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Protecting Consumer Trust in an Era of Data Breaches

Equifax. Capital One. Facebook. Yahoo. Consumer worries about data use has been growing—and with good reason, as data breaches and other incidents demonstrate poor controls. Companies access, use, and share consumer data for myriad purposes, but it doesn’t mean that consumers feel good about it.

A study in the Journal of Marketing finds that consumers feel vulnerable when companies access their data for any reason—even if the company never actually uses that data. Data access alone leads to loss of consumer trust and feelings of violation. It decreases purchase intent and increases consumer desire to spread negative-word-of-mouth and switch to a competitor.

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When a data breach occurs, companies experience substantial drops in their stock prices, suggesting that the market builds in negative consumer sentiment about the loss of personal information. Interestingly, the closest rival’s stock also drops, demonstrating a spillover effect.

The study demonstrates that strong privacy protections and consumer-friendly practices that provide greater transparency and control can help suppress negative effects and differentiate companies in the digital marketplace.

Read the full article.

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