Research has shown that small businesses are especially vulnerable to data security breaches. They don’t have the protections in place to prevent cyber criminals from hacking into their systems and stealing information, and they don’t have a dedicated IT security staff. But beyond the immediate cleanup costs businesses face after a breach, there’s an even more damaging one: lost customers.
A new study by Javelin Strategy & Research, commissioned by data management company Identity Finder, found that companies that suffer breaches stand to lose a significant portion of their customers soon after a breach is revealed.
The report points to the significant losses experienced by Target Corp. after the retailer revealed that more than 40 million customers had their card information stolen in November and December of 2013. Some analysts have predicted the total losses and fines incurred by Target due to that breach could top $1 billion.
According to the study, retailers and healthcare providers face the worst fallout from data breaches: 33 percent of customers said they would avoid shopping at a retailer after a breach, while 30 percent said they would switch healthcare providers post-breach.
This research suggests the importance of taking preventative measures to protect customer data and thwart thieves. (California’s Attorney General’s recently put out a handy guide for how businesses can secure their data.)
"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 in a news release. "That's real money lost in customer churn and reduced sales, and certainly demonstrates how the reputation of the organization hits the bottom line."
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