In this episode of the Account Experience Podcast, CustomerGauge CEO Adam Dorrell sits down with Fred Reichheld, the Bain & Company Fellow who invented the Net Promoter Score (NPS) in 2003 and co-authored the original Harvard Business Review article that introduced it to the world.
Fred covers the origins of NPS, including the name he originally wanted and still regrets not using. He discusses his book ‘Winning on Purpose,’ the concept of earned growth, and why he believes the digital age is NPS's greatest opportunity — not its undoing. He also addresses the common pitfall that destroys NPS programs: linking scores to front-line compensation.
Topics covered: the naming of Net Promoter Score • NPS in the digital age • customer capitalism and the FREDSI index • earned growth vs. bought growth • why B2B is where NPS started • the golden rule as a business philosophy
5 Key Ideas from Fred Reichheld on NPS
1. The Name He Regrets
Fred originally wanted to call it ‘Net Lives Enriched,' a name he believes better captures the purpose of the metric. He settled on ‘Net Promoter’ while riding in a cab, and has said he wishes he hadn't. The name stuck because it spread too widely to change.
2. NPS Is More Relevant in the Digital Age, Not Less
Fred pushes back strongly on claims that digital has made NPS obsolete. He argues digitalization creates more opportunities to measure and improve customer experience, not fewer. Over two-thirds of Fortune 100 companies use Net Promoter as of his last count.
3. The Open Source Decision — and Its Tradeoffs
Fred describes releasing NPS with an open-source mentality, allowing practitioners to use, modify, and build on it freely, as the most important decision he made. It drove innovation and adoption. The tradeoff: he lost control of it, leading to widespread misuse (particularly linking NPS to front-line compensation, which Fred says destroys programs within one to two years).
4. Earned Growth vs. Bought Growth
Fred advocates for ‘customer-based accounting’ — measuring how much revenue is earned through referrals and loyalty versus bought through advertising. He created the FREDSI (Foster Recommendation and Eliminate Detraction Stock Index): an index of high-NPS companies that he claims has returned more than triple the stock market over ten years.
5. NPS Started in B2B
Fred corrects a widespread misconception: Net Promoter did not originate as a consumer tool. ‘It started in a business to business context. The idea came from large complex B2B enterprises.’ This makes CustomerGauge’s B2B Account Experience methodology a direct continuation of the original NPS intent.
How The Name “Net Promoter” Came About
“Believe it or not, we had a different name for Net Promoter. These loyalty leaders, Net Promoter leaders have a moral compass and set of ethics that are formulated around the golden rule.”
When Fred was thinking about the name, he tried to boil down exactly what the essence of this new indicator was and he came to this conclusion:
“When a company or team touches a customer, have they enriched the life or diminished the life of a customer?”
And here’s the bombshell:
“I was originally going to call it new lives enriched, and I wish I had! There are a lot of businesses where enriching lives really resonate with their employees, much better than promoters or detractors. I thought ‘net lives enriched’ was too soft and lovey dovey.”
“I remember sitting in a cab and pondering these different names like ‘net advocacy score’, ‘net fan score’ and ‘Net Promoter’ was sort of winning in my head but then I had this image of that fight promoter that used to work for Muhamed Ali and his hair was crazy, and I thought ‘promoter’ is just not a good name, but I settled.”
That’s right folks, you heard it here first, Fred wished he kept his original name of Net Lives Enriched, but by the time Net Promoter was released in the wild, it spread too far and wide to change it. A mistake? Probably not as Net Promoter has been widely adopted, but definitely an interesting regret from the creator of Net Promoter!
Fred on Net Promoter Score in the Digital Age
On digitalization, Adam asked Fred how he thinks Net Promoter fares in the current world, and Fred, god love him, pulls no punches:
“Digitalization is awesome. There are people that say Net Promoter is less relevant in the digital age and I think to myself ‘my god these are the stupidest people I’ve ever met’ digitalization is this awesome opportunity to measure effectively and delight customers...in the re-conceiving of the customer journey there are so many opportunities to shock and amaze customers with some many wonderful, thoughtful kind and caring innovations—this is the age of net promoter and the evidence is clear.”
And Fred’s not wrong, over ⅔ of Fortune 100 use Net Promoter.
The NPS Mistake That Destroys Programs
According to Fred Reichheld, the most common and most damaging misuse of Net Promoter Score is linking it to front-line employee compensation.
When scores are tied to bonuses or performance reviews, employees start gaming the system asking customers for high scores, explaining what a ‘10’ means for their paycheck, or avoiding surveying at-risk accounts. This inflates NPS scores while destroying the honest feedback loop the metric was designed to create.
Fred’s verdict: programs that make this mistake typically collapse within one to two years.
“I thought naming it was the most important thing, it was not. The most important choice was going with an open source mentality where practitioners could use it, experiment with it, change it, modify it and the innovation and insights just exploded.”
But making it open source has downsides and Fred mentions ‘you lose control of it.’ But his core philosophy is to treat people the way you want to be treated.
Fred believes “most people are using and abusing the system. They’re making this cancerous decision to link it to compensation and the front line. But within a year or two it essentially destroys itself and you get begging and pleading for high scores.”
And this echoes our experience in B2B as well, if you link to compensation people start begging and using ‘car salesperson’ tactics to inflate scores and the program inevitably will collapse.
Winning on Purpose
Fred’s new book is called “Winning on Purpose” and Adam wanted to know a bit about how Fred came up with the name. Here’s the story:
Fred had time to think and reflect on the current state of business and he kept asking himself ‘why do people not see the golden rule as the key to success?’
Looking back to the Net Promoter days it was bluntly obvious to Fred and his team that If you looked back at the highest Net Promoter Score companies, their scores were directly correlated with a leadership team that truly believed the reason their business existed was to make their customers' lives better. But Fred mentioned that he came to realize this was a minority point of view.
The realization Fred had after this exercise was that only 10% of businesses today believe their purpose is to serve their customers. And he presents powerful evidence that serving your customers better is the only way to win today.
The Rise of Customer Capitalism
In Fred’s book, he talks about how accounting was developed for capital-intensive industries like railroads, steel manufacturers and has evolved very little since then.
Fred even talks about Bain’s balance sheet as being a complete waste of time. “Of course you have to do it,” says Fred “but in a complete service business, it makes no sense at all.”
So he asks the question—” why are we making these businesses go through all of these antiquated accounting practices and not measuring what really matters. Who are your assets, maybe your employees that delight customers, maybe your customers themselves.”
What Is Earned Growth? (Fred Reichheld’s Framework)
Fred Reichheld distinguishes between two types of revenue growth in his book ‘Winning on Purpose’:
- • Earned growth: revenue generated through customer loyalty: repeat purchases, expanded relationships, and referrals from satisfied customers. This growth is sustainable and signals genuine customer value.
- • Bought growth: revenue acquired through advertising spend, discounting, and promotional campaigns. This growth can mask underlying customer dissatisfaction.
Fred created the FREDSI (Foster Recommendation and Eliminate Detraction Stock Index): an investment index composed of companies with the highest Net Promoter Scores. His claim: companies in the FREDSI have returned more than triple the stock market over ten years.
The implication for businesses: NPS is not just a satisfaction metric. It’s a leading indicator of whether revenue is earned (and therefore sustainable) or bought (and therefore fragile).
Fred is advocating for customer-based accounting. One way companies can track customer growth is by tracking referrals and focusing on earned growth—essentially how much is earned through referrals and how much is bought through advertising and expensive marketing campaigns.
But does it pay to invest in such customer practices?
Short answer—absolutely.
Fred claims with Bain’s detailed analysis of industry vs. industry Net Promoter Scores, he has a very clear picture of which companies value and feed customer loyalty. Whenever there is no client conflict, he invests in those high-performing NPS companies and has been for ten years.
So how did he fare?
Fred claims his returns are more than triple the stock market over the decade.
He also states that there are very few PE firms that can match that record and no public ETFs or mutual funds that can claim the same returns.
So Fred went a step further and created an index called FREDSI
It stands for Foster Recommendation and Eliminate Detraction Stock Index. This stock index and the customer-first companies included is the secret to more than tripling the stock market over the last ten years.
The Golden Rule & NPS (& B2B of Course!)
But what is this all really about? What does the act of referring a friend or colleague to a product or service really mean?
Fred believes it’s about love—they want to enrich the lives of their friends and family.
Fred believes Net Promoter is really a Net Love Score. It’s the notion of what makes people loyal. He believes you don’t trick them with fine print, you treat them well and set them up for the best outcome possible.
In short, great businesses love their customers..it’s really that simple.
But, what about B2B? Does loving your customers still work?
Most people think Net Promoter is a consumer invention, but that couldn’t be further from the truth according to Fred. “It started in a business to business context. The idea came from large complex B2B enterprises.”
Adam mentioned that CustomerGauge is happily helping B2B companies across the globe continue Fred’s B2B NPS legacy with Account Experience, a B2B experience methodology that embodies consumer capitalism and customer love in a software package.
To close out, Fred gave one final example of this business ethos in action. There was an article in the Wall Street Journal recently where a restaurant put a sign in the window that said “Be kind or please leave.” Fred wishes the leaders of today embodied that mentality more.
The golden rule is quite possibly the most powerful concept in human history, isn’t it about time companies follow the lead of people?
And that is how you win your customer's hearts and lifelong loyalty (on purpose).
Frequently Asked Questions: Fred Reichheld and Net Promoter Score
Q1: Who invented the Net Promoter Score?
Net Promoter Score (NPS) was invented by Fred Reichheld, a Bain & Company Fellow, and first introduced in a 2003 Harvard Business Review article titled ‘The One Number You Need to Grow.’ Reichheld developed NPS in collaboration with Bain & Company and Satmetrix. The core insight was that a single question — ‘How likely are you to recommend us to a friend or colleague?’ — could predict customer loyalty and business growth more reliably than complex customer satisfaction surveys.
Q2: What does Fred Reichheld think is the biggest mistake companies make with NPS?
According to Fred Reichheld, the most damaging misuse of NPS is linking scores to front-line employee compensation. When employees’ bonuses depend on NPS scores, they begin asking customers for high scores or avoiding surveying at-risk accounts — which inflates scores while destroying the honest feedback the metric was designed to create. Reichheld says programs that make this mistake typically collapse within one to two years.
Q3: What is earned growth according to Fred Reichheld?
Earned growth, a concept Reichheld developed in his book ‘Winning on Purpose,’ distinguishes between revenue earned through customer loyalty (referrals, repeat purchases, expanded relationships) and revenue bought through advertising and discounting. Earned growth is a measure of whether a business is genuinely creating customer value. Reichheld argues that NPS is the best leading indicator of earned growth — high-NPS companies earn more of their revenue, making it more sustainable.
Q4: What is the FREDSI index?
FREDSI stands for Foster Recommendation and Eliminate Detraction Stock Index. It is an investment index created by Fred Reichheld, composed of companies with the highest Net Promoter Scores. Reichheld has claimed that FREDSI companies have returned more than triple the stock market over a ten-year period, using the index as evidence that customer loyalty — measured by NPS — is a leading indicator of long-term financial performance.
Q5: Did Fred Reichheld regret calling it ‘Net Promoter Score’?
Yes. Fred Reichheld has said he originally wanted to call the metric ‘Net Lives Enriched’ — a name he believes better captures the purpose of measuring whether a business is improving or diminishing the lives of its customers. He settled on ‘Net Promoter’ while in a cab, considering and rejecting names like ‘Net Advocacy Score’ and ‘Net Fan Score.’ By the time the name was published, it had spread too widely to change.
Q6: Is Net Promoter Score relevant in the digital age?
Fred Reichheld argues it is more relevant, not less. He contends that digitalization creates more opportunities to measure customer experience effectively and to respond quickly — making NPS more actionable than ever. As of his most recent estimates, over two-thirds of Fortune 100 companies use Net Promoter. His view: critics who say NPS is less relevant in the digital age fundamentally misunderstand what the metric measures.
Put Fred’s Vision Into Practice for B2B
Fred Reichheld built NPS with B2B in mind — large, complex enterprises with multiple stakeholders and account relationships that need to be managed intentionally. CustomerGauge is the platform that operationalizes his vision: account-level NPS, closed-loop follow-up, revenue-linked CX, and earned growth measurement.
It’s the platform Gartner ranked #1 for B2B CX management. And it was built to answer the question Fred has spent his career asking: are you enriching the lives of your customers — or diminishing them?
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