by adam on January 25, 2011
Average abnormal churn rates across all incidents in the study were slightly higher than last year (from 3.6 percent in 2008 to 3.7 percent in 2009), which was measured by the loss of customers who were directly affected by the data breach event (i.e., typically those receiving notification). The industries with the highest churn rate were pharmaceuticals, communications and healthcare (all at 6 percent), followed by financial services and services (both at 5 percent.)
- 126 of the hundreds of organizations that suffered a breach were selected (no word on how) to receive a survey. 45 responded, which might be a decent response rate, but we need to know how the 126 were selected from the set of breached entities.
- We don’t understand the baseline for customer churn. What is normal turnover? Is it the median for the last 3 years for that company? The mean for the sector last year? If we knew how normal turnover was defined, and its variance, then we could ask questions about what abnormal means. Is it the difference between management estimates and prior years? Is it the difference between a standard deviation above the mean for the sector for the past 3 years and the observed?
- Most importantly, it’s not an actual measure of customer churn. The report states that it measured not actual customer loss, but the results of a survey that asked for:
The estimated number of customers who will most likely terminate their relationship as a result of the breach incident. The incremental loss is abnormal turnover attributable to the breach incident. This number is an annual percentage, which is based on estimates provided by management during the benchmark interview process. [Emphasis added.]
The report has other issues, and I encourage readers to examine its claims and evidence closely. I encourage this in general, it’s not a comment unique to the Ponemon report. Some examples from a number of additional surveys, that George Hulme raised in argment in this blog post:
Briefly, the CMO council found concern about security, not any knowledge of breaches. Forrester showed that some folks are scared to shop online, which means brand doesn’t matter, or they’d shop online from trusted brands. Javelin reports 40% of consumers reporting that their relationship “changed,” and 30% reporting a choice to not purchase from the organization again. Which is at odds with even the most ‘consumer-concerned’ estimates from Ponemon, and is aligned with the idea that surveys are hard to do well.