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Study: Data Breaches Make Huge Impact On Brand Reputation

Consumers rank data breaches and poor customer service high in their effects on brand perception.

Data breaches can have as much impact as poor customer service in their effects on brand reputation, according to a study published Wednesday.

The new survey, "The Aftermath of a Mega Data Breach: Consumer Sentiment," was conducted by the Ponemon Institute and sponsored by Experian's Data Breach Resolution unit. It asked more than 700 consumers about their attitudes toward a company's brand, and their willingness to buy in the wake of specific events.

According to the study, the three occurrences that have the greatest impact on brand reputation are data breaches, poor customer service, and environmental disasters. These incidents were selected ahead of publicized lawsuits, government fines, and labor or union disputes.

Breaches also have a major impact on customer fears about identity theft, the survey says. Prior to having their personal information lost or stolen, 24 percent of respondents said they were extremely or very concerned about becoming a victim of identity theft. Following the data breach, this concern increased to 45 percent, Ponemon says. Almost half of respondents feel their identity is at risk for years or forever.

Many of the respondents were affected by a retail (35 percent), credit card (35 percent), or social media (19 percent) breach in the last two years. A majority of respondents feel the personal information that would cause the most stress or financial loss if exposed or stolen would be a Social Security number (78 percent of respondents), followed by an account password/personal identification number (71 percent).

Yet despite being notified about a breach affecting their information, many consumers have not taken action, the survey says. A majority of respondents felt stress as a result of being affected by a data breach (76 percent), but this did not lead to action: more than 50 percent did not take any steps to protect themselves from identity theft afterwards.

"This inaction may be a result of data breach 'fatigue,' as 30 percent of those surveyed received at least two data breach notifications and 15 percent received three in the last two years, while 10 percent received more than five," Ponemon reports. "Unfortunately, more than one-third of consumers ignored the data breach notification from the company and did nothing. However, almost 30 percent of consumers accepted the offer of free identity protection services."

Tim Wilson is Editor in Chief and co-founder of Dark Reading.com, UBM Tech's online community for information security professionals. He is responsible for managing the site, assigning and editing content, and writing breaking news stories. Wilson has been recognized as one ... View Full Bio
 

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Bprince
50%
50%
Bprince,
User Rank: Ninja
5/18/2014 | 12:46:36 AM
Re: Ummmm.......
I was going to bring up the decline in sales as well. I don't know if that is the case in breaches overall, but certainly Target took a hit in this case. I think it also may matter why the breach happened and how the affected company handles the response. With Target, there were questions raised about why this wasn't stopped, and lawsuits started flying. 

BP
Kelly Jackson Higgins
50%
50%
Kelly Jackson Higgins,
User Rank: Strategist
5/15/2014 | 5:23:42 PM
Re: Ummmm.......
Yes, there appears to have been at least some initial queasiness about shopping there after the breach--plus the remediation costs to Target for the aftermath. 
Kwattman
50%
50%
Kwattman,
User Rank: Black Belt
5/15/2014 | 2:58:35 PM
Re: Ummmm.......
If no one is "doing anything about it" - then why are target sales down 46%???
Kwattman
50%
50%
Kwattman,
User Rank: Black Belt
5/15/2014 | 2:56:42 PM
Re: Ummmm.......
If no one is "doing anything about it" - then why are target sales down 46%???
securityaffairs
50%
50%
securityaffairs,
User Rank: Ninja
5/15/2014 | 2:18:45 PM
Re: Ummmm.......
Data breaches represent a serious problem for companies, brand reputation is just one aspect. Ponemon has evidenced this, but I fear that asset damages, service interruption, response procedures and recovery activities have a similar impact.

 
Kelly Jackson Higgins
100%
0%
Kelly Jackson Higgins,
User Rank: Strategist
5/15/2014 | 11:30:52 AM
Re: Ummmm.......
It's definitely easier to stop shopping at Target (well, for maybe for some people, not me ;-) ) and go somewhere else than it is to switch doctors. It would be nice to see actual impact data on retailers and healthcare orgs.
armorguy
50%
50%
armorguy,
User Rank: Apprentice
5/15/2014 | 11:21:39 AM
Re: Ummmm.......
I absolutely believe that people say they will switch in the event of a breach.

 

But, when the inevitable breach happens, do they?  Only if they do make that change does the breached organization suffer any damage.

 

I am not aware of a valid study that has addressed this question.  My anecdotal experiences, especially in a healthcare environment, are that a few do but most do not.  People *like* their doctor and it takes a lot for them to take the effort to find a new one.
Kelly Jackson Higgins
100%
0%
Kelly Jackson Higgins,
User Rank: Strategist
5/15/2014 | 11:16:20 AM
Re: Ummmm.......
A recent Javelin study we covered showed similar consumer sentiments, even with their doctors: http://www.darkreading.com/attacks-breaches/consumers-ditch-their-breached-retailers-banks-and-doctors-/d/d-id/1234959?
armorguy
0%
100%
armorguy,
User Rank: Apprentice
5/15/2014 | 10:23:53 AM
Ummmm.......
So brand damage is "huge".  People are "outraged".  But they aren't doing anything about it.

 

Like so many studies from Ponemon this doesn't make sense.  If there were brand damage there would be consistent data showing sales impact directly tied to breach, long term stock price decline due to breach, etc.  But none of that exists.

 

If the premise were true the sponsor of the study, Experian, would have a highly damaged brand.  Do they?

 

To be clear I am not saying Larry Ponemon (or anybody associated with the Ponemon Institute) aren't good people nor am I questioning anybodys motives.  I'm saying that too many of their studies fail critical evaluation and *that* damages the Ponemon brand.
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