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Follow the Money Trail in Digital Marketing

By Laura McLellan | December 27, 2012 | 2 Comments

Digital marketers will increase investments in social, mobile and analytics  in 2013 (see the graphic below). No surprise there. But there are other factors in the digital marketing money trail that matter more —where the money comes from, how it’s used, and how you measure success. We believe 2013 will have to be the year to follow —  and to improve —  the money trail if digital marketers want higher investments in following years.  

Two Parts of the Money Trail That Are Difficult

Digital marketing should be a slam dunk.  Who can say no to increased investments that promise to improve the customer experience, shorten the buying cycle, increase retention, and open the door to new customers?  Not to mention improve product development, reduce selling expense, and speed up customer service?  Well, it turns out that plenty of CMOs, as well as their financial and internal IT counterparts, are moving ahead more cautiously than the hype would suggest. 

What holds them back? Let’s look at just two of most commonly expressed reasons – both connected to the money trail:

1.  Unclear measurements of success

Oh, there are plenty of digital marketing measurements around. Some are too tactical, some are of questionable merit, some are downright unverifiable. Metrics come from big name external branded sources, from marketing service providers you use to help with digital marketing, and from internal analytics. Some are done via Excel spreadsheets; others from sophisticated marketing analytics software. Providers of marketing software and services have developed their own Return on Marketing Investment (ROMI) calculations. 

Our research has shown that marketing is typically measured on revenue and profitability.  Problem is, few of the digital marketing measurements companies are using can be rolled up –  simply or reliably – to those two metrics (the exception is specific campaigns). So if you want to justify increased investments in digital marketing, you need to find, trust and use better measurements. The riskier alternatives are to formulate and document your own assumptions, or convince management to take a leap of faith.

Conclusion: A clearer, cleaner set of measurements is required. Metrics need to aggregate easily from the tactical to the strategic. They have to show how digital marketing investments support the ways marketing is measured and the company’s business objectives.

2.  Sources (and uses) of funding

The marketers we’ve been speaking with tell us they have four major sources of funding for digital marketing investments: cut traditional media spending, especially advertising; pare back other areas of traditional marketing spending (some because of the savings digital marketing can create); obtain increased budget from the business units they support; or convince the CEO and CFO to increase marketing’s budget. Some companies are fortunate enough to have all four sources.

Problems arise when marketers try to manually allocate labor, internal cross-charges and external expense and capital spending to digital marketing projects so they can match spending vs. returns. For example, if you have two people who are doing most of your social marketing, are you going to make them fill out daily time sheets?  Try to say which blog they worked on belongs to which business unit? Most company’s financial systems aren’t set up to support all the different types labor and expenses of digital marketing efforts. Should they be? Maybe the “big rocks” – planned, high cost projects or high-visibility pilots – but certainly not the day-to-day efforts.

Conclusion: Someone —   the Marketing Operations manager or the financial person supporting Marketing or the digital marketing manager —has to settle on a money trail tracking method that gives enough detail to capture the sources and uses of funding, without being too onerous for the people involved.

A Look Ahead

Gartner surveyed 512 large [500M$ to over 10B$] companies in the U.S. and Europe about their digital marketing investment plans.  The graphic below shows results from 244 marketers responsible for digital marketing. This  research is just a snapshot in time, and the respondent base may not accurately represent the market in general.  Details from the research show significant differences by vertical industry and geography.  



 What’s Next?

Look for upcoming Gartner research on 2013 digital marketing budgets, on marketing analytics, and specifically on the measurement methods for digital marketing.

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