Data breaches can sometimes lead to the loss of customers, according to a new study by Javelin Strategy & Research.
The study, “Avoidable Collateral Damage from Corporate Data Breaches,” polled over 5,000 adults in the United States about their potential reactions to a data breach in healthcare, financial and retail institutions.
Respondents were the most likely to cut ties with retail companies in the event of a data breach, with 33% of consumers unwilling to return to a business that had a data breach.
Other industries also had the potential to lose business after a data breach, with 30% of healthcare consumers and 24% of consumers from financial institutions like banks or credit card companies saying they would take their business elsewhere after a breach.
“Once thought to be a theoretical consequence, new evidence clearly shows consumers become less apt to open their wallets and patronize a company after a data breach,” the report said. “In addition to potential lost business and goodwill, a breached company may find itself saddled with the cost of litigation and subsidizing identity protection services for affected consumers.”
Target’s recent data breach has shown the potential impact of compromising customer data. The retailer announced Monday that Gregg Steinhafel, their president, chairman and CEO, has resigned as a result of the breach after 35 years with the company.
Profits at Target also dropped after the December data breach. The company reported in February that their fourth-quarter profit dropped 46% and revenue decreased 5.3%.
Shares have also been affected by Target’s breach, dropping 2.5% since the breach was made public.
Target’s chief information officer, Beth Jacob, resigned two months ago and has since been replaced.
The retailer has also started investing in additional technology to help keep customers safe, like chip-and-PIN systems and upgraded cash registers.
Target expects to spend $100 million on technology upgrades and new consumer security systems.
Other breach-related costs included legal fees, paying card networks, legal fees and credit monitoring. Target spent $61 million on these costs in 2013, according to the report.
