Quantifying Creative Leverage

Photo by @anniespratt on Unsplash

“We want to consistently make $1 = $100.”
 – Mike Cessario, CEO of Liquid Death, at Cannes Lions Festival of Creativity 2024

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There’s a concept in corporate finance and wealth management called leverage. It refers to how much excess power an organization can generate beyond its current assets.

There are two main kinds of leverage:

1. Operating leverage – creating excess revenue through how you go to market
2. Financial leverage (AKA debt-to-equity ratio) – how much you’ve borrowed against your assets for extra capital/liquidity

Anyone who’s bought a house should be loosely familiar with both. Trimming your household expenses or working a side hustle to save up enough for a down payment – that’s operating leverage. Maximizing your borrowing power to stretch a mortgage as far as possible – that’s financial leverage.

Of the two, financial leverage is much stronger – you can generate exponential leverage through borrowing; operating leverage is often measured in percentage points.

I think there’s also a clear parallel in advertising: let’s call it creative leverage.

Creativity as a force multiplier is a well-understood concept. It’s an unparalleled path to value creation in business the world over.

But despite knowing that creativity is valuable, and that we can quantify that value, we rarely explore the fact that creativity converts concepts into value using a number of different mechanisms. And not all of them are equal.

Need proof? Back to Liquid Death.

There are plenty of exceptionally motivated and creatively gifted companies with leaders who could drop “We’re launching nothing but 100x ideas!” in a Keynote.

And from almost any other leader, that would undoubtedly sound like puffery. A bit of hyperbolic chest-beating and self-congratulatory navel-gazing that sends shivers through their team, who know that they’ve just been handed an almost impossible expectation to deliver against.

But in the context of Liquid Death, I think this was simply revealing their report card. They’ve done the math. For every dollar spent on bringing an idea into the market, it is entirely within the realm of possibility that they generate an earned media value in excess of $100; that’s a ludicrous track record in value creation, and one of the driving forces behind how Liquid Death grew to a $700 million valuation in its first three years before doubling to $1.4 billion by year five.

Their campaign archives are littered with campaign after campaign, all radically different from one another, that were able to engineer excess value at an exponential rate. That kind of consistency cannot be chalked up to a team riding a hot streak – they’ve got to be exploiting a gap in the market that others are missing.

Which begs the question of Liquid Death’s creative leverage: what exactly is it that lets them CONSISTENTLY convert $1 into $100+?

Said another way: Where is the excess power in an idea coming from?

The true strength of an idea – the reason it works, in capturing attention, in evoking emotion, and in establishing clear memories – might come from a number of different mechanisms, but broadly speaking they can roll up into two neat categories that parallel the finance world’s concepts of leverage.

1. Operating leverage = creative craft. Gaining incremental value through better operations (e.g., better “creative margins”)
2. Financial leverage = cultural advantage. Value created by leveraging meaning from other external sources/norms/entities (“creative debt” to fund our equity)
3. Compound interest = creative commitment. Stealing from another financial mechanism here to illustrate the third form of creative leverage: strong memories benefit reinforcement learning.

What are the mechanisms driving leverage in each territory?

Creative craft leverage

This mechanism is all about making the brand’s expression of creativity, the assets we create and push into advertising, as strong as possible through things solely within the domain of the client/agency team – things like taste, judgment, and craft of the production team.

1. Stylistic craft: a story impeccably told; writing, art direction, lighting, sound design, pacing, casting, performance, FX
2. Dissonant action (breaking character): putting previous behavior and reputation to use, likely through unexpected elements (e.g., doubling down on past commitments/assets or through cognitive dissonance/transgressions)

A random sampling of incredibly fun, powerful, creative work tapping into creative craft leverage might look like:

There’s magic to be created solely with elements within our creative control. But the leverage here is minor; it takes a significant number of resources to gain incremental breakthrough power (again, in capturing attention, evoking emotion, and instilling long-term memories) through creative craft alone. This is the incremental path to creative leverage.

On the other hand, we’ve got borrowed leverage, the exponential effect.

Cultural advantage leverage

Borrowed equity is a powerful force, and it can be generated using:

• Cultural references: nostalgia, memes, licensed IP, allegory, identity-based signaling

• Poignant context: a perfect moment in time, reacting with uncommon speed to introduce an idea that reacts to culture, finding dense and rich co-viewing environments that let people see an ad in the context of who they are within a community first, tapping into media that amplifies the idea in context (e.g., amplify the emotional resonance vs. stand out for being intentionally dissonant)

• Celebrity involvement: not just actors – athletes, musicians, creators/influencers

• Auteur notoriety: hire a famous director/studio (it ain’t cheap, but it works)

• Pattern-disrupting interjections: intercept common behaviors, patterns, and rituals on a personal or cultural level with an experience that forces someone to break their habit

• Amplification through outrage: “OMG can you ~ believe ~ they did this?”

• Really, anything by MSCHF. https://mschf.com/

• Amplification to remix: “OMG, check out my version.”

Creative commitment leverage

The more consistently a brand iterates from a common core platform with inventive consistency, the greater the compounding effects on memory will be.

Think of this as the “land and expand” territory. It’s not just about rote repetition – when you’re learning about a concept, hearing the same explanation repeated ad nauseam won’t make the meaning clearer. But if whoever is explaining the idea can say it slightly differently, use a more apt metaphor, demonstrate the concept in action, put it in someone else’s words, you might pick up more meaning.

This is the territory of:

“15 minutes could save you 15 percent or more on your car insurance.”

“You can do it, we can help.”

“Should have gone to Specsavers.”

“You’re not you when you’re hungry.”

“Eat mor chikin.”

Different takes on a core theme and idea ultimately create a network of related ideas in your memory – compounding interest on your memories.

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Should more brands have the ludicrous expectation of making every dollar spend like a hundred? It’s worth recalling that in this metaphor, financial leverage is also strongly coded as a measure of risk. Ambition is a good thing – you’ll never take a big enough creative leap without having a big chasm to cross, but it’s absolutely critical to understand the concept of leverage when taking on that challenge. Without using the right kinds of exponential-leverage-creating creative executions, an unrealistic expectation will just cause frustration, pain, and a stomach-churning drop into the pit of ignored ideas.