Digital or Physical

As members of the digital age, we’re lucky to have the option to deliver our products in either physical or digital form. However, with options come choices, so we often get the question, “Which is better? Digital, physical or both?”

The answer: “It depends.” When you select the format for your product, you’ll consider a number of factors, including the content you’re providing, the audience you’re speaking to and the budget you’ll want to maintain. Ultimately, it’s rarely a clear-cut decision, but rather one in which you’ll weigh the pros and cons. We’ll provide you some food for thought, as well as a six-point list of criteria to help you make the right decision for your business.

We’ll start with physical products, which include items like CDs, DVDs, physical books, manuals, flashcards and whatever else your creativity can conjure up.

The Advantages of Creating a Physical Product

• Even in a world where everything is online or digital, physical products often have a higher perceived value. Part of this may be attributed to the tactile experience. Does your heart race faster when you receive a big box in the mail or when you receive a login to a membership site? Offering a physical product may also set you apart from your competition and provide a competitive advantage with customers who wish to own a physical product.
• Often, the return rate on physical products is lower than with digital products. Whether it’s because people still place greater value on a physical product—and feel greater satisfaction when receiving one—or because the burden of physically mailing a product back proves a barrier, the numbers tell the story: physical products tend to have a higher “stick” rate.
• Physical products may appeal to your target market, especially if your ideal customer is technologically unsophisticated. For example, baby boomers may be more comfortable with DVDs or even software sent to them on CD, rather than accessing tools through a membership site. (Or they may not! Make sure to do your research on this one so you don’t end up stuck with a warehouse of physical products that no one wants.)
• Because they have the product in their possession, your customers may feel greater certainty when buying the product. After all, they won’t have to worry about losing an access code or your going out of business. They own the physical product forever.
• Customer service for physical products can be less demanding and takes less expertise. Although you will run into defective DVDs or CDs, you can simply replace those. If a customer is having trouble with a digital product or a piece of software, your customer service staff may have to troubleshoot their problems. Depending on your product, it can get tricky, which is why you need experienced staff in place.

Even though creating a physical product has its upsides—including the feeling of pride some people get when holding their product in their hands—giving your product physical form may give you pause for the following reasons:

The Disadvantages of Creating Physical Products

• Selling physical products involves more logistics on your end, including shipping the product and storing your inventory, both of which cost money. Sure, you can pass some of these costs along to the buyer, but the more costs you incur, the trickier it becomes to produce a product with both high perceived value and good margins. You’ll also have to deal with damaged or lost shipments, as well as make provisions for the product to clear customs for international deliveries.
• Shipping time means that your product takes longer to get into the customer’s hands. If your customer loses his or her state of enthusiasm in the meantime, you can run the risk of higher return rates.
• Depending on your product, creating a physical version may require a larger upfront capital investment. For example, consider a physical book vs. an eBook. Paying for formatting and distribution of your eBook is significantly different than writing a check to print 10,000 copies. That’s not to say that a digital product is “free,” More on that as we dive into the pros and cons of digital products.

The Advantages of Creating Digital Products

Since their introduction, creators have gravitated toward digital products. Offering your content online offers significant benefits, including:

• You pay to create it, but after that, there are no production or manufacturing costs to cut into your profit. Nor are there shipping costs to deliver the product to your clients. Plus, your product doesn’t need to be stored in a warehouse—and you won’t ever have to worry about running out of stock. Online products also infinitely scalable. The cost of adding 100 customers is the same as 1,000 customers (with the exception of the customer service that goes along with it)!
• Digital products are delivered immediately, providing your customers with instant gratification, so they can consume your product while they’re still in a state of excitement. This can ultimately result in greater compliance—i.e., more customers actually using your product, getting results and becoming your new hero stories. Most importantly, your product can be accessed anywhere in the world, instantly. There’s no two-week lag time for shipments and there are no customs forms to complete.
• Digital products are more environmentally friendly. They cost little in terms of natural resources to produce, and no fossil fuels are expended to ship the product. For some of your customers, this may be a selling point.
• Although they may require more customer service, as noted above, a great deal of the administration can be automated. Wishlist, Nanacast, Digital Access Pass, as well as other membership site plugins, can automatically send out user names and passwords without you having to lift a finger. Additionally, where returns are concerned, if someone falls behind on payments, you can immediately restrict access, whereas if someone misses their second payment on a physical product, you have to rely on their good will to send it back.
• Digital products can be more flexible in terms of content delivery. If you notice a mistake, or need to make a revision, you can do so immediately. You can also test different aspects of your product and change them instantaneously based on your results.
• By setting up a comments or member feedback section of your digital product, you can also create a community of engaged users. These users can often become super fans, who will nurture your community for you, create success in their own lives and share them via testimonials. Although you can certainly create an online community for physical product users, it can be easier to get customers to participate in an online community if they’re already online and accessing your product.

However, even in the digital world, it’s not all roses. You’ll also need to consider a couple of items before deciding on a digital delivery

The Cons of Creating Digital Products

• Creating a digital product might (MIGHT!) be cheaper than manufacturing physical products, but it can still be expensive to build and maintain the site where your digital products reside. Just because there’s no physical product doesn’t mean there’s no cost. Just as with manufacturing a physical product, you need to set a budget and watch your costs closely. If you choose to customize your digital product considerably, you may be looking at a hefty bill. You’ll also need to choose your hosting package carefully to make sure that you can offer continuous access to your product. If your online product goes offline, you’ll shake your customers’ confidence in you.
• As we noted earlier, you’ll need a well-trained customer service and/or technical support staff, especially if there are videos involved. Customers develop issues, even with common formats like Vimeo, YouTube or Flowplayer.
• Because digital products are more intangible, people may not recognize the value it represents, which can lead to requests for discounts or refunds. Also, depending on the organization of your site, some of your features may be “hidden” from your customers, preventing them from getting the full value out of your product. It’s easier to ignore a sidebar on a membership portal than an extra DVD in a physical package. Finally, the easy return process for digital products—i.e., no need to carry a box to the post office—can mean a higher return rate.

It’s Decision Time

Now that you understand some of the considerations involved in your decision, how should you go about taking the final plunge? We suggest six criteria:

1) What format is best for your customer? Is your avatar a digitally-savvy 20-something who’s always on his or her smartphone or a 70-something retiree who reads paper books and watches DVDs? Some people love digital products. Others despise them. Know your customers and their preferred means of content delivery, and shape your product accordingly.

2) What format is best for your content? Does your product include components (i.e., calculators or other web-based tools) that need to be delivered online? Or are some items, like a journal, inherently a physical product?

3) How are you planning to sell this product? If you hold seminars or speak at events, a physical product gives people something to walk away with. This can often increase “stick” rate and reduce returns. However, if you’re doing an international promotion, it might make more sense to do an online product to cut down on delivery lag time and logistics.

4) What’s your budget? Physical isn’t always more expensive, just as online isn’t always cheaper. A small physical product may end up being cheaper than a deep online site. Evaluate the capital you have on hand and how it can best be applied.

5) How many copies do you plan on selling? Online products can be infinitely scalable, while there’s a cost of goods with every physical product sold. Know your margins, project your sales, and do your calculations to determine how many sales it will take to earn you the profits you want.

6) What infrastructure you have in place to support sales and customers? Do you have staff that can help you handle orders for physical products or a reliable production and shipping company to manufacture and ship your products on demand? Do you have qualified customer service people to help answer questions and provide tech assistance for your online products?

It’s also important to note that your best option may be a combination of the two.

Whatever you choose, make sure you’re behind it 100% so you have the confidence to market and sell it like crazy. Let your content, goals, budget, sales process, and infrastructure help guide you in making the best decision for your business.