Consumer Loyalty To Brands After Data Breaches

Recent revelations about a potentially sweeping credit and a debit card data breach at The Home Depot raise new questions about the extent to which these events turn consumers away from impacted stores. In fact, Target saw its first-quarter sales drop 16% over last year following the well-publicized Target data breach in November 2013.

A new analysis based on actual credit card spending patterns by Lightspeed Financial Services Group (FSG) shows that close to one-quarter of credit card accounts used to make purchases at Target before the data breach had fewer purchases – and in some cases, no purchases – after the breach was announced. This analysis is based on Lightspeed FSG’s nationwide credit card behavioral tracking panel, which monitors consumer card use and spends on a continuous basis.

Lightspeed FSG’s analysis compared to credit card purchases at Target in the four months preceding the data breach announcement (September to December 2013) to the four months following (January to April 2014), finding that:

• About 6% of credit card accounts used at Target in late 2013 had more than two purchases in the four months preceding the Target data breach, but absolutely none in the subsequent four months.

• Another 18% of accounts used at Target in late 2013 were still used at Target after the data breach, but only about half as often.

• Yet, there were some credit card accounts that showed no decline in Target spending – about 37% of accounts were used at the same rate or more often than before the data breach.

The 18% of accounts with a sharp decline in Target purchases had an average of 7.8 purchases in the four-month period before the breach, but only 4.4 purchases in the four-month period following the incident.

Adapted from Lightspeed GMI