Consumers avoid doing business with a breached organization, a new study said.
Financial and banking institutions, healthcare providers and retailers stand to have significantly increased expenses and lose up to one-third of its customer/patient base after a data breach:
• 33 percent of consumers will shop elsewhere if their retailer of choice ends up breached
• 30 percent of patients will find new healthcare provider if hospital/doctor’s office suffers a breach
• 24 percent of consumers will switch bank/credit card provider if institution ends up breached
“A significant proportion of affected consumers discontinue or reduce their patronage post-breach,” said Al Pascual, Senior Analyst of Security, Risk and Fraud at Javelin Strategy & Research. “That’s real money lost in customer churn and reduced sales, and certainly demonstrates how the reputation of the organization hits the bottom line. It’s noteworthy that about a third of people will go as far as to find a new doctor, if their provider is breached, as we all know healthcare services can be a big hassle to change.”
Target quantified the reputational damage and sales impact of their recent data breach and stated it resulted in significantly reduced revenue following their breach this past December, according to the study commissioned by Identity Finder.
The fiscal impacts expanded well beyond sales. Target saw stock prices drop and estimates $61 million in expenses to investigate the breach, offer credit-monitoring services, increase call center staffing and procure legal services.
Not only will revenue go down, but also expenses will go up. There is a great deal of data supporting a significant increase in post-breach expenses such as compliance, legal, and victim reparation costs.
The research finds identity protection services alone are a common cost to each industry:
• 54 percent of healthcare providers offer victims protection
• 40 percent of financial/banking institutions offer victims protection
• 30 percent of retailers offer victims protection.
“Organizations must be more proactive in preventing a breach by understanding where a data leak can originate. By discovering and managing sensitive information at its source and not at the perimeter or after the fact, businesses can identify risk, change employee behavior, and justify where to spend security dollars,” said Todd Feinman, chief executive at Identity Finder.