Consumers are spending less in bricks and mortar stores, and more people are looking for goods and services online. On top of this some major retailers have suffered data breaches which have tarnished their reputation. For Target, the data breaches it suffered have had a serious impact. Sales have been lost to competitors as a result.
According to a Cowen & Co.’s tracking survey, there has been a decrease in customer satisfaction. The survey indicates there has been a fall in satisfaction in the overall shopping experience and ratings for customer service have also declined.
The data show that reputation and brand image do have an impact on shoppers’ behavior. They will go elsewhere if they do not trust a retailer.
Target is one of the biggest retailers in the United States. What would be the impact on a small to medium sized organization? Would it be possible to weather the storm after a massive data breach has been suffered?
Data Breaches Can Cost SMBs Dearly!
The cost of a data breach can be considerable. The Ponemon Institute has recently quantified this. In a recent survey, 850 executives were asked about reputation damage following a data breach. 44% of respondents said it would take between 10 months and 2 years to recover from damage to reputation following a data breach. For some companies the effect will be felt for much longer. If they manage to stay in business that long!
Not all breaches have the same effect on a company’s reputation. Consumers are aware that security breaches are now a fact of life, but they are likely to be unforgiving if their Social Security numbers, credit card numbers, or bank account details are obtained by criminals.
The potential financial losses for a company can be considerable. Ponemon’s study suggested that brand image damage can cost between $184 million and $330 million. Best case scenario? You are likely to lose 12% of your brand’s value.
Your Competitors are Waiting to Take Advantage
All companies are likely to suffer a data breach of some description, yet many are ill prepared to deal with a security breach when it occurs. If a breach response plan is developed prior to a security incident being suffered, this can reduce the damage caused.
It is possible to win back the trust of customers after a breach, but it can be a long and difficult process. It is not actually clear whether a company’s reputation can ever fully recover. After all, today’s marketplace is particularly unforgiving. There is simply too much competition and plenty of competitors who will be ready to take advantage.
If your reputation is damaged, it will have an impact on your bottom line. Customers will change brands and there will be class-action lawsuits filed as plaintiffs try to recover damages. Revenues are likely to fall, and regulators may also issue costly financial penalties.
Fortunately, there are a number of actions that can be taken to reduce the risk of a data breach being suffered. Should the unthinkable happen, they can also reduce the severity of the breach. Think of data security investment as an investment in your brand image. That must be protected at all times.