Stacking Wins: How Martech Sophistication Drives the Digital Transformation Premium

Abstract

This study investigates whether the strategic composition of marketing technology (martech) investment drives superior financial performance. Using Verhoef et al.’s (2021) digitization-digitalization-digital transformation framework, we develop a sophistication index weighting martech investments by strategic value and test how martech sophistication affects financial performance. Analyzing 1,460 publicly traded companies from the S&P Total Market Index, we find strong evidence for a transformation premium—companies with more sophisticated martech portfolios achieve significantly higher market valuations (Tobin’s Q) than those emphasizing less digital transformation. This relationship is moderated by industry sector and firm size, with larger firms capturing greater benefits from more sophisticated martech investments. Our findings demonstrate that strategic composition, not mere volume of investment, drives martech value creation. The research provides actionable guidance for technology investment decisions and introduces a replicable framework for measuring digital transformation quality across organizations.