Marketing case

Presented by Fairstone

Case written by

Sylvie Morin Ph.D. Teacher in Management at UQAR Lévis campus

With the collaboration of

Claire Verleyen, Senior Marketing Manager, Fairstone

Harold Heppell Ph.D. Teacher in Management at UQAR Lévis campus

The Lending Industry

In the non-bank lending industry, category awareness is low. People generally don’t know
they can’t get a loan or line of credit from the bank until suddenly, one day they can’t.
Customers situations vary and are as unique as they are; for example: perhaps they used
their credit cards to pay for unexpected expenses like car repairs or new appliances, and
before they have a chance to pay off this debt, their roof begins to leak. With no room
left on their credit cards and no additional savings, this person will need to take out a loan
to pay for the roof repair. When they go to the bank, they have their finances reviewed
but with high credit card debt, a mortgage, a car loan and little savings, the person likely
won’t meet the bank’s conservative criteria for borrowers. See page 4 for further
examples.

As prime financial institutions, banks have tight lending criteria based on a person’s
financial situation; they will look at a person’s debt utilization (how much of their credit
limit they’ve borrowed up to), savings to pay for emergency expenses, and how much
room is within the person’s budget to pay back the loan. With low appetite for risk, the
bank’s cut-off for these measures are tight. Unless the person has excellent credit and
has never been in a similar situation before (and sometimes even then), the bank may
decline their application for a new loan or a higher credit limit on a credit card. Until then,
the person has probably never considered applying for a loan anywhere other than a
bank, and they may not know where to turn, but with something as urgent as a leaking
roof they must continue to look to borrow money.

Payday lenders are often easy to find and may be the next option that pops into a
person’s mind when they are denied by the bank (unless they can borrow money from
friends or family). A payday loan is a type of loan that has a two week or one-month term
(the term is the length of time a person has to pay the loan back). For this type of loan,
people generally take out the money assuming they will pay off their loan with their next
pay cheque, almost like a pay advance. Payday lenders also offer larger loans with longer
loan terms.

People generally know it’s easier to borrow money from a payday lender, and in a high-
stress situation, such as a leaking roof in the scenario above, this may seem to be their
only option. However, payday lenders charge high interest rates over a short period of
time. For example, a $15 borrowing fee per $100 borrowed on a 30-day payday loan has
an interest rate of 182.5%. Many borrowers find these rates too expensive, and not a good
option – particularly if they are used to dealing with the bank.

Here is an image showing how lending and financial services can be considered a
spectrum, and reflect customers’ credit scores:

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If the bank is not an option and they aren’t interested in borrowing from a payday lender,
borrowers may begin to search for other lenders. An online search might lead them to
financial companies such as Mogo, Fairstone, and easyfinancial.

• Mogo is a “fintech” (financial services technology) company. Mogo offers personal

loans, mortgages, a Visa Debit card and credit score monitoring to customers in all
credit score ranges. Mogo is a primarily online lender, and the majority of its business
is not in personal loans. Most of Mogo’s personal loans customers are on the lower end
of the credit spectrum, likely carrying multiple debts at high debt utilization, who may
have demonstrated poorer borrowing habits (e.g. missing payments, making late
payments, not paying bills).

• Fairstone has over 230 branch locations in all provinces and territories except Nunavut,
and serves “near-prime” customers as well as those in the “fair-to-good” credit score
range, those who just fail the credit criteria of the bank. These borrowers also often
have multiple debts and higher debt utilization, but may have demonstrated some
stronger borrowing habits than lower-credit borrowers. This might be the right fit for
the person in the scenario explored above.

• easyfinancial has over 200 branches in Alberta, BC, Manitoba, Newfoundland, Nova
Scotia, Ontario, Quebec and Saskatchewan, and serves customers in the “poor-to-fair”
credit score range. Their customers would display similar characteristics to both Mogo
and Fairstone’s customers.

These lenders are structured differently, and each serve different groups of customers
with different financial situations, but are different from the bank in that they are more
willing to lend to people who have are in what is considered to be “riskier” financial
situations.

On the other hand, this same online search could lead a person to any number of private
lenders or unknown companies that may be less reputable or advisable.

These lenders attract consumers’ attention once they realize the bank is not an option. A
quick online search or discussions with friends and family may brings up many lenders,
but how do consumers know who to trust? Brand awareness – both at the national and

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local level – is a key factor in the consumers’ decisions about which financial company to
choose. Internal research indicates if a potential customer (or someone they know) has
had previous exposure to a brand, they are more likely to feel secure in their choice.

Consumers’ Borrowing Habits

Canadian debt is at an all-time high. Many people live paycheque to paycheque, with little
or no money set aside for emergencies, let alone long-term savings goals like retirement.
Currently, the average Canadian owes $1.69 for every dollar of after-tax income earned
per year – substantially higher than $1.00 owed per $1.00 earned 20 years ago.1

Canadians’ mindset about borrowing money has also changed. In previous generations,
people borrowed money for large-ticket items like houses and cars, with the intention of
paying off those debts. Today, many Canadians borrow money with the knowledge that
they’ll likely never pay it off before they acquire something new, like a newer or second
car, or a larger home. This acceptance that debt is a way of life means that people are less
afraid to take on debt and may get into riskier financial situations.

Both situations increase the likelihood that a person will experience a credit crunch and
not be able to borrow money from the bank. Having little to no savings for emergency
situations leaves it likely that a person will need to borrow money if something
unexpected occurs, like a car breaks down or a roof caves in. High debt service ratios
(when someone’s debt payments are too high compared to their income) decrease the
likelihood that a person will be approved from the bank.

Knowing and being familiar with financial options, including bank alternatives, can help
protect a person in the case of a sudden financial concern. Rather than borrowing from
the first source that comes to mind (often a payday lender, due to their large presence),
the consumer has the ability to weigh their options and find a lender that provides the
right loan amount and rate for their situation.

More examples of customers scenarios

To provide added context, here are some situations that could lead a person to be in a
credit crunch and not qualify to borrow money from the bank, based on internal research:

• Sandra graduated a few years ago. She recently signed up to be a sales consultant for
an online cosmetic distributor and is planning to use social media to grow her business.
Sandra did ok with her finances in school and afterward - she wracked up some credit
card debt moving into her new place and buying clothes for work, and missed a few
payments by accident, plus she got behind on a few hydro and internet bills, but she

1 Reference: https://www.cbc.ca/news/business/household-debt-canada-1.4823706 ; see Appendix 1.

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 didn’t realize how negatively those had affected her credit score. The starter kit for
cosmetics was costly, therefore she bought it with her credit card because she
expected to make enough money in the long run to pay it off. Unfortunately, Sandra
also got into some legal trouble over a speeding ticket she hadn’t paid off. With no
room in her budget or on her credit card, Sandra realizes that if she’s going to get
ahead of her bills, she needs to find a way to pay off her credit card debt, clear out all
her bills and pay off the old ticket. Sandra needs a loan. Because her credit history isn’t
excellent, and she has a lot of outstanding debt, Sandra doesn’t qualify for a loan from
the bank. She needs a reliable lender to help her find a way out.

• Pete is a busy dad on a tight budget. Even though he and his wife are careful spenders,
Pete’s a bit behind on his bills and that is affecting his credit score. On top of all their
other expenses, Pete’s car has broken down, and without it, he couldn’t get to work.
Pete needs some money to repair his car and get back on the road. However, since
Pete is behind on his bills, he doesn’t qualify for a loan from a bank – but he doesn’t
want to go to a payday lender.

• Danielle is an administrative assistant by day and an avid hockey mom by night. She
has a limited amount of spending money and, with a busy family, many bills to pay.
Hockey registration is coming up and both her sons need new equipment, plus there
are away games to think about, but Danielle doesn’t have any savings that could cover
these costs. Her credit cards are almost maxed out and she fell behind on a few
payments, so she isn’t sure if she’ll qualify to increase her credit limit at the bank.

The Fairstone Case

Fairstone is a non-bank lender providing personal loans, home equity loans and debt
consolidation services. With over 230 branches across the country, in which Lending
Specialists help create loans solutions tailored to each individual borrower, Fairstone is
focused on providing responsible, transparent loan options to Canadians experiencing a
credit crunch.

Fairstone provides loans for people in the “good-to-fair” credit score range, who may not
be able to receive money from a bank or credit union but do not require a payday loan.

Products & Services

Fairstone provides the following products and services:
• Personal loans range from $500-$30,000, with rates starting at 19.99%
• Mortgage loans up to $400,000, with rates from 12.99%
• Debt consolidation, using any loan product

Structure
Fairstone has over 230 branch locations from coast to coast, in every province and
territory except Nunavut. Each branch has a Branch Manager, as well as Lending

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Specialists who work directly with the customer. Fairstone also has two corporate offices,
one in Montreal, QC, and the other in London, ON.

The Opportunity: More Informed Borrowers and Increased Brand-Awareness

Positioning
Because Fairstone truly does provide an option between banks and payday lenders, with
strong policies that protect consumers and experienced Lending Specialists who help
guide the loan process, it is in Fairstone’s best interest that more consumers become
aware of their financial options before an issue arises. In this pre-need phase, consumers
may not be interested in learning about non-bank borrowing, but it provides added
security should the unexpected occur to them or someone they know.

Current Awareness Building Efforts & Challenges

In 2018, Fairstone began a national media campaign, leveraging television commercials
and online videos to grow brand awareness.2 This campaign will continue in 2019, and has
demonstrated movement in awareness at the national level. However, unaided brand
awareness of Fairstone (people knowing of the brand without being asked about it)
remains below 5% among the general population, largely because it is a new brand.

The brand name Fairstone has existed since April 1, 2017.3 Before 2017, Fairstone was
owned by Citigroup and called CitiFinancial. Before CitiFinancial, Fairstone was made up
of a number of legacy companies, dating back to 1923 in Canada.

2Read more about the campaign here: https://www.fairstone.ca/blog/fairstone-advertising-campaign ; see Appendix 2.

3https://www.newswire.ca/fr/news-releases/presentation-de-la-financiere-fairstone-inc-anciennement-citifinanciere-
entreprise-qui-offre-des-solutions-de-pret-responsables-aux-canadiens-617982983.html; see Appendix 3.

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Beyond being a new brand, Fairstone faces the following marketing challenges:
• Low brand awareness of non-bank lending among the general population.

• Most people don’t view financial services as a spectrum, with a range of lenders
catering to different people depending on their credit score and financial situation;
instead, they see banks on one hand and non-banks on the other (grouping payday
lenders with near-prime lenders like Fairstone).

• There is social mistrust and general distaste toward non-bank lending, and fear of “sub-
prime borrowing” since the 2008 financial collapse and ensuing recession.
- In 2008, many US banks collapsed due to over-lending to non-prime borrowers.
As interest rates rose (along with social factors like unemployment), too many
borrowers were unable to pay their loans back, and ended up defaulting,
causing a ripple effect through the US financial system, and globally, leading to
a global recession.

Owned Marketing Channels

Fairstone leverages mass media, print, and digital marketing campaigns, as well as
partnerships and affiliations, to grow brand awareness and convert prospects into
customers, including:
• Search Engine Marketing (SEM) • Direct Mail
• Social media & social advertising • Roadside signage out front of
(Facebook, LinkedIn, Instagram) branches
• Search Engine Optimization (SEO) • Sponsorship (JA Canada, Tree Canada) 4
• Online affiliate partners • Community Engagements (sponsoring
• Television and online video ads local events like music festivals, runs,
parades e.g. Peterborough Musicfest,
Run for Leucan)

4 https://www.fairstone.ca/community; see Appendix 4.

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Your Mandate: Generate Local Buzz

Fairstone needs a new and exciting method to build brand awareness at the local level,
through spontaneous campaigns or “guerilla” marketing tactics. Fairstone wants to
differentiate itself, help consumers (particularly younger audiences, late 20’s/early 30’s)
understand the non-bank lending industry, and identify if or when they may choose a
company like Fairstone.
Specifically, the marketing task is to:

• Creating a new campaign to attract and surprise new audiences and grow brand
awareness
• Generate positive feeling about Fairstone
• Distinguish Fairstone in the lending industry – not a bank, but also not a payday lender
• Grow our pool of prospective customers

Your mandate consists of:

• Analyzing the current position of Fairstone, and identify opportunities for Fairstone to
“make a splash” and “create noise in the market”, particularly among younger
audiences
• Developing of a strategic, coordinated plan to grow awareness at the local level,
helping to explain Fairstone’s position in the market and our products/services

Here are some leads to explore during your strategic thinking:

• Could Fairstone branches become involved in the campaigns, or perhaps execute the
campaigns? With so many local employees, can/should we involve our branches in the
event(s) or tactic(s)?
• Today, Branch Managers are encouraged to build connections within their community,
whether it’s with local banks (so they know where to refer clients who cannot be
approved for a loan with the bank), financial advisors, or other local businesses.

Your recommendation must respect the following characteristics:

• Fairstone is not a provider of student loans, nor do we offer loans for education.
• Fairstone does not advertise ‘frivolous debt’, or taking on debt for reasons that could
be perceived to be unnecessary (e.g. to take vacations), per the Consumer Protection
Act.
• With 230 branches, costs for large-scale advertising campaigns can be prohibitive.
Consider carefully when choosing what strategy and tactic(s) you select; it must be
feasible and not imply too high an increase in marketing costs.

Fairstone expects creativity from you and that you direct your thoughts toward
innovative, exciting ideas that can help us appeal to younger demographics in a non-
traditional way.

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Appendix 1

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Appendix 2

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Appendix 3

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Appendix 4

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