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Tuesday, October 28, 2014

Customer service, not breaches, more important to consumers

It is a given that damage to a retailer's reputation is one of the biggest negative outcomes from a big data breach. However, research from the Ponemon Institute LLC said that customer service, or the lack thereof, is a bigger turn-off for consumers than a data breach, and by a wide margin.

In April 2014 research entitled The Aftermath of a Mega Data Breach: Consumer Sentiment, 75 percent of almost 800 survey respondents said poor customer service would have the greatest impact on a company's reputation. Some type of environmental incident was the second most determining factor in reputational damage, at 33 percent, with a data breach coming in third at 30 percent.

In fact, when respondents read about data breaches happening to particular companies, 41 percent said the breaches did not change their opinions of the companies, while 29 percent said the data breach news would make them less likely to frequent that company, and only 15 percent would sever relationships with breach-affected companies.

These survey results are apparently not idle talk, as over half of the respondents said they had been victimized by a data breach and their sensitive personal information compromised. Of 797 respondents, 400 said they had been data breach victims. Additionally, the main damage from a data breach was in the stress it caused individuals, not the financial damage.

In fact, 81 percent of respondents who had their accounts compromised said they had no out-of-pocket expenses as a consequence of the breach; and if they did, the cost averaged $38. However, the stress caused by a breach was the overwhelming fall-out for consumers. Seventy-six percent of respondents said stress was the chief result of a breach, followed by time spent repairing problems caused by the breach (39 percent) and fraudulent charges appearing on their accounts (25 percent).

Customer service in data breach management

Ponemon's 2014 research, sponsored by Experian Data Breach Resolution, was a follow-up to 2012 research focusing on the same topic. In comparing consumer sentiments from 2012 to 2014, more consumers believe today that data breach-affected companies should compensate their consumers in the form of cash, products or services – 67 percent to 63 percent (2012) – and provide identity theft protection – 63 percent to 58 percent (2012).

It also seems that retailers, especially, are becoming more proactive in informing customers of breaches, which shows a higher level of customer service and emphasis on damage control. Respondents in the 2014 survey said 35 percent of retailers notified them of breaches, up from only 7 percent in 2012. The same can be said for credit card companies, presumably card issuing banks and the card brands, which notified affected customers 35 percent of the time in the 2014 study, compared to only 3 percent in the 2012 report.

According to the 2014 survey, businesses can do themselves the most good in the wake of breaches by explaining the potential risks or harms of the compromises, disclose the facts of the incidents and tell the unvarnished truth. Sixty-seven percent of respondents believe explaining the risks/harms to them of data breaches is the best way companies can improve communications, followed by fact disclosures (56 percent) and not "sugar coating" the message (33 percent).

When asked what businesses could do to prevent customers from ending relationships with them following breaches, 54 percent of respondents said nothing would change their minds, but 43 percent said a sincere and personal apology would result in them keeping relationships intact, and 41 percent said offering free identity theft protection and credit monitoring services would help out, too.

Contradictions in consumer attitudes

Ponemon's research revealed some seemingly contradictory results as well. When consumers are victimized by data breaches, their fears of also becoming victims of identity theft increase. Following a data breach, that fear nearly doubles, from 11 percent to 20 percent of respondents in the "extremely concerned" category, and from 13 percent to 25 percent in the "very concerned" category. Furthermore, following breaches, 48 percent of victimized consumers in the survey said that their identities were at risk for years, or forever.

But curiously enough, when consumers received data breach notifications that they may have been victimized, 32 percent of respondents ignored the notifications and took no action and only 18 percent followed the advice provided in the notifications.

Nevertheless, most consumers seem to recognize what types of data are the most sensitive and would cause the most stress and financial damage if compromised. Seventy-eight percent of respondents said the compromise of Social Security numbers would lead to the most potential damage, followed by password/PIN (71 percent) and bankcard account information (65 percent). end of article

Editor's Note:

The Green Sheet Inc. is now a proud affiliate of Bankcard Life, a premier community that provides industry-leading training and resources for payment professionals. Click here for more information.

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