Editor’s note: A Marketing Science Institute (MSI) Best Paper Award Winner (short summary)
As marketers’ use of big data is increasing, their data management efforts may increase customer data vulnerability or at least perceptions of susceptibility to harm. Yet most firms have little insight into the potential negative ramifications of their big data efforts or how to prevent them.
The authors evaluated data vulnerabilities along a continuum of potential harm, which affects performance through customer’s feelings of violation and reduced trust. Data access vulnerability (where the firm has access to the customer’s personal data) and data breach vulnerability (where a firm or its closest rival suffers a data breach) are the focal domains of interest.
In a study of data security breaches affecting 167 public companies, the authors identify the effects on firm performance and close rival firm performance, as well as managerial tools to suppress this harm.
A second study, involving a series of experiments designed to understand the effects of data vulnerability from the customer perspective, shows that firms’ mere access to customers’ personal data inflates feelings of violation and reduces trust, creating negative word-of-mouth and switching behaviors.
Third, this research identifies and tests two mitigation strategies that are effective across a range of data vulnerabilities: making data management policies more transparent and providing customers with control over their data. Transparency and control interact to suppress the negative performance effects of data breaches at focal firms, spillover to rivals, and even the negative effects of firm access to customer data.
Martin, K.D., Borah, A., & Palmatier, R.W. (2016). The Dark Side of Big Data’s Effect on Firm Performance. Marketing Science Institute.