For Fraud And Trust, A Powerful Reminder That Retail Reality And Perception Are Light-Years Apart

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An insurance company survey released Thursday (June 13) threw out new statistics about how consumers perceive fraud. One such stat—37 percent of U.S. shoppers said that they "have personally experienced fraudulent use of their personal information to make purchases without their consent." At first glance, the figure seems extremely inflated, but it's actually an interesting peek into the ways consumers today perceive fraud.

This has significance because shoppers don't perceive fraud in the way that retailers do, so they react very differently to how retailers talk about breaches and security defenses. As for that stat, let's start with the phrasing. The question was intended to ask whether the shopper had had fraud perpetrated on his/her personal payment card. But the question can also be interpreted as "have personal knowledge of."

That means that if fraud happened to the shopper's spouse, sibling, parent/child, neighbor, friend, classmate or even someone on a friend's Facebook or Twitter list, then that shopper would say "yes, I have personally experienced" that kind of fraud. That is interpreting "personal" to mean "it happened to someone you know, as opposed to someone you read about online or in a newspaper." Despite the absurdity of that—who reads newspapers anymore?—social sites today are affecting what people feel that they have personally experienced.

There are two other issues. First, the question gave no time limit. Had it said "within the prior three months" or "this year," it would have been much stronger. As it was phrased, though, it's asking for the shopper's full lifetime. That alone could explain a lot of the number inflation.

But the more important question is what—in the shopper's perception—constitutes a breach. Let's say a major chain has been breached. Standard bank procedure these days is to change the numbers for all payment cards that had been recently used at—or on file with—that retailer. Given the number of recent breaches—and the millions of customers who collectively received such a notice—that's a lot of shoppers who might think they had been personally breached.

But they need to ask the question: Did the bank detect any purchases that seemed fraudulent? If the answer is no, then that shopper did not personally experience fraudulent use of their personal information to make purchases without consent. At best, they were mildly inconvenienced because someone else suffered such fraud, but they didn’t.

As a practical matter, though, very few consumers would bother (or even know) to ask such a question. They hear their bank say that their card is being re-issued due to something fraud-like. If a survey asks whether they have personally experienced it, they're almost certainly going to say yes.

For retailers, this is a very key point. A chain could have honestly believed—because it's true—that only a tiny fraction of a percent of its shoppers had actually experienced fraud. But given the social and bank activities referenced above, it's possible today that a very large percentage of your customers believe that they have personally suffered a fraud loss, even though they haven't.

When you issue a fraud statement, remember that. When you choose how much space to give to fraud protections in a news release, an ad/commercial or Web event, remember that. If you were giving a speech about burglary preventive measures, would you phrase things differently if you knew you were addressing an audience in which 80 percent of people thought they had recently been burglarized?

There was another interesting tidbit from the survey, which was done for Allstate and The National Journal.The survey sampled 1,000 adults via landline and cellphone May 29-June 2, 2013. That interesting tidbit was the perception difference among shoppers when differentiating online and offline retailers.

When asked "How much do you trust the following groups or people to responsibly use information about you?", respondents said that they trust "a great deal" when dealing with e-tailers 6 percent of the time, a number that more than doubles (13 percent) when the question asks about bricks-and-mortars. Granted, physical store managers shouldn't be doing a jig that they convince only 13 percent to trust them a great deal, but it's a lot better than online.

That pattern held firm as the answers moved to "some" trust (38 percent online, 52 percent in-store), "not very much" trust (21 percent online, 16 percent in-store) and "not at all" trust (28 percent online, 17 percent in-store). If it's of any consolation, social media sites fared even worse, with trust levels of "great deal" at 4 percent, "some" at 21 percent, "not very much" at 24 percent and an impressive "not at all" score of 46 percent.

The obvious takeaway is that the physical interactions inside a store make shoppers more comfortable and trusting, given that they can meet someone and associate a face with the chain. This is in contrast with the fact that in-store associates often have the means to do more fraud than the typical call center employee.

But there's another interpretation. What we don't know is whether shoppers envisioned standalone online retailers or the online arms of major physical chains (the difference between an Amazon or eBay and a Walmart.com or Target.com). Statistically, there's an excellent chance shoppers are including both kinds in their answers, with a generous dose of the online-arm-of-a-physical-chain kind. If so, Houston, we have a problem.

The idea has always been that people might shop at Macys.com or Footlocker.com because they know and trust that brand and that, by 2013, they would trust the dotcom store the exact same amount as the physical store. Given that we're still seeing this large a trust gap suggests that even though shoppers today are certainly comfortable with online purchases, the "trust" part of "comfort" isn't there yet. After 19 years of E-commerce, if it's not there yet, it's unlikely to get there.

This raises a similar question to the "personally breached" issue above. Despite the facts—which should include that a chain's return, price-match and other guarantee policies should be equally protective of online and in-store purchases—chains should consider making their online guarantees more generous and vocal than the in-store versions. Why? Because they're needed more online.

Just in case some marketers are thinking "OK, we'll just weaken our in-store guarantees to make the online ones better," sorry, but that won't work. Diluting any existing policy will be detected and it won't go over well. To make online protections stronger, you're just going to have to do it.

We've said many times before that reality and perception are two very different and important animals that have to be treated separately. But it's nice every now and then for a properly done survey (which puts the Allstate survey into the distinct minority of surveys we've seen) to make the distinctions so clear.