Summarize the article and how does it relate to time value ofmoney

The finance department and CFOs are getting closer and closer tothe marketing department, and for once, it’s not because marketingis asking for more budget. Here’s why your CFO peers are shiftinginto digital strategy, how they’re interacting with the marketingdepartment and what your organization can do to increasealignment.

The Time Value Of Money

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

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

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

The Time Value Of Marketing

Allow me to introduce a new concept: the time value ofmarketing. It says that a consumer level of engagement/attention orconversion available at the present cost of acquisition is worthmore now than the same amount in the future. There are more choicestoday for capturing attention than yesterday. And the cost of theattention 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 inpaid search campaigns, to develop history and links for searchengine optimization, to develop social audiences that engage withyou enough to make a purchase, to develop a remarketing pool and onand on. Marketing develops a rolling tide of future customers that,when nurtured consistently, eventually mature into customers.

If marketing loses its budget and can’t nurture leads, then it'sessentially the equivalent of taking money out of your IRAprematurely -- you’ll never be able to realize the results. Cut theinvestment, and marketing can’t nurture those leads intorevenue.

Investment Theory Vs. Marketing Reality

Unfortunately, CMOs rarely have the luxury of patience. In myexperience, the CEO -- and, yes, even the CFO -- typically tend totreat marketing more like a gumball machine than an investmentportfolio. There’s a misleading vocabulary around marketingefforts, such as whether a campaign “worked” or calculating returnon investment (ROI) strictly as revenue made this month vs. monthlymarketing spend. The budget gets cut, the CMO gets scolded or firedand results (most often meaning “immediate cash flow”) are stillexpected.

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

Traditionally, marketing ROI was calculated through a simpleequation: ROI = (Gain from Investment - Cost of Investment) / Costof Investment. In the past, organizations took this calculation toeach medium: the ROI of print, digital, TV, billboards, etc. Thiscreated a false narrative and duplication.

As digital evolved, marketers adapted innovative ways to deriveROI with the introduction of attribution models, such asfirst-click, last-click, multitouch, weighted average, etc. They’reall designed to prove the value of the channel or the peopleresponsible for the channel.

How To Create Alignment Between Marketing, Finance AndThe C-Suite

Leads cost more to generate today than they did yesterday. Everytime marketing’s budget fluctuates, the entire company losesmomentum from the lost investment. Ramping up marketing efforts isas hard as it sounds: you’re fighting an uphill battle until theinvestment starts to have a yield. That often takes more time thanthe 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 marketing’sbudget and work, here’s how to get the rest of the C-suite onboard:

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

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

Help the C-suite value audience growth.

Marketers used to be able to close deals by shouting louder thaneveryone else. Put out enough billboards, radio ads, print ads andTV commercials, and you’d net something. That’s not the world welive in anymore.

Marketers have to cultivate an audience and nurture each personuntil they are ready to make a purchase. When marketing spendyields more newsletter signups and social media interactions,that’s valuable -- at least, as long as you are able to track thetimeframe and conversion rate to get those interactions down thefunnel to purchase.

Implement measurement tools.

Everyone wants a scorecard. Establish universally agreed-uponkey performance indicators and measure them accurately. The budgetdiscussion should be quick and obvious, and that’s a win foreveryone.

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