Digital Products Vs. Physical Products: Pros & Cons?

I've been doing pretty well selling all of my products in digital (i.e. downloadable) form through Clickbank. (E-books, mp3 audio coaching, streaming videos, etc.) But occasionally, I get emails from customers saying that they don't want to download my product -- they want me to send them hard copies. Or even worse, I get the rare email from someone who bought my product and now wants a refund, because they were expecting hard copies to be shipped to them. (You'll always run into these customers, no matter HOW clear you make it on your website that your products are downloadable....)

Anyway, I know there are some good services that will create "print on demand" versions of your books, audios, etc.

The benefits of going this route, as I see it, are:

1. Higher perceived value. You can raise the price of your products when you are shipping out hard copies, because the customer sees this as having more value than an instant download.

2. Lower refund rates. People are a lot less likely to send back the materials and request a refund. (With Clickbank, it's almost too easy...they just send in an email, and wham, they get a full refund.)

My question: would it make sense to offer BOTH options to your customers? Or would that only make the process more confusing?

My feeling is that I should probably offer one or the other (download format, or hard copy format.) If I decide to offer hard copies, then I might want to do so through a separate site that only markets and offers my products in that format.

What do you think? Clickbank is wonderfully easy from a vendor perspective, and even refunds are processed automatically with no fuss. Things get trickier when you're shipping out hard copies -- but again, the "perceived value" is greater.

I once read somewhere that when you ONLY offer your products in download format, you lose around 1/3 of your possible sales. Nowadays, I fear that a lot of customers still aren't comfortable spending a decent amount of money on an e-book (even when you load it with additional bonuses) -- but might grab the offer IF you were sending them hard copy materials.

Curious to get some perspectives on this...and the names of some good services that create hard copies of your products on demand (I don't want to wind up with a garage full of books and DVDs that I'm trying to unload...)