A new value proposition is emerging in the business world, offering consumers temporary access to experiential goods. This trend is bound to have a major impact on the relationship between brands and customers.
This evolution of consumer markets, from a society of “owners” to a society of “users,” not only gives us greater access to more abundant goods at lower prices, but also helps reduce our Carbon Footprint. The price is a reduction in psychological ownership (the feeling that something is owned by me) to a specific commodity, but this reduction may be offset by changes in the way and purpose of perception of ownership. As our enduring relationship with the real thing fades, so does our sense of ownership of abstract concepts such as the ideas, groups, and brands we identify with. Businesses should understand this evolutionary trend and its future implications.
Increasing Experience
Value Driven by the rise of digital and technology-driven platform markets, the way we consume goods and services is evolving along two dimensions. First, we began to replace private ownership with temporary use rights of commodities; second, we gradually abandoned physical commodities and replaced them with experiential substitutes. For example, on-demand use of ride-sharing or ride-sharing platforms like Zipcar and Uber can replace long-term ownership of a car. We package physical media such as books, CDs and DVDs into libraries for digital delivery on subscription platforms. Even our data is migrating from paper archives and physical hard drives to enterprise cloud platforms. In this conversion process, we give up a series of rights associated with private ownership of physical goods in exchange for temporary access to experiential goods.
Usage rights-based consumer behavior is not a new concept. We traditionally enjoy the services provided by amusement parks, country clubs, libraries, hotels, public transportation systems, and taxis as such consumption behaviors. However, the technology-driven platform market is accelerating and expanding the dissemination of right-of-use products. In 2020, during the Covid-19 pandemic, Uber-owned drivers completed more than 1 billion rides, and the streaming service has become the most commonly used way to listen to music.
The right-to-use consumption model offers many tangible benefits. We can temporarily consume items that we might not normally be able to afford or wish to own permanently. For example, we can rent a backyard pool to kick off a party, call a black sedan to a date, or dress up in sumptuous clothing from a famous designer to a celebration or wedding. We can download the perfect book, song or movie, even when we’re at home or on a deck chair at the beach. Experiential consumption based on tenure rights reduces the impact of modern lifestyles on the environment.
But giving up private ownership comes at a price, and the price is a weakening of psychological ownership. We can feel psychological ownership of concrete objects like cars and abstract concepts like ideas, neighborhoods or rights. A psychological ownership is established when we explicitly exercise ownership of something (such as a property settlement signature), or when we develop a psychological connection to something. It’s just that the former is a conscious behavior, while the latter is an unconscious behavior. This psychological connection occurs when we feel that we control something, devote resources to it, or know it very well, or when it embodies some important aspect of our identity. That’s why we feel psychological ownership of a project at work, an office, a seat in a conference room, or even our own company—even if legally, those things are owned by someone else.
Psychological Ownership Enhances Commodity Value
We see what we own as part of ourselves, and we extend our positive self-perception to what we own. We prefer the things that belong to us and value them more than the things we don’t own. For example, when trying to sell an item, we often ask for more than we are willing to pay to buy it. For merchants, this value-enhancing effect of ownership is (mostly) worth maintaining: it reduces customers’ price sensitivity to goods, services, and brands, while increasing word-of-mouth, satisfaction, and loyalty. If we feel less psychological ownership of the things we use, so too will the perceived value they bring to us. Indeed, consumers are willing to pay less for digital goods than for similar physical goods.
These trends suggest that psychological ownership is on a downward trajectory. But if people develop stronger relationships with the platforms, brands, communities, and devices that provide a commodity experience, rather than just the specific goods or services they consume, psychological ownership may be altered and reserve.
One reason is that physical goods are often seen as less abstract, while corresponding experiential goods are seen as more abstract. For example, when we think of a car, we focus on its physical properties; when we think of a road trip, we think about the purpose and meaning of the trip, and miss our traveling companions. At this point, the car we use to complete the trip becomes a supporting role. For platforms that offer access-based experiential goods, this difference has the potential to reinforce consumers’ perceptions of ownership. In fact, consumers who have stronger psychological ownership of car-sharing and streaming music services not only use them more often, but also see them as a better alternative to private car or music ownership.
We can cultivate a closer relationship with the platform or service than with a privately owned physical good, because our relationship with the physical goods based on the right of use is temporary, but we want to be with the service that provides the right of use or a long-lasting relationship between devices. For example, we have a strong sense of attachment and identification with our mobile phones, which may reflect their role as gateways to digital media and online social life.
Cultivate a new sense
of ownership How should companies respond to this changing nature of ownership? On a broader level, merchants need to take steps to avoid homogenization.
Brands with significant market share, brand equity or capital may benefit from direct-to-consumer sales by taking control of their relationship with consumers while maintaining their distinctive brand image. Disney, for example, spun subscription content off of its other platforms and dedicated it to its Disney+ platform, to get rid of the clutter with the family-friendly entertainment offerings of so many other companies. This strategy helps protect Disney’s brand equity and its unique positioning in the eyes of consumers. Automakers such as Volvo offer access to cars for a monthly fee to avoid the risk of homogenization.
When a single brand struggles to provide the mix of goods or services consumers demand, merchants may create intermediary devices or platforms to maintain control over the customer relationship. Through these devices or platforms, consumers can consume experiential goods and services of various brands. The Kindle is one such device, and Amazon is equivalent to providing both the device and the platform. But that’s easier said than done: platforms that are successful are few and far between, and nurturing a consumer’s connection to a device or platform requires the ability for consumers to gain a sense of control, invest time or money, and see the brand as their own some kind of identity expression.
Brands that continue to cooperate with the platform need to carefully manage the exclusivity of the brand by planning the use of their own products. For example, when car brands partner with ride-sharing platforms such as Uber and Zipcar, they should negotiate exclusive brand usage on these platforms to avoid homogenization. This essentially makes the platform a brand extension for the automaker. In addition, brands can develop platform-specific products or encourage platforms to use an existing product. General Motors, for example, is trying to do just that by offering discounts to platform drivers who buy the Chevrolet Bolt EV electric vehicle. If neither of these options are feasible, then it is better for brands not to be involved with the platform.
Companies may increase psychological ownership of experiential goods by extending usage rights, such as offering long-term contracts for popular content. Merchants selling digital products must be more strategic in the management of long-term rights and interests. For example, many of us mistakenly believe that when we buy an e-book, we buy title to it, when in fact it is long-term use. This misunderstanding can spark a backlash when platforms end licensing, even compensating consumers. This kind of experience is deeply felt by Microsoft, which caused public outrage when the company suddenly shut down its e-book platform, making all its e-book users unable to access the company’s digital library.
How to Cultivate Psychological Ownership
We can feel a kind of psychological ownership of many things that we do not legally own. As for how to cultivate psychological ownership of the experience, everything can be traced, such as providing more choices, or more control. The latter can be further enhanced by allowing users to interact with touchscreen controls and by allowing consumers to decide when, where and how quickly to consume goods. We can also use the user’s self-investment to strengthen their psychological ownership by using gamification, identity ratings, and reminders to remind users how much time and effort they have invested in a platform, brand, or community. The language-learning app Duolingo, for example, sends frequent notifications to users as they learn, reminding them to practice skills they’ve already mastered, to urge them to participate in special events like leaderboards, and to receive badges or Points and other rewards.
Finally, marketers are better off keeping some tried-and-true relationship-building strategies in mind, such as educating consumers about a brand’s unique history and unique offerings, and encouraging them to use the brand for self-expression or community identities.
The evolution from an “owner” society to a “user” society is an exciting process of change that brings many benefits and necessary changes to the future of mankind. Careful consideration of the psychological cost of change can help consumers and businesses discover new value from their new relationships with consumers.
