Will the Growing Reports of Data Breaches Impact Customer Loyalty?

Hardly a week goes by, it seems, without a story about a data breach of this brand or that brand. Consider the past month: Yesterday, Best Buy revealed customer payment was exposed. Sears/Kmart and Delta Air Lines each revealed a data breach on Thursday, April 5. That came on the heels of Panara Bread revealing three days earlier that it had a data breach on up to 37 million of its MyPanera loyalty rewards members. A day earlier, Saks Fifth Avenue announced a 5 million user breach. Before that, Under Armour had its 150 million MyFitnessPal users’ data breached, and Orbitz had 880,000 customers data breached.
 
And those brands aren’t alone. According to a new report, “2018 Global Payments Insight Survey: Bill Pay Services” by ACI Worldwide, 20 percent of all organizations have been impacted by a data breach over the past 12 months, with government organizations hit the most (30 percent), followed by consumer finance (26 percent), healthcare (25 percent), higher education (21 percent), insurance (17 percent) and utility organizations (13 percent).
 
Across all industries, the report noted, 36 percent of organizations believe they are at a greater risk of data breach than a year ago, and the balance between placing an emphasis on customer experience and protecting data has tipped toward security.
 
Although the breaches involved highly personal data of the brand’s users, they also resulted in another—perhaps more valuable—breach: Trust.
 
Can customers trust a brand to keep their personal information secure? The Washington Post even asked the question in a story about the Panara breach: Are signing up for loyalty programs even worth the risk of having personal information exposed through data breaches?
 
That’s a question that has tremendous consequences for those who live in the customer experience and brand loyalty world. Loyalty360 asked its members their thoughts on how the slew of data breaches could impact customer trust and, potentially, the future of loyalty programs. Some of their responses:
 
Brad Marg, Vice President and General Manager of Lottery for Stellar Loyalty:
“While data breaches are a reality across a broad spectrum of industries, it would be incorrect to correlate brand loyalty programs with an increased risk of such occurrences. Many of the firms who fell victim to these crimes had no loyalty component to their programs at all—Yahoo, Equifax, Target, Home Depot, etc.
 
“Loyalty programs are of great value to consumers providing better brand experiences, highly relevant content, cost savings and increased efficiencies in shopping, making purchases and obtaining support.  To mitigate potential exposure, consumers should consider not storing their financial information with brands such as the option to do so with the MyPanera rewards program.
 
Evan Magliocca, Brand Marketing Manager, Baesman:
“While data breaches have scared customers, they’re often viewed as random with a ‘probably won’t happen to me’ attitude. The event that has really impacted customer trust is Facebook’s data practices that have recently come into the limelight.
 
“It’s creating an environment of skepticism for customers, which can have an outsized impact on loyalty. If you want customers to trust you, to give over their data willingly—you need to give them a reason, they’re going to be active stewards of their own data in the future. 
 
“So whether that’s ramping up security or being transparent with how and what data is being collected—customers appreciate and think highly of brands that are open and put themselves out there for members.  After all, loyalty is a two-way street. Don’t we owe it to them to be transparent, diligent and secure with our data practices?”
 
Joe Doran, Vice President of Client Services, Persuade
“Loyalty marketing more than ever is shifting its focus to creating a personalized member ‘experience.’ The days are gone where cohorts are meaningful. We need to present our members with a value-rich, on-brand experience that is tailored to their preferences and what they are searching for. That experience requires a tremendous amount of data which comes with HUGE responsibility.
 
“This isn’t necessarily about being big and spending millions on your data center or cloud, but it does mean you have to know what you’re doing. If you don’t or you’re unsure, there are no excuses. It also means knowing what to do when things go wrong.”
 
Bloomberg Businessweek wrote an opinion piece saying we should “stop giving retailers a free pass on data breaches.” CSO magazine online listed the 17 largest data breaches, which ranged from 3 billion Yahoo accounts downward, and included credit information for 147 million Equifax customers, and credit card information on 110 million Target customers and 56 million Home Depot customers.

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