The Cost of Data Breaches: What Consumers Really Want and How Companies Can Respond

Strategic Insights -

Consumers expect prompt disclosure of a data breach, and want to hear it directly from the company. A study conducted by Varun Grover, a Distinguished Professor at the Sam M. Walton College of Business, found that an apology is sufficient to retain customers, while additional compensation has little impact on their attitudes towards the company. The average cost of a single data breach in the United States is $9.36 million, and every company should expect to suffer a data breach at some point.

Key Takeaways:

  • Customers expect prompt disclosure of a data breach, and want to hear it directly from the company.
  • An apology is sufficient to retain customers, while additional compensation has little impact on their attitudes towards the company.
  • The average cost of a single data breach in the United States is $9.36 million.
  • Companies can reduce the cost of data breaches by forgoing compensation that has little impact on customer attitudes.
  • Every company should expect to suffer a data breach at some point and have a crisis management plan ready in advance.
  • Prompt acknowledgment of a breach and an apology are the most effective responses to data breaches.

Statistics:

  • The average cost of a single data breach in the United States is $9.36 million (Varun Grover, et al.).
  • Nearly 1,000 adults were surveyed to determine which responses would prompt them to switch to another company (Varun Grover, et al.).
  • 90% of companies add new security measures to protect consumers' data in the future after a breach (Varun Grover, et al.).

Sources:

  • Varun Grover, et al. (Journal of Management Information Systems)
  • University of Arkansas (Press Release)
  • Varun Grover (Distinguished Professor, Sam M. Walton College of Business)