Bad Customer Service vs. Data Breaches: Competing for "Best Way to Lose Customers" Award

So which is worse: bad customer service or a data breach? Well, when it comes to brand reputation and customer loss rate, they may be equivalent.

Customer service has always been a sticking point for brands. After all, a bad in-store or phone experience with a company can send customers heading for the door, never to be heard from again. Environmental disasters also still rank high on the list of reasons customers may consider discontinuing their loyalty to a brand or company (think Exxon Mobile or BP). Yet, according to a recent study by the Ponemon Institute, customers now rate data breaches right along with customer service and environmental disasters as a major reason to ditch a company and run into the loving arms of its competitors.

It was really bound to happen, if you think about it. With the increase of very highly publicized data breaches in recent years (think Target a few months ago and eBay getting headlines today), customers are beginning to sit up and take notice. After all, the threat of identity theft promises much worse consequences than a bad experience with a rude customer service rep, and it hits much closer to home than an oil spill hundreds of miles away.

The average American consumer understands the long-lasting and potentially devastating effects of a breach of their personal information. According to the study, “prior to having their personal information lost or stolen, 24 percent of respondents (customers) 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.”

Data Breach Costs Rise 9% in 2013

The 2013 statistics are in from the Ponemon Institute.

So just how much money did companies lose last year to data breaches? Which industries are most at risk? Let’s break down the facts for 2013:

• Average cost of a data breach to US companies: $5.4 million
• Average cost per lost record: $201
• Industries with highest breach costs (in this order):
• Healthcare
• Transportation
• Energy 
• Financial services 
• Communications 
• Pharmaceuticals
• Manufacturing

While 2013 did not reach 2011’s high ($214 per lost record), this information still represents a 9% rise in data breach costs from last year’s $188 loss per lost record—and they think this may be due to loss of customers. A 15% “churn rate” (or tendency for customers to abandon a company) based on a data breach represented a steep increase from prior years. Folks are getting wise to companies that don't make securing their sensitive information a priority.

Will this rising cost trend cause companies to sharpen their security behaviors and stay on top of the dangers? We hope so. After all, security is our business. 

Maybe your company in that high-rilibrary of security courses, security awareness campaigns, or even social engineering consulting and penetration testing. These first steps can go a long way towards ratcheting those costs down and keeping customers feeling safe and satisfied. 

sk list. Maybe you are a small company with limited resources that still feels the pressure of social engineering and identity theft. Or maybe you just need more ideas about how to secure your own company’s assets. Consider Sight Training’s

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