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How Much Is Your Customer’s Trust Worth?

By Natalie L. Petouhoff and Brian Johnson
Hitachi Consulting


 

Identity theft, while once thought to be a minor issue, could dry up multichannel contact center sales. Companies must determine their data privacy and protection strategy to gain and retain customers’ trust. Without their customers’ trust, companies are bound to lose just about everything.

Who knew the crime of the century would be attacking the very same data companies have been working for years to collect, organize and use? Data thieves, that's who. In fact, the theft of the very information that is the lifeline of contact centers and CRM operations is now more profitable than illegal drug trafficking, according to U.S. Treasury Adviser Valerie McNiven.

Could Identity Theft Dry Up E-commerce? As a leader in your company's contact center and CRM practices, you'll know that cyber crime has come front and center. While companies are strategizing how best to utilize customer data, thieves are learning new ways to steal it. Consumers are learning that the danger they are in is growing exponentially.

What is the impact of data theft to your company, your customers, their trust and subsequently your bottom line? It's insurmountable, unless the need for data privacy and protection moves from the server room and the legal beagles to a corporate-wide customer strategy in which every employee is responsible for protecting customer data. Gartner's recent study about online security shows customer confidence is rapidly eroding. If customers' confidence continues to erode, how many of them will be willing to buy on the Web, disclose personal information or offer credit card information to contact center agents when placing orders on the phone?

The Role Of The Media In Alerting Consumers
Why is identity theft a hot topic right now? Part of the reason is that criminals have gotten much better at data theft. Another key component is the increasing awareness on the part of consumers. Several years ago, when the Ponemon Institute interviewed consumers, most did not fear identity theft. They did not know how prevalent it was or the effects it could have on their lives should they fall victim. As such, they did not pay much attention to it or demand changes from companies.

However, this is all about to change. Identity theft stories appear almost daily on every major cable news program and newspaper. It's even discussed in publications such as Parade Magazine and Popular Mechanics. Via this saturation coverage, the media is obliterating the na'vet' of consumers, driving the heightened outrage of customers and the need for change.

In researching further, we found that part of the reason customers have not put more pressure on companies to do something is that they were under the impression that credit card theft, for example, would not affect them very much. The facts, however, are astounding. Consider the following:

' According to the FTC study, nearly 10 million consumers were victimized by some form of identity theft in 2004 alone. That equals 19,178 people per day, 799 per hour and 13.3 per minute. Consumers have reportedly lost over $5 million, and businesses have lost an estimated $50 billion or more.

' Between 2001 and 2002, identity theft was about 11 to 20 percent, but increased by 80 percent in 2003, according to a Harris Interactive Study. ' Gartner reported that phishing scams have affected 2.4 million Americans, costing consumers, banks and merchants $929 million.

' The Secret Service and the FBI recently busted Shadowcrew.com, an online shopping bazaar for identity theft criminal organizations where thieves from all over the world bought and sold credit card numbers and identity documents.

' And while many credit card consumers thought that zero liability meant zero damage when their cards are stolen, all are quite surprised when they learn the truth. When a card is stolen, it can take years of paperwork and lost time and result in embarrassment, limited access to loans and the ability to buy property or qualify for a new job.

The Data Decision: To Protect Or Not Protect
With the most recent report of identity theft in which the VA's office reportedly lost the social security, name and address information of 26.5 million veterans and as much as 80 percent of active military service members via a stolen laptop, we are again reminded of how vulnerable we are. The list of companies reporting data theft, including ChoicePoint, Bank of America, T-Mobile, DSW Shoes, LexisNexis and the University of California Berkeley, just keeps growing. Why? Because most companies, when building their databases, did not foresee the danger of data theft or this new type of crime. With each evolutionary step we take to improve business comes a parallel challenge. In this case, the challenge is protection.

The Emotional Impact Of Customer Data Theft
One of the most surprising findings of the California Public Interest Research Group and Privacy Rights Clearinghouse study, 'Nowhere to Turn: Victims Speak Out on Identity Theft,' has to do with customer trust. While the financial impact of I.D. theft is certainly great, the worst is the emotional impact the situation creates. Stress, emotional trauma and damaged credit reputation were among the most difficult aspects to deal with. Victims reported feeling violated, helpless and angry. Consider if that is how most of your customers feel when they have trusted you with their data.

As the media stories gain momentum, from the hijacking of Paris Hilton's Sidekick to the theft of retired General John Shalikashvili's (former chairman of the Joint Chiefs of Staff) identity, which allowed scammers to open 273 new credit cards and run up $2 million in fraudulent charges, consumers are becoming outraged by the repercussions affecting ordinary people's lives. Consumers have reason to be angry. According to Besty Broder, FTC Identity Theft Expert, 'Even when you give your information to legitimate merchants, it's only as safe as that institution's safeguards.'

The Effect Of Eroding Trust
Consumer's trust of online banking, Web site and contact center sales could dry up in a instant. The financial impact could extend even further. Research by CoreBrand assessing the impact of a negative incident on brand equity and shareholder value suggests that upwards of 10 percent of shareholder value can be tied to brand.

What's A Company To Do?
Customer data are critical to the positioning and success of a company, shaping how it innovates products, goes to market, builds customer relationships via the contact center, gains market share and increases revenue and profits.

On the flip side, imagine how your customers, who value their personal information and privacy, would feel if they realized their data were being sold to the highest bidder and that your company does not have a foolproof data privacy and protection plan. Imagine the negative 'word of mouth' that could instantly spread in a blog about your company.

If customers are the sole source of value creation, then maintaining their trust is imperative for a company's success. This means identity theft must move from compliance towards the bottom-line. Companies must begin to take their brand, their customers and their data security seriously.

Who Is Responsible For Data Privacy And Protection?
If you surveyed your employees, how many would say they felt they are personally responsible for protecting customer data? With all of the bottom-line factors mentioned in this article, what can companies do to incorporate data privacy and protection into their business strategies? First, understand the strategic importance of privacy as a tool to improving customers' satisfaction, trust in the company and propensity to continue to do business with that company, (i.e., customer lifetime value).

Second is to create a team that is responsible for protecting the company's number one asset: customers. The role of a company's privacy officer is to connect privacy and brand. This begins by implementing the golden rule: think about how you would want to be treated if you were the customer. The success of a data privacy and protection initiative requires not only the support of privacy managers but also HR, CRM and the marketing and legal departments.

Respecting privacy while using personal data to benefit the customer can be a difficult balancing act. New marketing campaigns consider customers' privacy needs and provide an appropriate level of choice and personalization. Companies will want to look at the role of marketing not only in collecting and protecting customer data, but also in communicating to customers how well their data are being protected.

Marketers often fear customers will opt-out if given the choice. The study by Ponemon Institute showed that 89 percent of consumers surveyed said if they trusted a merchant, they would share their personal interests to increase the quality of products and services. Customers lose trust and stop sharing only when they don't feel a company is protecting their data and their best interests. In fact, protecting privacy can be a tool for creating more value for the customer, faster. As companies look towards the stewardship of customer data, customers will bring their loyalty.

The Bottom Line On Customer Data Privacy And Protection
Privacy and protection are competitive differentiators. For a company committed to its customers, the data protection interests of the customer and the company must be synchronized. If customers are a company's true source of value creation, then maintaining their trust is imperative. When companies understand this, privacy protection will become an important business tool, rather than just a regulatory requirement.

For more information, go to www.tmcnet.com/310.1 to download the white paper Protecting Customer Data: How Much Is Your Customer's Trust Worth? The Business Case for Data Privacy.

Dr. Natalie L. Petouhoff (a.k.a. Dr. Nat) is a thought leader with Hitachi Consulting (news - alert) (www.hitachi.com). She writes white papers, articles and books based on her many years of practical experience in contact centers and CRM. Dr. Nat, as part of the Customer and Channel 20/20 Solutions Group at The study by Ponemon Institute showed that 89
percent of consumers
surveyed said if they trusted a merchant, they would share their personal interests to increase the quality of products and services.
Hitachi, helps companies gain a clear vision of their customers today and takes them beyond the year 2020 to continue to understand their changing needs and the bottom-line value of acquiring and retaining customers in a very competitive marketplace.

As a managing vice president for Hitachi Consulting, Brian Johnson is responsible for profitable growth and intellectual property development in the areas of sales and channel marketing, customer care optimization and automation. Brian has spent his entire 20 year professional career assisting companies with improving and automating their customer-facing functions. He has extensive experience in helping clients develop CRM strategies, architect technical CRM solutions, plan for complex global implementations and manage the process and organizational change required to successfully transform themselves into customer-centric organizations. CIS


References
How to Guard Your Identity, Lynn Brenner, Parade, July 31, 2005, page 4. Who's Stealing Your Identity? High Tech Crime Is Getting Worse. Here's How to Fight Back, Brian Krebs, Popular Mechanics, February, 2006, page 54. If a Bank Says Don't Worry, Worry, Steve Lopez, LA TIMES/California edition, front page, January 1, 2006. ID Theft: Who's In YOUR Wallet?, Mike Fillion, Success from Home, May 2005, page 41. IT Tackles Phishing, Michele Delio, InfoWorld, January 1, 2006, page 31. Phishing Attack Trends Report, Dan Maier, www.antiphishing.org, May 2004. Cybercrime Crackdown: The Secret Service Fights Phishing and Online Fraud, Ephraim Schwartz, InfoWorld, March 7, 2005, page 8. ChoicePoint CEO Grilled By Congress on Data Loss, Bob Sullivan, MSNBC.com, March 15, 2005. Hacking Paris Hilton, Arik Hesseldahl, Forbes.com, February 23, 2005. FTC: Millions Hit by ID Theft. Survey Finds Problem Much Worse Than Previously Believed, Bob Sullivan, MSNBC.com, September 3, 2005. Consumers Could Be Warned, But U.S. Government Isn't Talking, Bob Sullivan, MSNBC.com, January 29, 2005.



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