3 Reasons Why an Ongoing Dialogue About Data Security is Critical for Retailers

Ignorance is not bliss when it comes to data security. Just ask any identity theft victim who was left with a lowered credit score, criminal charges or a maxed out credit card. Or ask retailers like Target, Home Depot, Best Buy, and Walgreens – who are among many that have had data compromised, resulting in settlements and customer concern.

Data security is just one example of a myriad of complex issues where it is crucial for retailers to have an ongoing dialogue with their customers. There is a need to understand what people do and don’t know, test and fine tune education strategies, track the impact of those efforts and follow-up to dive deeper into understanding and education.

Ignorance is not bliss when it comes to data security. Just ask any identity theft victim who was left with a lowered credit score, criminal charges or a maxed out credit card. Or ask retailers like Target, Home Depot, Best Buy, and Walgreens – who are among many that have had data compromised, resulting in settlements and customer concern.

Data security is just one example of a myriad of complex issues where it is crucial for retailers to have an ongoing dialogue with their customers. There is a need to understand what people do and don’t know, test and fine tune education strategies, track the impact of those efforts and follow-up to dive deeper into understanding and education.

Data security is, however, a fascinating example of why dialogue is essential. Here are three reasons why:

1. People misunderstand risk, which increases the risk

People tend to grossly over estimate low probability risks and under estimate larger risks. We also tend to underestimate the risk of things we like to do and overestimate the risk of things we don’t like. The results of this misperception can be damaging.

When people misunderstand the risk of retail data security breaches they are more susceptible to malware and phishing schemes. Retailers need to understand what customers do and do not know about data security.

2. The problem is widespread and ignoring it can be damaging

One in four (27%) Americans we surveyed reported having been “impacted by a company or website having a security breach, where users’ personal data was accessed or taken by hackers.” According to IBM’s Cost of Data Breach study, the average cost for each lost or stolen record containing sensitive and confidential information is $221, of which $145 pertains to indirect costs. This also includes abnormal turnover or churn of customers and $76 represents the direct costs incurred to resolve the data breach. When this is happening to one in four Americans, it’s an expensive problem.

3. The impact is greater than just financial

Eight in ten (81%) of those Americans who were impacted by a security breach reported it had knock-on effects. We also found that one-in-three (32%) Americans reduced the amount of business they did with that company and 12% switched to another company entirely. A decline in trust is also a common casualty (39%). Customer churn and a loss of reputation are not the kinds of things that make shareholders happy. But what’s to be done about it?

When dialogue is needed

Data security is an excellent example of how it is essential for retailers to enter into an ongoing discussion with shoppers. Through the constant dialogue made possible by an insight community, retailers can iteratively and agilely learn what their customers do and don’t know about data security and risk. Armed with that, they can test alternative strategies, monitor their impact, and then cycle back to dive deeper and further reduce risk.

Data security is just one example of how using an insight community to have an ongoing dialogue with your customers is essential.

To learn more about our research on data privacy, check out our infographic:

Big Data: How to Make it Personal with These 4 key Consumer Segments.

Click to view infographic