We have gone through the technical aspects of data breaches in some detail, notably in our recent eBook. However, the business impacts are just as (if not more) important.
When your organisation suffers a data breach, the damage is more than
lost data or costs to restore a system. Reputational damage can result
in significant customer churn.
How do data breaches impact customer churn?
In IBM and The Ponemon Institute’s research report on data breaches in Australia, the organisations outlined the exact breakdown of breach costs.
On average, a data breach cost businesses $139 per compromised file. That breaks down to $60 in technical costs, and $79 to indirect costs like customer churn. That’s an average of 56 per cent of data breach costs coming through issues of customer retention.
Some sectors are more susceptible to this than others. Financial services and technology companies recorded higher than average churn after a data breach, while hospitality and retail are among those with more limited churn impacts.
At its core, this is an issue of trust. If your organisation deals in personal or private information, particularly financial data, there is an expectation that your company will be able to keep it secure. When it fails to do this, it fails at the core of its business. That is perhaps why churn in those sectors is so much higher than in retail or hospitality, where data security is not a core theme.
Lost records mean lost trust, which in turn means lost business. But how can you go about minimising this churn?
How to minimise the business impacts of a data breach
In trend terms, the churn-related impacts of a data breach are on the decline. IBM and Ponemon’s research noted a 5.3 per cent drop in these costs over 2017, particularly among companies that had a lower technical cost per record.
One of the keys to this could be brand management. Your response to a
data breach shouldn’t just be in line with the Notifiable Data Breaches
scheme – it should be part of a wider
strategy to regain the trust of your customer base.
1. Future-proofing and transparency
Consider Facebook’s response to the Cambridge Analytica scandal – one
of the most reputationally damaging events in history. Beyond repairing
the immediate harm, the company
completely overhauled its privacy settings and communicated those
changes to users clearly. Well, relatively clearly. The company’s stock
continued to fall after the event, but this
is a prime example of future-proofing in a transparent manner, of
demonstrating a commitment to safety and security in the eyes of your
customers.
2. Implement best practice early
Data breaches will, to a certain degree, always have an element of embarrassment to them. However, if your company can demonstrate to customers that it has a strong history of best-practice data security, this may go a long way towards minimising churn.
As an example of this done wrong, look no further than the Australian
government. Early 2018 saw the leak of confidential written documents
that were stored in a cabinet that was
sold in a second-hand store. Regular audits of your information storage
and best-practice rules on digitisation are a must at the very least.
Use people you trust
In many cases, businesses simply won’t have the in-house expertise required to implement proper data security strategies. And that’s OK! The team at Over the Wire are network specialists – local experts who will partner with you to understand exactly what your business needs.
It’s a surefire way of tightening up security, demonstrating to customers that you take handling their information seriously, and mitigating the churn that results from a data breach. Don’t forget to download and implement our white paper, 6 Steps to Improve Your Business Cyber Security here.
Act early, act in good faith and act smart. Get in touch with the Over the Wire team to minimise risks today.
