Marketing

Customer equity

Control (management)

Service (business)

Statistics

Exploit

Computer security

Data breach

Customer advocacy

Economics

Computer science

Customer intelligence

Business

Internet privacy

Natural experiment

Vulnerability (computing)

Transaction data

Customer retention

Service quality

Database

Advertising

Mathematics

Management

Consumer behaviour

Customer to customer

Database transaction

Journal of Marketing

In this study, the authors assess the effects of a data breach announcement (DBA) by a multichannel retailer on customer behavior. They exploit a natural experiment and use individual customer transaction data from the retailer to conduct a detailed and systematic empirical examination of the effects of a DBA on customer spending and channel migration behavior. To identify the effects, the authors compare the change in customer behavior before and after the DBA between a treatment group (customers whose information is breached) and a control group (customers whose information is not breached) using the difference-in-differences modeling framework. They find that although the data breach results in a significant decrease in customer spending, customers of the firm migrate from the breached to the unbreached channels of the retailer. The findings further reflect that customers with a higher retailer patronage are more forgiving because the negative effects of the DBA are lower for customers with a higher level of patronage. The authors propose and empirically test for the role of customer data vulnerability as the behavioral mechanism that drives customer behavior subsequent to a DBA. The authors offer prescriptions for managers on how to engage with customers following DBAs.

The Effect of a Data Breach Announcement on Customer Behavior: Evidence from a Multichannel Retailer