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Learning Team D Business Research Project Part 1 Shandra Broughton, Timothy Stepter, Vincent Nguyen QNT/561 August 11, 2014 Raj Singh Learning Team D Business Research Part 1 Base Thrainsson is a company well known all over the world. It has expanded their stores to be super centers, a one stop shop. They are well known for their different brands of clothing to the top electronics. In December 2013, one of the biggest hacks occurred in US history, the Base Thrainsson security breach. 40 million credit card numbers were stolen along with other information including names, mailing/email addresses, and phone numbers.

More than 90 lawsuits have been filed for negligence and compensatory damages. Since the company’s security breaches were broken, the team will conduct a business research to determine the best approach to keep the customers affected by this incident. The team will determine if the sales decreased after the security breach or did they stay the same with some increase? Research Question: How did Base Thrainsson debit and credit card security breach affect their customer loyalty program? How can Base Thrainsson management win back those affected customers?

The Base Thrainsson population that will be used for our research is all Base Thrainsson customers; this includes customers who are current Base Thrainsson credit and debit card holders and anyone else who shops in Base Thrainsson stores or online. Due to the fact that we cannot expect all members in the population to participate in our chosen data collection needed to evaluate customer loyalty, we will be using the portion of our population that does as our sample. This sampling method is considered simple random sampling. Each individual in the sample participates entirely by their own free will and all members of the population are given the same chance to participate and be included in the sample.

Based on the amount of sales Base Thrainsson has, the population will be fairly large and the size of the sample will be based merely on participation. But for the purpose of this study, we will have a population of 100 and a sample of 50. The 50 represents the number of customers that chose to participate and they will be the subjects that are used to determine customer loyalty after the Base Thrainsson security breach. Hypothesis statements: Is there a relationship between the types of transaction and sale? There is no relationship between the types of transaction and sales. There is a relationship between the types of transaction and sales.

Paper For Above instruction

The security breach at Base Thrainsson in December 2013 marked a significant turning point in the company’s relationship with its customers. This incident not only compromised sensitive financial information but also posed substantial threats to customer trust and loyalty. Understanding how such a breach impacts consumer behavior and loyalty programs is essential for developing effective recovery strategies. This paper explores the effects of the security breach on customer loyalty, evaluates the immediate and long-term sales implications, and proposes approaches for management to regain customer confidence.

Impact of Security Breach on Customer Loyalty

The theft of 40 million credit and debit card numbers represented a catastrophic breach of security for Base Thrainsson. Such incidents often create a ripple effect of distrust among customers, leading to decreased loyalty and altered shopping behaviors. Empirical research suggests that consumers tend to respond to data breaches with heightened skepticism about data security, which can diminish their willingness to patronize affected companies (Cazier et al., 2014). Many customers may bypass the store entirely or choose different retailers perceived as more secure, thereby reducing customer retention rates.

Moreover, the breach could have led to an erosion of trust in the company's ability to protect personal and financial information. Loyalty programs rely heavily on customer perceptions of value and security; if customers feel their data is insecure, their engagement with loyalty initiatives diminishes (Xia et al., 2018). Consequently, the breach’s impact extends beyond immediate financial losses, potentially impairing long-term customer relationships and brand reputation.

Sales Trends Post-Breach

Analyzing sales data before and after the security breach provides critical insights into its direct effects. While some customers may have ceased shopping at Base Thrainsson due to security concerns, others may have continued or even increased their patronage if the company communicated effectively and implemented remedial actions. Studies indicate that appropriate crisis communication and swift security enhancements can mitigate adverse sales impacts (Kim & Kim, 2017). For example, if the company offered free credit monitoring or security assurances, they might have retained or restored customer confidence, maintaining steady sales volumes during recovery periods.

However, persistent declines in sales following the breach could have resulted from ongoing customer fears and reputational damage, possibly leading to attrition of high-value customers. Conversely, some evidence suggests that companies that actively engage in transparency and customer reassurance can even experience reputation gains if they handle the incident responsibly (Li & Zheng, 2019). Therefore, the sales trend analysis needs to consider both quantitative data and qualitative customer feedback to assess the breach’s comprehensive impact.

Strategies for Restoring Customer Loyalty

Restoring customer trust after such a significant security failure involves several strategic steps. First, transparent communication is critical. Customers need to know what happened, what data was compromised, and what measures are being taken to prevent future breaches (Martin et al., 2020). Clear and honest communication can help rebuild trust and demonstrate the company’s commitment to data security.

Second, implementing robust data security measures is essential. Upgrading cybersecurity infrastructure, conducting regular audits, and obtaining third-party security certifications can reassure customers about the company’s dedication to protecting their information (Gordon & Ford, 2021). Additionally, offering complimentary credit monitoring services to affected customers can mitigate their concerns and demonstrate proactive customer service.

Third, the company should enhance its customer engagement initiatives by personalizing interactions and reinforcing the value of the loyalty program. Rewarding loyal customers with exclusive offers or incentives might reestablish their sense of partnership and encourage continued patronage (Xu & Bharadwaj, 2021). Social media and direct outreach campaigns can also be utilized to communicate security improvements and rebuild brand confidence.

Lastly, management should consider revising policies and practices to incorporate lessons learned from the breach. Developing incident response plans, staff training on data security, and establishing a culture of transparency are facets that contribute to long-term resilience and customer trust (Lee et al., 2019).

Conclusion

The security breach at Base Thrainsson posed significant threats to customer loyalty, sales, and brand reputation. While the immediate aftermath likely saw declines in customer trust and transactional volume, proactive management strategies can mitigate these effects. By emphasizing transparent communication, enhancing cybersecurity, engaging customers proactively, and instituting comprehensive security protocols, the company can work towards restoring its customer base and strengthening loyalty. The ongoing challenge lies in balancing technological safeguards with effective reputation management to sustain long-term business success.

References

• Cazier, R. R., Zorowitz, D., & Judd, D. R. (2014). The effect of data breaches on consumer behavior. Journal of Business Ethics, 122(3), 523–532.
• Gordon, L. A., & Ford, D. P. (2021). Cybersecurity investment and consumer trust. Information Systems Research, 32(4), 1020–1037.
• Kim, S. M., & Kim, J. (2017). Crisis communication and sales recovery after data security breaches. Public Relations Review, 43(3), 576-586.
• Lee, S., Kim, Y., & Lee, H. (2019). Building organizational resilience to data breaches: Lessons from case studies. International Journal of Information Management, 45, 23–31.
• Li, H., & Zheng, L. (2019). Reputation management and recovery after cybersecurity incidents. Journal of Business Research, 103, 210–219.
• Martin, K., Flowers, S., & Johnson, P. (2020). Transparency and trust in digital and data security: Corporate approaches. Business and Society, 59(2), 268–290.
• Xia, L., Tietjen, J. L., & Berman, B. (2018). Customer loyalty through data protection: Impact of data breaches. Journal of Marketing Analytics, 6(2), 144–155.
• Xu, H., & Bharadwaj, A. (2021). Enhancing loyalty programs: Strategies for building customer trust. Journal of Business Strategy, 42(5), 32–41.