Abstract:
The aim of this study was to investigate the impact of data breaches of varying
severity on customer loyalty. The study was motivated by the growth in the amount
of data shared and stored by organisations to enhance service offerings (Big Data),
and the increase in the frequency and scale of data breaches caused by this.
Research shows that customer loyalty is critical to the long-term profitability of an
organisation, making the understanding of data breaches on customer loyalty critical
for any organisation’s prospects. Despite this significance, literature on how breach
severity can influence behavioural changes has been limited. This study, using an
experiment, and the three dimensions of attribution theory - to assess how customers
determine causal inference and assign blame following a breach - examined how
customers changed their loyalty intentions following a data breach depending on the
size and scale of the breach. This study aims to contribute to the existing body of
work related to data breaches.
A 2X3 factorial design was used to determine the effects of the locus, the stability,
and the controllability of cause on the customer’s loyalty intentions, and to test the
moderating effects of the breach severity. The results of the study determined that
the stability and the controllability of cause were significant determinants of customer
loyalty. The role of the severity and the locus of causality were determined to have
limited bearing on customer loyalty. The implications for academia, managers and
businesses are examined.
