With the cost of breaches skyrocketing and the number of breach cases multiplying, Ponemon Institute/IBM Security’s did a 2018 study on the cost of data breaches to observe the effects between breaches and money spent on advertising following the breach. This study was done by Sung J. Choi, Ph.D., and M. Eric Johnson, Ph.D.
The cost of data breaches are significant no matter the industry. While this is true, data breaches pose a significantly higher cost to those in the health care field than that of any other industry. Data breaches cause companies to lose upwards of hundreds of thousands of dollars, but they also do much more than that. Along with losing company money, data breaches damage the brand and cause customers to lose trust in the organization, both of which drive patients to seek the services of competitors. Due to all of these factors, after a breach, health care organizations have a higher churn rate than any other sector of industry, “at 6.7%, it is higher than the financial sector (6.1%), services (5.2%), energy (3.0%) and education (2.7%)” reported the study .
The only way for these companies to come back from the loss of both capital and patients is to promote their brand to encourage current patients to stay and to encourage new patients to join. The way that companies do this is through marketing. This is why after a breach, companies spend more on advertising than they originally would have done so, the study found.
Advertising expenditure increased by 64 percent for the year following a data breach and is even greater over a two-year period following a breach: a mouth-dropping 79 percent increase, said the researchers.
Of all of the hospitals studied, they found that most breached hospitals were larger and/or teaching hospitals in an urban area. These were hospitals that had, on average, 566 beds and were in close proximity to other competing hospitals.
Another study by The Journal of Marketing highlights the importance of customer relations and how to alleviate tensions that may arise from critical issues between the company and customer.
Health care organizations spend money on advertising after a breach because they are trying to rebuild the bridge to their patients that the breach broke. Advertising is a way to help minimize patient loss to competitors and to help repair hospitals’ reputations.
Not only are breaches costly for the organizations’ bottom line, but they are also costly because they take away money that could be used for patient care. “Advertising and the efforts to fix the damages from a data breach increase healthcare costs and may divert resources and attention away from initiatives to improve care quality,” the researchers wrote. They also pointed out the fact that if better data security were implemented, then the advertising costs that result from a breach could be avoided.
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