Negative Effects of Data Collection on Companies

Data collection is a crucial part of Marketing. Almost all the companies today collect data to get better insight into the want of their target segment, make their product or service visible to their target segment, and provide a personalized experience to their target segment. But with the collection of Data comes risks that can cause considerable losses to a company.

1. Bad Data- The data that provide incorrect insight into the market can be termed as bad data. False data (given by prospect or surveyor), irrelevant data, incomplete data, biased data, biased surveys, improper compilation are the reasons that lead to bad data. (C., 2020) Bad data makes a company make wrong decisions while developing their strategies and investing huge amounts of money in these strategies, leading to huge losses. In my opinion, Bad data causes the most damage to companies as they suffer losses across the following stages.

• While acquiring bad data

• Money spent on research of bad data.

• Studying and researching data and developing strategy and brand prepositions according to the incorrect insights found from bad data.

• Deploying strategy and brand preposition in the market and advertising it.

• At last, they lose market share.

Once one of the most powerful companies in the world, ENRON went bankrupt because of poor data management. The executives and auditing team of the organization provided false financial data to the board of directors, resulting in huge financial losses and finally leading to bankruptcy. (Writer, 2021)

Bad data is often unidentifiable, but the risk of losses through bad data can be minimized with the help of regular scrutiny of data and also with the use of external auditing and research firms.

2. Data Breach- Most countries have data protection laws to protect the data collected by any company, and in most countries, there is a provision of huge penalties and compensation if the data is leaked. So, whenever a company fails to provide adequate security to data collected and falls prey to the data breach, they have to pay huge sums in compensation and penalties. (GLS GROUP, 2020)

In 2017, the Equifax data breach resulted in the loss of financial data of about 150 million users, and the settlement cost the company $575million. (Swinhoe, 2021)

3. Security- To protect themselves from any incidents, companies need to spend a huge chunk of their finances on security. There can be instances that a company spends more on securing data than what they get in return from the data.

References

1. C. (2020, March 21). What is bad data and how will it affect your business? TechTalks. https://bdtechtalks.com/2020/03/21/what-is-bad-data/

2. GLS GROUP. (2020, May 28). What are the risks associated with collecting personal data? Gls.Global. https://www.gls.global/en/startupresources/what-are-the-risks-with-collecting-personal-data

3. Swinhoe, D. (2021, March 5). The biggest data breach fines, penalties, and settlements so far. CSO Online. https://www.csoonline.com/article/3410278/the-biggest-data-breach-fines-penalties-and-settlements-so-far.html

4. Writer, S. (2021, March 24). Famous Companies That Have Suffered Due To Poor Data Management. PC Tech Magazine - Uganda Technology News, Analysis, Software and Product Reviews from Africa’s Oldest ICT Magazine. https://pctechmag.com/2021/03/famous-companies-suffered-poor-data-management/