How to Compensate After a Data Breach?

Abstract

Data breach recovery is often likened to service failure recovery. Like service failure recovery, compensation is a major factor toward data breach recovery. However, compensation involves different types, which may have varying effects on data breach recovery. This study investigates the effect of compensation types on customer's repatronage intentions to organizations that have suffered a data breach. Three compensation types were identified in this study: monetary, service, and psychological compensation. The findings of this study indicate that only service and psychological compensation have a significant effect on customers' perceptions of being treated fairly by the organization following a data breach. Furthermore, service compensation impacts the trust a customer regains in the company. Monetary compensation did not play a statistically significant role in the data breach recovery process. In turn, both perceived fairness and regained trust influences customer repatronage intentions. This study contributes to the information privacy field by identifying the types of compensation that are impactful to re-engage individuals who suffered PII related data breach.