Summarize the article and how does it relate to time value of money

The finance department and CFOs are getting closer and closer to the marketing department, and for once, its not because marketing is asking for more budget. Heres why your CFO peers are shifting into digital strategy, how theyre interacting with the marketing department and what your organization can do to increase alignment.

The Time Value Of Money

Investing, at its very core, is about patience. You put money into a concept, like a business or a retirement fund, and you wait. The longer you wait, the more your money grows through compounding interest. Once you take money out, you prevent future returns from ever materializing. Your money becomes more valuable the longer you leave it in your investment.

According to Investopedia, "The time value of money (TVM) is the concept that money available at the present time is worth more than the identical sum in the future due to its potential earning capacity."

CFOs focus on current revenue to project future value of the organization. Marketing works in the same way. Company growth focuses on sales and innovation.

The Time Value Of Marketing

Allow me to introduce a new concept: the time value of marketing. It says that a consumer level of engagement/attention or conversion available at the present cost of acquisition is worth more now than the same amount in the future. There are more choices today for capturing attention than yesterday. And the cost of the attention was less expensive yesterday than it is today.

Marketing has a remarkable resemblance to investment portfolios. For example, you need time to develop relevance and trust scores in paid search campaigns, to develop history and links for search engine optimization, to develop social audiences that engage with you enough to make a purchase, to develop a remarketing pool and on and on. Marketing develops a rolling tide of future customers that, when nurtured consistently, eventually mature into customers.

If marketing loses its budget and cant nurture leads, then it's essentially the equivalent of taking money out of your IRA prematurely -- youll never be able to realize the results. Cut the investment, and marketing cant nurture those leads into revenue.

Investment Theory Vs. Marketing Reality

Unfortunately, CMOs rarely have the luxury of patience. In my experience, the CEO -- and, yes, even the CFO -- typically tend to treat marketing more like a gumball machine than an investment portfolio. Theres a misleading vocabulary around marketing efforts, such as whether a campaign worked or calculating return on investment (ROI) strictly as revenue made this month vs. monthly marketing spend. The budget gets cut, the CMO gets scolded or fired and results (most often meaning immediate cash flow) are still expected.

Is that how you would manage your investment portfolio? The stock market takes a downturn, you tell your hedge fund manager to shape up, sell off your shares and still expect the same investment yield? Of course, the idea is absurd.

Traditionally, marketing ROI was calculated through a simple equation: ROI = (Gain from Investment - Cost of Investment) / Cost of Investment. In the past, organizations took this calculation to each medium: the ROI of print, digital, TV, billboards, etc. This created a false narrative and duplication.

As digital evolved, marketers adapted innovative ways to derive ROI with the introduction of attribution models, such as first-click, last-click, multitouch, weighted average, etc. Theyre all designed to prove the value of the channel or the people responsible for the channel.

How To Create Alignment Between Marketing, Finance And The C-Suite

Leads cost more to generate today than they did yesterday. Every time marketings budget fluctuates, the entire company loses momentum from the lost investment. Ramping up marketing efforts is as hard as it sounds: youre fighting an uphill battle until the investment starts to have a yield. That often takes more time than the C-suite is often willing to give it.

In other words, the more you dial up and down marketing budget, the more money you lose -- now and in the future.

Now that you know why CFOs would want to defend marketings budget and work, heres how to get the rest of the C-suite on board:

Show the CMO how to build a core portfolio from a finance perspective.

Not all investments pan out. Not all marketing tactics are dead ringers, either. But if your CMO wants to hang onto any budget, they have to identify their core tactics, what those tactics are yielding and how much budget they require to maintain performance.

Help the C-suite value audience growth.

Marketers used to be able to close deals by shouting louder than everyone else. Put out enough billboards, radio ads, print ads and TV commercials, and youd net something. Thats not the world we live in anymore.

Marketers have to cultivate an audience and nurture each person until they are ready to make a purchase. When marketing spend yields more newsletter signups and social media interactions, thats valuable -- at least, as long as you are able to track the timeframe and conversion rate to get those interactions down the funnel to purchase.

Implement measurement tools.

Everyone wants a scorecard. Establish universally agreed-upon key performance indicators and measure them accurately. The budget discussion should be quick and obvious, and thats a win for everyone.

CFOs are uniquely positioned to help CMOs tell the story of long-term value of marketing in your organization. The marketing team is constantly investing in the long-term. With the CFO at their side, marketers can demonstrate the concept of the time value of marketing.