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Australasian Marketing Journal

journal homepage: www.elsevier.com/locate/ausmj

Are promoters valuable customers? An application of the net

promoter scale to predict future customer spend
Philip Mecredya, Malcolm J. Wrighta,b,∗, Pamela Feethama
a
Massey Business School, Massey University, Раlmеrstоn Nоrth, New Zealand
b
Ehrenberg Bass Institute for Marketing Science, University of South Australia, Adelaide, South Australia, Australia

a r t i c l e i n f o a b s t r a c t

Article history: The Net Promoter Score (NPS) is widely used in industry to measure loyalty and predict revenue growth.
Received 1 March 2017 The mechanisms underpinning this revenue growth are thought to be (i) positive recommendation from
Accepted 12 December 2017
loyal customers to potential customers, and (ii) increased purchases from the existing base of loyal cus-
Available online xxx
tomers. These claims are controversial, with both the methodology and the performance of NPS being
Keywords: challenged by a number of researchers. The present study adds evidence to this debate through the anal-
Net Promoter Score ysis of a repeated cross-sectional data set (n = 2785) from a services company operating in a business to
Word of mouth business context in the New Zealand primary sector. The data include recommendation scores matched
Customer loyalty to past, current and future revenue, at both the aggregate and individual level, over a five-year period.
Customer spend The analysis of this data provides directional support for the association between NPS and company rev-
enue growth, and confirms that promoters do spend more in the current year. However, the analysis
shows promoters to be a relatively minor and inconsistent source of same-customer revenue growth,
with same-customer growth mostly arising from a general increase across the whole customer base.
© 2017 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.

1. Introduction current or future growth rates. Keiningham et al. (2007a) found

Customer loyalty measures are frequently used in academic and
commercial market research due to their perceived ability to pre-
dict future purchase behaviour. Globally, one of the most com-
monly adopted loyalty measures is the Net Promoter Score (NPS)
– a metric derived from word of mouth likelihood scores by sub-
tracting the proportion with low scores (0–6) from the proportion
with high scores (9–10). Reichheld (2003) developed NPS in re-
sponse to concerns that existing satisfaction and retention mea-
sures were poor predictors of company revenue growth. Reichheld
claimed a key advantage of Net Promoter is that companies need
only to ask their customers a single question to manage loyalty and
predict growth; how likely they are to recommend the company to
a friend or colleague.
Reichheld (20 03, 20 06) found a strong correlation between NPS
and company growth rates in most industries he studied. How-
ever, other researchers have criticised Reichheld’s claim that Net
Promoter is the most accurate method to measure loyalty and pre-
dict company growth. Keiningham et al. (2007a) note that Reich-
held actually correlated NPS with past growth rates, rather than
∗ dinal data set (n = 2785) that contains individual promoter index
Corresponding author.
E-mail address: malcolm.wright@marketingscience.info (M.J. Wright).
that customer satisfaction was a better predictor than NPS for cur-
rent growth rates, while Morgan and Rego (2006) claimed that
customer satisfaction was also a better predictor than NPS for fu-
ture growth rates. However, Van Doorn et al. (2013) pointed out
that Morgan and Rego’s findings were not statistically significant,
and when Van Doorn et al. compared NPS against other metrics
on a range of outcome measures, they found all metrics performed
equally well on predicting current outcomes, and equally poorly on
predicting future outcomes.
As company growth is a result of aggregated customer be-
haviour, Leisen Pollack and Alexandrov (2013) argue that NPS must
first have a positive impact on individual customers for revenue
growth to occur. That is, for companies to grow revenue at the firm
level, it is necessary to increase the amount spent by their existing
customer base, attract new customers to purchase their goods and
services, or achieve a combination of both outcomes. The relative
importance of these components of individual behaviour is hardly
studied, although there is evidence that growth relies more on ac-
quisition than on retaining the existing customer base (Riebe et al.,
2014).
The present research uses a unique dataset to add evidence to
the NPS debate. Specifically, this research uses a 5-year longitu-
scores and customer spend data together with aggregate company

https://doi.org/10.1016/j.ausmj.2017.12.001
1441-3582/© 2017 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.

Please cite this article as: P. Mecredy et al., Are promoters valuable customers? An application of the net promoter scale to predict future
customer spend, Australasian Marketing Journal (2018), https://doi.org/10.1016/j.ausmj.2017.12.001
JID: AMJ
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2 P. Mecredy et al. / Australasian Marketing Journal 000 (2018) 1–7
revenue data. Analysing this dataset provides some fresh evidence
on the relative performance of NPS as a lagged, current or lead-
ing indicator, and the performance of NPS in predicting revenue
growth for the existing customer base. It also casts light on the ex-
tent to which growth in revenue from the existing customer base
comes from individual promoters increasing their spend in the fol-
lowing year.
2. Net Promoter
Net Promoter is a word-of-mouth (WOM) metric, calculated by
asking customers, “How likely is it that you would recommend
[company X] to a friend or colleague?” Customers report their like-
lihood of recommendation on an 11-point scale ranging from 0 to
10. Scores of 10 indicate extremely likely to recommend, 0 indi-
cates not at all likely, and 5 indicates neutral. The respondents who
give an index score of 9–10 are classified as promoters, 7–8 are
passively satisfied, and 0–6 are detractors. The NPS is calculated
by subtracting the percentage of promoters by the percentage of
detractors.
Reichheld (2003) claimed that a strong correlation between NPS
and growth rates exists in most industries. Reichheld also claimed
that a 12-point increase in NPS corresponds to a doubling of a
company’s growth rate (Reichheld, 2006). Other work has found
that a 7-point increase in NPS produced a one percent increase in
brand growth (Marsden et al., 2005).
NPS has been adopted by a large proportion of companies glob-
ally. It is even sometimes reported to investors and applied to de-
termine pay for senior staff (Creamer, 2006). A key reason for the
widespread commercial adoption is that the NPS calculation is very
simple (Grisaffe, 20 07; Keiningham et al., 20 08), and this makes
the NPS very easy for managers and shareholders to understand
and interpret. With numerous companies using the Net Promoter
metric, it has become a common tool for comparisons across or-
ganisations and industries.
Another advantage of NPS is the ability to reduce long and com-
plex surveys to a single concise would-recommend question. This
decreases both respondent fatigue and the resources spent on re-
search (Keiningham et al., 2008).
However, questions remain about the accuracy of NPS in mea-
suring loyalty and predicting company growth. As identified earlier,
the first concern regarding NPS is the lack of research that sup-
ports the superiority of Net Promoter in predicting growth rates.
Outside of studies by Reichheld, only Marsden et al. (2005) found
strong support for a positive relationship between NPS and rev-
enue growth. Further, these prior studies have been criticised as
they correlated NPS with past growth rates rather than with fu-
ture growth rates (Keiningham et al., 2007a; Sharp, 2008).
Other research fails to validate the superiority of the Net Pro-
moter metric (Keiningham et al., 2007a; Morgan and Rego, 2006;
Van Doorn et al., 2013). In particular, Keiningham et al. (2007a) ex-
amined the relationship between NPS and company growth rates
in a cross-industry, longitudinal study. They replicated Reichheld’s
study, but instead of using past growth rates they correlated NPS
with company growth rates from identical time periods. By com-
paring correlations of both NPS and American Customer Satisfac-
tion Index (ACSI) scores with current company growth rates they
determined that Net Promoter performance is not superior to the
ACSI.
Additionally, Reichheld (2003) noted that Net Promoter was not
applicable in a few of the industries he studied. With only a dozen
or more industries tested, discovering that the NPS could not pre-
dict growth rates in some of these industries illustrates that a sig-
nificant proportion of companies may be unable to use the metric.
In particular, Net Promoter was shown to be ineffective in deter-
mining growth rates in monopolistic industry and for niche com-
Please cite this article as: P. Mecredy et al., Are promoters valuable customers? An application of the net promoter scale to predict future
customer spend, Australasian Marketing Journal (2018), https://doi.org/10.1016/j.ausmj.2017.12.001
[m5G;March 29, 2018;13:39]
panies (Reichheld, 2003). These inconsistencies show that Reich-
held’s claim that NPS is the only number companies require to pre-
dict growth is not universally accepted (Grisaffe, 2007).
Further concerns with Reichheld’s methodology are that the 11-
point Net Promoter scale is broken into three categories and that
the passively satisfied category is excluded from his calculations
(Grisaffe, 2007; Pingitore et al., 2007). While debate has contin-
ued over the optimal number of scale categories to use, researchers
have found that validity and reliability worsens when the number
of scale points is reduced, especially when using 4-point scales
(Green and Rao, 1970; Lozano et al., 2008; Preston and Colman,
20 0 0). Due to this, Grisaffe (2007) questions why only promoters
and detractors are used to calculate the NPS when it is expected
that more scale points would result in a more accurate prediction
of growth.
Grisaffe (2007) also raised concern over including rating scores
of six in the detractor category, as the Net Promoter scale consid-
ers a score of five as being neutral. By grouping the zero to six rat-
ings together, consumers who rate their likelihood to recommend
as neutral or slightly above are assumed to be detractors with the
same chances of defecting as those that give a rating of zero. This
criticism adds further weight to the case against the NPS calcula-
tion of promoters minus detractors, and indicates that other meth-
ods of analysing the “would recommend” question may need to be
explored.
3. NPS and Word-of-mouth (WOM)
An important consideration with NPS is the effect of WOM, as
this is a principal method of recruiting new customers. WOM is
the informal communication between consumers about a prod-
uct, service, organisation or brand (Anderson, 1998; East et al.,
20 08; Westbrook, 1987). Reichheld (20 03) introduced NPS as a loy-
alty measure based on consumers’ intentions to engage in positive
WOM by recommending a company or brand to a friend or col-
league. He proposed that intentions to recommend are one of the
most prominent signs of customer loyalty and most accurate in-
dicators of company growth, as consumers are putting their per-
sonal reputation on the line. However, for NPS metric to predict
company growth accurately two assumptions must be met; that
WOM impacts purchasing decisions and that intention to recom-
mend correlates with actual behaviour. These assumptions are dis-
cussed below.
Research has indicated that WOM is an influential information
channel when making a purchase decision. Early studies found ef-
fects from WOM on purchase probability for a new food prod-
uct (Arndt, 1967) and a hypothetical personal computer (Charlett
et al., 1995). Other research by Engel et al. (1969) found that WOM
was the most influential type of information sought by consumers
when conducting a search for information into a new automotive
diagnostic centre. Work by Keaveney (1995) discovered that half
the respondents chose a new service provider through WOM.
WOM about a product or brand can be either positive or nega-
tive (Charlett et al., 1995; East et al., 2008). Negative WOM is less
common and has less impact on purchase intention than positive
WOM (East et al., 2007, 2008, 2016). The goal for companies using
NPS may be to both increase positive WOM and decrease negative
WOM, consistent with the NPS calculation of promoters minus de-
tractors. Prior research therefore suggests that while the focus of
Net Promoter on WOM is justified, the emphasis should be more
on positive WOM than negative WOM.
There is limited research that examines the relationship be-
tween intentions to recommend and actual recommendations
(Keiningham et al., 2007b). As Net Promoter measures intentions
to recommend, it is important that there is a strong link between
intended behaviour and actual behaviour. If this relationship is
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weak then it is unlikely that NPS will accurately forecast whether
a company will grow. A limited number of studies have explored
the relationship amongst intention to recommend and actual rec-
ommendation. In a meta-analysis, Kraus (1995) found only mod-
erate correlations between attitudes and behaviour. Kumar et al.
(2007) found fewer than half the consumers who stated an inten-
tion to recommend actually recommended the company. Romaniuk
et al. (2011) found that only 30% of respondents classified as inten-
ders recommended a television programme. Therefore, intentions
are an inaccurate predictor of recommendations on an individual
level. Conversely, Wright and MacRae (2007) found that, despite
individual inaccuracies, purchase probabilities and purchase likeli-
hoods were unbiased estimators at the aggregate level for overall
population proportions, and this lends some support to the use of
NPS as an aggregate, rather than individual, metric.
East et al. (2008) further suggested four weaknesses in the Net
Promoter metric with regard to operation of WOM. The first is that
the likelihood to recommend question requires self-prediction. By
asking a consumer their likelihood to recommend, it requires a
prediction of when a situation would arise that would allow a rec-
ommendation about a specific organisation to be given.
Second, the Net Promoter metric assumes that ‘one size fits all’
(East et al., 2008). For this reason, East et al. (2008) claim that
NPS does not allow for variation in the impact of WOM across
brands. For example, depending on a variety of factors, positive
WOM about one particular brand may have a larger impact on pur-
chase probability as opposed to an alternative brand.
Third, NPS does not directly measure negative WOM. Instead,
the metric infers negative WOM from detractors, who give low
scores on the willingness to engage in positive WOM. A study
by East et al. (2011) discovered that NPS is poor at capturing
negative WOM because detractors were shown to engage in both
positive and negative WOM. Furthermore, a study by East et al.
(2007) found that 49% of negative WOM was given by ex-users of
a brand and 30% was given by customers who have never used the
brand. The findings of East et al. (2011) support this statement:
55% and 22% of negative WOM was given by ex-users and never-
users, respectively. However, only current users of a brand are typ-
ically sampled when calculating a brand’s NPS, highlighting the in-
effectiveness of the metric in measuring negative WOM.
The fourth weakness described by East et al. (2008) is that
NPS measures given WOM, as opposed to received WOM. Received
WOM is likely to be more effective in measuring the impact of
WOM, because a consumer may give a recommendation to more
than one consumer at a time (East et al., 2008, 2011). Therefore,
the quantity of consumers who have received a recommendation
will provide a better measure of WOM.
4. NPS and loyal customers
NPS also relies on the common generalisation in marketing that
loyal customers are good for business. Some researchers believe
that retaining loyal customers is crucial as it significantly impacts
company profitability (Fornell and Wernerfelt, 1987; Reichheld and
Sasser, 1990). The proposed benefits of retaining loyal customers
are that they require a lower cost to serve (Fornell and Wern-
erfelt, 1987; Reichheld and Sasser, 1990), are more likely to in-
crease purchases and buy other goods and services from the com-
pany (Reichheld and Sasser, 1990; Zeithaml, 20 0 0), are less likely
to search for information (Dick and Basu, 1994; Furse et al., 1984;
Moore and Lehmann, 1980), are more likely to engage in positive
WOM (Dick and Basu, 1994; Fornell, 1992; Reichheld and Sasser,
1990; Zeithaml, 20 0 0), and are more resistant to competitive ef-
forts should product quality temporarily decline (Anderson and
Sullivan, 1993; Dick and Basu, 1994; Fornell, 1992). By implication
then, the NPS relies on assumptions about the behaviour of each
Please cite this article as: P. Mecredy et al., Are promoters valuable customers? An application of the net promoter scale to predict future
customer spend, Australasian Marketing Journal (2018), https://doi.org/10.1016/j.ausmj.2017.12.001
[m5G;March 29, 2018;13:39]
3
type of loyal customer, and in particular promoters; yet, these as-
sumptions are not made explicit and nor are they tested.
Other research has shown that a sole focus on customer re-
tention may be unwarranted as the perceived benefits of retain-
ing loyal customers are overstated. Various studies provide counter
claims that long-term customers do not always spend more (East
et al., 2006), are not cheaper to serve (Reinartz and Kumar, 20 0 0,
2002) and do not pay higher prices (Reinartz and Kumar, 2002).
Research has found that to maintain or improve market share, a fo-
cus on acquiring new customers is more important than customer
retention (Riebe et al., 2014). Of particular relevance to WOM as
measured by NPS, research has found that long-term customers
are not more likely to recommend a brand than short-term cus-
tomers (East et al., 2005). These findings contradict the claims by
Reichheld and Sasser (1990) by highlighting that, across all in-
dustries, loyalty does not always result in increased spending, in-
creased WOM, or increased profitability for the firm level.
The double jeopardy phenomenon may shed light on how com-
panies may grow from increasing NPS. The phenomenon occurs
consistently in competitive markets, and refers to the repeated
finding that smaller brands have fewer customers, and that these
customers are also slightly less loyal. Studies have observed the
double jeopardy phenomenon across a wide variety of industries
and countries (Ehrenberg et al., 1990, 2004; Sharp, 2010; Sharp
et al., 2012; Uncles et al., 1995). Double jeopardy contrasts with
the views of Reichheld and Sasser (1990) as it implies that com-
pany growth is typically achieved through increases in market pen-
etration rather than by retaining loyal customers, as loyalty does
not differ much between brands. Therefore, according to the dou-
ble jeopardy pattern, high market share is achieved by increasing
the number of customers who purchase the brand occasionally. As
the number of brand buyers grows, these buyers will make slightly
more frequent purchases on average. Thus market share growth
arises from having many more customers who have only slightly
greater loyalty than before, and many of these customers are likely
to remain ‘detractors’ or ‘passively satisfied’ in the Net Promoter
calculation.
5. Objectives, data and method
5.1. Objectives
The preceding reviews show that the use of the NPS score is
contested, both as a measure to predict future revenue and also for
the assumptions that are made about the behaviour of individual
promoter classes. Commercial enterprises that base their actions
on NPS are thus vulnerable to making questionable marketing de-
cisions.
Given the contradictory nature of the literature about the effect
of NPS, the present research seeks to add to the evidence available.
The research makes several contributions. First, it extends prior
work on NPS to the context of a business-business-company oper-
ating in the New Zealand primary products sector. Second, it repli-
cates prior analysis on the relationship between NPS and company
revenue, by investigating whether NPS predicts company revenue
growth in this context.
Third, the research investigates whether individual promoter
classes show the behaviours expected from Reichheld’s theories,
with more loyal customers buying more and increasing their pur-
chases over time. This is done by considering three further ques-
tions:
1. Is NPS correlated with past, present or future revenue from the
same customers?
2. Do promoters buy relatively more in the current year than de-
tractors or passively satisfied customers?
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3. Do promoters increase their spend in the following year, and is Table 1

Descriptive statistics for NPS and company revenue.
this the primary source of revenue growth from the same base
of customers? Year n NPS Rev. Index (t − 1) Rev. Index (t) Rev. Index (t + 1)

2010 – – – 100 121

2011 317 −9% 100 121 130
5.2. Data
2012 965 11% 121 130 142
2013 725 11% 130 142 152
Longitudinal Net Promoter data were collected from a com- 2014 377 19% 142 152 167
pany offering business to business services to the New Zealand 2015 401 12% 152 167 –
primary products sector. These services are offered using the com-
pany name as the core brand with which business customers en-
gage.
apply one-way ANOVA to consider whether loyal customers do in-
The Net Promoter question was included in a survey completed
deed spend more in the current period, and then apply multiple
by current customers over a five-year period, conducted by the
regression to consider whether loyal customers do in fact increase
company’s in-house market research team. Within the survey, cus-
their expenditure in the next period. The regression uses the fol-
tomers were asked to indicate their likelihood of recommending
lowing specification.
the company to a friend or colleague on the 11-point Net Pro-
moter scale. The final data set includes individual customers’ NPS
collected for the period 2011 to 2015; the annual spend for each
Next Year Spend (t + 1 ) = β0 +
of those customers in the focal year and adjacent years from 2011 β1 ∗ Current Year Spend (t ) +
to 2014, collected from internal company records and expressed as (1)
β2 ∗ Promoter +
an index; and the annual revenue of the company from published
annual reports for the period 2010 to 2015 also expressed as an β2 ∗ Passively Satisfied +ε
index to preserve confidentiality.
The individual-level data therefore consist of repeated cross- Eq. (1) incorporates a current spend variable to reflect that
sectional surveys, with each respondent matched to longitudinal growth in revenue and not just the level of revenue is now the
information from internal company records on their own spend in dependent variable. Eq. (1) also includes individual promoter cate-
the current, past and future years. These data were cleaned to re- gories (promoter, passively satisfied – defined using effects coding),
move five extreme outliers on the customer spend variable, and to take account of criticisms that the standard NPS is flawed due
any cases where the individual promoter index scores or customer to the omission of the passively satisfied category. The use of indi-
spend data were absent. Providing the customer spend and the vidual promoter categories is also required as NPS is inherently an
individual promoter index scores were both recorded for at least aggregate measure that cannot be applied in this individual-level
one year, the customer is included in one or more analyses. The fi- regression. Finally, Eq. (1) includes a constant to reflect the overall
nal sample included 2785 respondents with yearly samples ranging trend in spend across the whole customer base; thus the incre-
from 317 to 965 respondents. mental growth in spend by promoters (or passively satisfied cus-
tomers) is modelled separately from the overall growth in spend
experienced by the entire customer base.
5.3. Method

The first analysis considers the previously researched relation-

ship between aggregate NPS and company revenue. It compares
the performance of aggregate NPS as a lagged, current and lead-
ing indicator – that is, as a correlate of past (t − 1), current (t),
and future (t + 1) company revenue. Aggregate NPS is examined
against company revenue as Reichheld claims NPS to be an indica-
tor of net positive WOM that attracts new customers and therefore
grows revenue through increased market penetration. This anal-
ysis employs simple correlations as the data structure does not
support more complex methods. It provides a replication of prior
studies on the relationship of NPS with aggregate outcome mea-
sures (Keiningham et al., 2007a; Morgan and Rego, 2006; Reich-
held, 2003; Van Doorn et al., 2013).
The second analysis considers the relationship between aggre-
gate NPS and past (t − 1), current (t), and future (t + 1) spend for
the same customers. In this case, customers are only included if
they were active in the focal year, defined as having a positive
spend index in the year the NPS data were gathered. The analysis
extends prior work on the relationship between NPS and company
revenue to consider whether it applies equally to NPS and revenue
from the existing base of customers. This provides a rare direct test
of the claim that greater loyalty leads to increases in revenue from
the same customers. It again employs simple correlations, due to
the constraints of the aggregated data.
The third analysis considers the disaggregate case, examining
behaviour of individual active customers. This results in a much
larger sample size with greater flexibility in the statistical tech-
niques that may be employed. The analytical approach is to first
6. Results
6.1. Comparison between NPS and company revenue
Table 1 shows the aggregate descriptive statistics for NPS and
company revenue. As noted earlier, the sample sizes range from
317 to 965. The column for NPS shows substantial variation over
time, moving from negative to positive and then dropping back
slightly. The next three columns report the corresponding revenue
index: first for the prior year, then the focal year, and finally the
subsequent year. These values also show substantial variation over
time, but in this case with monotonic growth.
Based on the data in Table 1, NPS has a positive correlation with
past revenue (r = .85, p = .07), current revenue (r = .70, p = .19) and
future revenue (r = .91, p = .09). However, given the small number
of data points in Table 1, these correlations do not reach statisti-
cal significance. Although these results have weak statistical power,
they are noted here to support the accumulation of evidence for
inclusion in future meta-analyses.
Nonetheless, given the direction of the correlations, there is
nothing in these results to contradict previous findings that NPS is
positively correlated with past revenue (Reichheld, 2003), current
revenue (Keiningham et al., 2007a; Van Doorn et al., 2013) and fu-
ture revenue (Morgan and Rego, 2006). As the data do not include
satisfaction measures, no comment can be made whether the cor-
relation of NPS with revenue simply reproduces the results found
from the correlation of customer satisfaction with revenue.

Please cite this article as: P. Mecredy et al., Are promoters valuable customers? An application of the net promoter scale to predict future
customer spend, Australasian Marketing Journal (2018), https://doi.org/10.1016/j.ausmj.2017.12.001
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P. Mecredy et al. / Australasian Marketing Journal 000 (2018) 1–7 5

Table 2 Table 3
Descriptive statistics for NPS and average spend of the customer base. Same-year average spend by promoter category.∗ , n.s.

Year n NPS Avg.spend (t − 1) Avg.spend (t) Avg.spend (t + 1) Year n Detractors Passively satisfied Promoters Anova F-statistic

2011 311 −9% 35.80 36.20 42.20 2011 311 30.58 37.12 42.10 7.94∗ ∗
2012 922 11% 36.75 42.64 41.10 2012 922 34.88 43.04 47.30 19.30∗ ∗
2013 703 11% 41.28 39.15 38.71 2013 703 27.25 40.25 44.89 39.51∗ ∗
2014 370 19% 41.17 39.29 –
∗ ∗∗
2015 401 12% 39.83 – – p < .05, p < .01, n.s.
p non-significant.

Table 4
6.2. Comparison between NPS and average spend of sampled Prediction of next year spend from promoter category.

customers 2011 2012 2013 Pooled

n 290 880 670 1840

Table 2 reports descriptive statistics for NPS and revenue (mea- Adj. R2 .229 .259 .372 .288
sured as average spend) from the same customer base. The anal- F 30 103 133 250
ysis of revenue growth from the same customer base is not usu- Sig. F <.001 <.001 <.001 <.001
β 1 (current year spend) 0.469 0.499 0.555 .512
ally done in NPS analysis, but the assumption of revenue growth
β 2 (promoter) 0.071 0.060 0.182 .100
coming from loyal customers is inherent in Reichheld’s work, and β 3 (passively satisfied) 0.051 0.004 0.095 .040
it is interesting to test this on his own terms using his own vari- t (β 0 ) 9.57∗ ∗ 15.43∗ ∗ 9.66∗ ∗ 20.43∗ ∗
able. For this analysis, the sample sizes have been updated to re- t (β 1 ) 8.85∗ ∗ 16.75∗ ∗ 17.11∗ ∗ 25.15∗ ∗
flect the restriction of the analysis to active customers for the focal t (β 2 ) 1.16n.s. 1.55n.s. 4.21∗ ∗ 3.85∗ ∗
t (β 3 ) 0.86n.s. 0.17n.s. 2.25∗ 1.58n.s.
year. The remaining columns reflect the average of internal com-
∗ ∗∗
pany records for spend by the sampled customer base for the pre- p < .05, p < .01, n.s.
p non-significant.
vious, current and immediate future year, expressed as an index.
The underlying values of the index range from zero to 344. As the
sample differs each year, the customer spend for a particular year specified in Eq. (1). As each year has a different sample the re-
(e.g. 2013) may vary depending on whether that year is t − 1, t or gression is initially run for each of the three years independently
t + 1 relative to the focal year. (although see below for discussion of an additional pooled regres-
Based on the data in Table 2, NPS has a positive correlation sion). The first four rows report sample sizes and overall regression
with past revenue (r = .77, p = .129) and current revenue (r = .66, results. Adjusted R2 values for the regression range from .229 to
p = .343), and a negative correlation with future revenue (r = −.75, .372 with significant F values, indicating that these regressions do
p = .465). Again, given the small number of data points available have explanatory power.
in Table 2, these correlations do not reach statistical significance; The next three rows present the standardised Beta coefficients
however, they are noted here to support the accumulation of evi- for each variable. For each year the lag variable has the largest
dence for inclusion in future meta-analyses. coefficient (β 1 ), followed by coefficient for the promoter variable
There is nothing in these results inconsistent with the idea that (β 2 ), then the coefficient for passively satisfied variable (β 3 ). The
NPS is an outcome of past expenditure, and correlated with cur- coefficients for being a promoter or passively satisfied customer
rent expenditure, for the same customers. The reversal of sign for are non-significant in two of the three individual-year regressions.
the correlation with future expenditure may be due to regression The final four rows provide t-statistics and significance for each co-
to the mean; that is, customers who buy a lot in one year are likely efficient including the constant.
to think about the service more and thus recommend it; however, The dependent variable is non-normal and shows high kur-
they are unlikely to maintain the same high level of purchases in tosis, so the width of the confidence intervals in the first three
the following year if there is a random component to their pur- regressions may be inaccurate. Also, as the t-statistics are sensi-
chasing. tive to sample size, some non-significant effects may become de-
tectable by simply having a larger sample. The analysis in the final
6.3. Comparison between promoter score and future spend of same column of Table 4 addresses both these problems by pooling the
customers data to achieve a larger sample size, and by using bootstrapping
to estimate unbiased confidence intervals despite the presence of
The correlations reported so far have weak statistical power. non-normality in the dependent variable. These non-normal data
The next stage of the research addresses this limitation by extend- could also be analysed using non-parametric methods; however,
ing the analysis to an individual-level regression of the relationship this would lose some statistical power, raising the risk of a Type
between promoter scores and future revenue for the same cus- 1 error when considering whether promoters to buy more in the
tomers. This provides a stronger test of whether customers with future. Another alternative would be to transform the dependent
high promoter scores also buy more the following year, a key the- variable, but bootstrapping offers a theoretically superior approach
sis of Reichheld’s NPS and loyalty approach. The data allow the re- with fewer assumptions compared to transformation.
gression to be repeated for active customers who gave promoter The results of the pooled regression confirm the patterns ob-
scores in each of 2011, 2012 and 2013, and for whom the company served across the three individual regressions. Current year spend
provided spend figures for the focal year and the succeeding year. (β 1 ) has most influence, followed by the constant (β 0 , growth in
As a precursor to the regression analysis, Table 3 reports the dif- spend across the whole customer base). Membership of the pro-
ferences in same-year spend for each promoter category for the moter category (β 2 ) has an influence that is detectably different
three periods used in the regressions. As expected from prior lit- from zero; however, the effect is only about one fifth of the effect
erature, promoters do indeed spend more than passively satisfied arising from the constant (overall growth across the whole cus-
customers, who in turn spend more than detractors. This result is tomer base). Membership of the passively satisfied category (β 3 )
consistent across all three years analysed. has less than half the effect of membership of the promoter cate-
Table 4 presents results for the relationship between the pro- gory, although this small level of influence is not detectably differ-
moter category and future revenue growth, using the regression ent from zero in this sample.

Please cite this article as: P. Mecredy et al., Are promoters valuable customers? An application of the net promoter scale to predict future
customer spend, Australasian Marketing Journal (2018), https://doi.org/10.1016/j.ausmj.2017.12.001
JID: AMJ
ARTICLE IN PRESS
6 P. Mecredy et al. / Australasian Marketing Journal 000 (2018) 1–7
Thus, changes to levels of spend of the existing customers
largely arise from growth across the whole customer base. The
incremental growth in spend from promoters is much lower, al-
though it is greater than the growth in spend from the passively
satisfied customers.
7. Conclusion
7.1. Summary and discussion
This research has replicated prior work on the relationship be-
tween NPS and company revenue. This was done in the novel
context of a business-to-business services company in the New
Zealand primary products sector. The research also extended prior
work to consider growth in revenue from the same customer base,
and differences in current and future spend of individual classes of
promoters (detractors, passively satisfied, promoters).
These results give directional support for the role of NPS as a
predictor of past (t − 1), current (t), and future (t + 1) company rev-
enue. The positive relationship with past company revenue is con-
sistent with the findings of Reichheld (2003) and Marsden et al.
(2005) as these studies correlated NPS with past growth rates. The
relationship with current (t) and future (t + 1) company revenue is
consistent with Reichheld’s (2003) claim that NPS is a predictor of
future company revenue. However, as the aggregate-level analysis
has few data points, and does not include competing metrics such
as customer satisfaction and WOM, the contribution is to add the
accumulation of findings about the performance of NPS.
The present research also extended the analysis of NPS to its
association with past (t − 1), current (t) and future (t + 1) spend
from the same customer base. The results again give directional
support for the relationship between NPS and past and current
same-customer spend; however, the direction of the effect was re-
versed for future spend, possibly suggesting high value customers
expressed loyalty but then suffered a reversion to the mean on
their actual spend. The subsequent individual-level analysis gives
conflicting results, showing growth from across the whole cus-
tomer base, and to a lesser extent from promoters specifically. The
inconsistency could be due to differences in the way the promoter
variable was analysed, sampling differences that arise from the re-
peated cross-sectional aggregate analysis, or for some other reason.
Given that the correlation coefficients are not significant, further
discussion of this point must await stronger evidence.
Turning to the individual-level analysis, the increased sample
size and longitudinal nature of the data provide much clearer re-
sults. Research into growth in spend by individual members of the
existing customer base is rare in NPS studies, and so the present
research makes a substantial contribution. It confirms that loyal
customers (promoters), do in fact buy more than disloyal cus-
tomers (detractors), both in the current year and to a lesser extent
the following year.
However, the largest effect sizes for growth in spend in the
individual-level analysis were for current year spend and the con-
stant. Current year spend is a control variable to ensure that future
spend is not confounded by failing to account for current levels, so
while this is expected to have a large effect it has no particular
theoretical implications. The constant is different, in that it cap-
tures growth in spend in the subsequent year that occurs over all
three promoter classes (promoter, passively satisfied, detractor).
Taking the pooled regression as the most accurate measure, the
constant has an effect about five times that arising from member-
ship of the promoter category. Thus, most of the growth in spend
in the next year is evenly distributed across all three classes of loy-
alty. Achieving growth from the existing customer base mainly re-
lies on everybody buying a bit more, consistent with prior findings
from the double jeopardy phenomenon. The incremental effect of
Please cite this article as: P. Mecredy et al., Are promoters valuable customers? An application of the net promoter scale to predict future
customer spend, Australasian Marketing Journal (2018), https://doi.org/10.1016/j.ausmj.2017.12.001
[m5G;March 29, 2018;13:39]
purchases by promoters, separate from the overall trend, is rela-
tively modest.
It is possible that promoters are indirectly responsible for more
growth than is accounted for by their own direct expenditure or
recommendation. East et al. (2017) pointed out that the effect of
positive WOM may be subject to social amplification, in which re-
ceived WOM is easily repeated by existing customers where it pro-
vides a script others can apply in their own conversations. While
East et al. (2017) mainly consider the effect of social amplification
on new customers, it could equally operate to encourage additional
purchases from the existing customer base. As promoters are more
experienced customers, they are more likely to provide interest-
ing comments that could be picked up and repeated by other cus-
tomers in a viral fashion. Therefore, as well as recruiting new cus-
tomers and buying more themselves, promoters may amplify WOM
by spreading repeatable scripts that are eventually heard by the
less-loyal members of the existing customer network.
7.2. Limitations and future research
NPS has been heavily criticised for its scale properties. The
present research goes some way towards addressing these criti-
cisms by considering not just the aggregate NPS, but also indi-
vidual customer membership in the promoter and passively satis-
fied categories. However, this does not address all the objections to
the NPS scale, and further work could consider breaking the scale
points down further, exploring other psychometric approaches to
utilising NPS data such the population proportions of Wright and
MacRae (2007), or comparing other WOM-based metrics as predic-
tors of company growth. Alternative approaches to analysing the
same raw data could conceivably achieve greater statistical effi-
ciency, and thus improve the predictive ability of the scale.
A further point is that the present analysis has been applied
to a single near monopoly company serving the primary prod-
ucts sector in New Zealand. Reichheld (2003) claimed that the NPS
could not predict growth rates in industries dominated by a near
monopoly; so the results here show the NPS may be more broadly
applicable than previously thought. Future work could check this
result in the context of other near-monopoly businesses.
More data will help to further assess the generalisability of
the current findings in other ways. This could include a broader
range of industries, more companies within the industry, consid-
ering longer or different time periods than year-by-year measure-
ments, using other outcome measures, and enhancing the mod-
elling to explicitly include economic, competitive and exogenous
variables. Another useful approach would be to extend the present
one-year ahead approach to consider the complete lifetime value
of the customer as the dependent variable.
Finally, while the direct effect of promoters on same-customer
sales growth is relatively modest, further research should investi-
gate whether there is also an indirect effect of promoters that op-
erates through WOM on the existing customer base. First, WOM
from promoters may play a role in encouraging existing customers
to buy a little more. Second, if promoters produce WOM scripts,
these may be repeated by other existing customers and this may
result in new customer acquisition. The effect of WOM on exist-
ing customers and the ability of scripts to affect indirect customer
acquisition are both under-researched areas.
8. Conclusion
The debate about the performance of NPS as a predictor of
company growth is far from settled. There is mixed evidence on
whether NPS is a predictor of past, current or future growth rates,
and whether it performs better than other measures, such as cus-
tomer satisfaction. The present work has added data but more
JID: AMJ
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P. Mecredy et al. / Australasian Marketing Journal 000 (2018) 1–7
is needed – to continue the accumulation of evidence, to check
whether effects vary between contexts, and to directly compare
competing explanations for loyalty such as satisfaction, WOM.
Nonetheless, the present work gives directional support for NPS
as a predictor of company revenue growth, and confirms that pro-
moters do buy more than other customers. Also, even if NPS is no
better a predictor than other customer satisfaction measures, liter-
ature suggests it may still be superior from a practical perspective
if it is easier to apply. Also, NPS arguably has greater content va-
lidity than customer satisfaction, as it more directly measures the
mechanism by which growth is assumed to arise, namely positive
WOM.
Conversely, the results show that the classes of loyalty de-
scribed by individual promoter index scores do not explain much
of the growth that comes from the existing customer base. To the
extent that NPS predicts future revenue, it would seem to do so as
a predictor of acquisition of new customers, rather than predicting
an increase in spend from existing customers. Therefore, managers
may do well to consider two measures for future growth; NPS or
some alternative to assist in acquisition; and growth spread across
the whole customer base, including light buyers, to gain the bene-
fits that arise from retaining existing customers.
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