From Recommendation to Revenue: Store-level Evidence on the Dynamic and Spatial Effects of the Net Promoter Score (NPS)

We investigate the effects of customers’ propensity to recommend a brand measured by the Net Promoter Score (NPS) on the sales of a publicly listed UK retail firm, which is dominant in the upholstered furniture market in which relatively expensive durable products have a long replacement cycle. From reasoning about word-of-mouth transmission, we theorize that store-level NPS effects are likely to (i) be nonlinear over time and (ii) depend not only on store’s own NPS but also on the firm’s neighboring stores’ NPS. We investigate the relationship between the NPS and sales over a 48-month period, matching every UK store’s monthly sales with its monthly NPS. We advance an econometric approach to allow for the identification of a non-linear time path. We find that the NPS, operationalized by surveying established customers six months after purchase, predicts future sales. Moreover, NPS sales effects unfold over many months along an “inverted U” time path: for own-store effects, from eight months after purchase, peaking at 10 months; and for neighboring-store effects, from six months after purchase, peaking at 11 months. Quantitatively, a sustained increase in the NPS across the company gives rise to substantial financial returns.