by Larry Ponemon

The Value of Protecting Customer Privacy

Jan 15, 20062 mins

Research by the Ponemon Institute finds that public trust in corporations is fragile. In a recent survey, more than 70 percent of respondents said that two data breaches in the same company would be sufficient grounds for them to take their business elsewhere. Another study, which examined consumers’ opinions about the trustworthiness of 14 companies that suffered data security breaches this year, found that trust in these companies dropped significantly after the breaches were reported.

Obviously, companies must be sensitive to the impact a security breach can have on their reputation. The cost to a company of losing customers combined with the difficulty of recruiting new ones after a data breach averages $75 for every customer record it loses. The news isn’t all bad, however. Most individuals will share a large amount of personal information if they trust a company.

During the past three years, the institute has surveyed more than 31,700 consumers about the degree to which they trust the way companies in different industries collect and use their personal information. Respondents were asked to consider how a variety of privacy practices contributed to a company’s trustworthiness, as well as the overall dependability of the company’s products and services. Slightly more than two-thirds of consumers said privacy practices are related to a company’s trustworthiness, although information practices (including privacy) were somewhat less important than a company’s dependability and pricing practices.

The institute also surveyed 129 large companies about their privacy practices. Those that consumers said were the most trustworthy tended to have specific privacy practices in place, a way for customers to file complaints or get help resolving privacy issues, a privacy policy that is easy to understand and limits sharing of personal information.

That means it’s up to companies to establish responsible information practices that protect personal data and take into account individuals’ privacy preferences.