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How data vulnerability affects firms’ performance and how to remedy it

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Everyone talks about privacy. But what is it really ? A recent article in French economical journal “La Tribune” built upon two recent BCG reports (here and there) on data protection and privacy to question firms’ practices around data privacy
62% of French people surveyed by BCG said companies don’t respect the private character of their data.
Yet, what is privacy ? Most people will claim they know but once you scratch the surface you quickly discover that you get as many definitions as people you have asked. As Solove (2006) wrote “Privacy is a concept in disarray. Nobody can articulate what it means”.
Those readers interested in that matter will welcome a study by Martin, Borah and Palmatier (2017) which revisits the concept and introduces “vulnerability” (a much better defined construct) instead of privacy. The authors have studied the effect of vulnerability on firm’s performance and how to remedy data vulnerability. Their results are very interesting and worth further reading.

What is vulnerability

The concept of data vulnerability is defined by the authors as a

“customer’s perception of his or her susceptibility to being harmed due to various uses of his or her personal data”.

Vulnerability being a well defined construct in the literature, it allows the authors to build their study on much stronger foundations.

Results

Three studies were conducted that delivered some interesting insights

  • transparency and control allow a mitigation of negative customers’ perceptions in case of data vulnerability. In particular firms that are transparent in their practices around data and provide customers with control opportunities, will reduce the lost of trust in the firm in case a vulnerability issue occurs
  • data breach vulnerability negatively affects a firm’s performance and as well as its competitors. In other words competitors won’t benefit from your data management failures and will get harmed too. That’s what we call spillover effects.
  • transparency and control suppress the negative effects of vulnerability on a firm’s performance

Conclusion

This study proves that providing transparency and control to the user are good managerial practices. Firms are urged to follow pioneers in data management and satisfy users’ expectations in that matter. Readers should pay special attention to the form taken by measures of transparency and control. In particular we advise to communicate in simple, yet precise, terms to users. Video material can help support those efforts and further enhance customer’s trust. If you want to get guidance, feel free to drop us a line.

Image : shutterstock

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Author: Pierre-Nicolas Schwab

Pierre-Nicolas est Docteur en Marketing et dirige l'agence d'études de marché IntoTheMinds. Ses domaines de prédilection sont le BigData l'e-commerce, le commerce de proximité, l'HoReCa et la logistique. Il est également chercheur en marketing à l'Université Libre de Bruxelles et sert de coach et formateur à plusieurs organisations et institutions publiques. Il peut être contacté par email, Linkedin ou par téléphone (+32 486 42 79 42)

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