The Effect of the Net Promoter Score on Sales: A Study of a Retail Firm Using Customer and Store-Level Data
Fiserova, J., Pugh, G. T., Stephenson, A., & Dimos, C. (2018)
In this paper, Fiserova, et al. use the same data as their 2017 study and examined DFS, the market leader in the UK living room furniture market.
This paper received a best paper award for its conference proceedings.
The authors analyzed NPS survey data at three time points (postpurchase, postdelivery, and six months after purchase) for 96 stores over a four year period in the UK (August 2011–July 2015). In total they had 728 observations across the stores (after removing data from newly opened stores). They wanted to see if the NPS had an effect on future sales and investigated different future time periods. For example, it’s unlikely people would actually recommend their product immediately after purchase and less likely as time goes on as purchase novelty and salience decreases.
They found a store’s NPS has a statistically significant effect on store sales from five to nine months after purchase.
They found that a 1% improvement in NPS increases sales between £90 and £128 per month over a five-month period. Across 96 stores for a year, the increase in sales would be £643k. A 1% increase in NPS corresponding to a 0.5% increase in annual revenue. That would generate more revenue than opening a new store, which requires about a £1MM capital investment.
Takeaway: The authors found one UK store’s NPS has a statistically significant (non-linear) effect on store sales from five to nine months after purchase. A one-point increase in the NPS across all UK stores corresponded to approximately a 0.5% increase in the company’s annual revenue (which is a bigger impact that opening a new store).