprehensive marketing framework, can indeed complement and reinforce a brand’s legacy rather than detract from it. This considered approach necessitates a nuanced understanding of consumer psychology, brand heritage, and the evolving cultural meanings attached to luxury in the digital age.”
Moreover, the convergence of the physical and digital realms through digital twins should not be viewed simplistically as an additive innovation but rather as a transformative interaction with profound implications for luxury branding.
Brands must meticulously curate the narrative that frames their NFT offerings, ensuring that these digital collectibles echo the qualities that have traditionally defined luxury: rarity, craftsmanship, and a narrative of enduring value.
“Failure to do so risks relegating NFTs to gimmicks perceived as ephemeral or superficial, thereby undermining the symbolic capital of their physical counterparts,” Perez said.