Data breach incidents have become increasingly common and businesses incur enormous costs to recover from such events. While studies in marketing and other fields such as information systems have focused on how Wall Street responds to data breach announcements, no study to our knowledge has examined how the Main Street (i.e., the customers of a firm) responds to data breach announcements. Our study attempts to fill this gap. Our goal is to systematically examine and quantify the impact of data breach announcement on customer spending and channel migration behavior. We also investigate how customers’ perceived data vulnerability plays a role as the underlying mechanism behind customer behavior following data breach announcement by a retailer.
Data breach announcement results in a significant decrease in customer spending. An important result, from a managerial perspective, is that customers migrate from the breached channel to the unbreached channels after data breach announcement. This provides a justification for pursuing a multichannel strategy because it can help absorb some of the negative fallout after a data breach event. It is also crucial not only to mitigate the negative fallout but also to invest in consumer trust building initiatives. In particular, managers must address customers’ perception of data vulnerability as it influences how they respond to data breaches. While prevention is a key element in cyberattacks, managers must be prepared to engage aggressively in damage control once a threat to the company’s cybersecurity is realized. A data breach response plan is essential in surviving and successfully managing a data breach incident.
Ramkumar Janakiraman, Joon Ho Lim, and Rishika Rishika (2018) The Effect of a Data Breach Announcement on Customer Behavior: Evidence from a Multichannel Retailer. Journal of Marketing: March 2018, Vol. 82, No. 2, pp. 85-105.
Joon Ho (Juno) Lim is an Assistant Professor in the Marketing Department teaching Advanced Marketing Analytics area. He earned his Ph.D. in Business Administration – Marketing from Texas A&M University, his Master’s degree in Applied Statistics from Ohio State University, and his Bachelor’s degree in Business Administration from University of Seoul.
Juno is interested in empirical modeling of consumer behavior and firm decision making. His research focuses on marketing and public policy, multichannel retailing, food marketing, digital marketing, and marketing-operations interface.
Outside of work Juno enjoys traveling and spending time with his wife, Bohyun. He is also a big fan of soccer and baseball. He enjoys playing soccer, and his hobby is visiting the MLB stadiums and collecting baseballs from there.