Suppliers have evolved to become significant stakeholders in any companies’ business. Suppliers might seem hands-down or be taken for granted because of the vast number of available options nowadays, and buyers might consider the process of procurement to be simple and trivial. That might be true for the majority of purchased products, however, there are situations in which lack of supply resources or scarcity of certain products results in competition between customers to secure their access to the scarce goods or services offered by competent suppliers. In these situations, these highly demanded suppliers can pick and choose, giving birth to the concept of preferred customer status.
Preferred customer status is a level of customer attractiveness in which the buying firm has become the preferred and chosen customer of a certain supplier and will benefit from exclusive offers like early access to innovations and the best brainpower from the supplier. The objective of this study is to investigate how buying firms can become more attractive and gain this preferred status and to analyse the benefits a buyer gains by being an attractive or preferred customer. The drivers and consequences are explored from the available literature and a model of preferred customer status is constructed to be tested. In this study, three antecedents and two consequences are tested using data from a survey study. Statistical equation modeling is used to form a model and partial least square method is used to test the model using SmartPLS software.
The results of this study show that the bridging capability of a buyer or its ability to connect suppliers to interesting new markets or interesting potential partners has a significant effect on customer attractiveness. It also shows that both customer attractiveness and preferred customer status are positively influenced by the performance feedback that the buyer provides to the supplier. Furthermore, the study shows that common goals and strategic fit of the two parties has a positive effect on the chance of gaining preferred status but has no effect on customer attractiveness. Moreover, testing the consequences, it is found out that customer attractiveness and preferred customer status both increase the supplier’s willingness to share information with the customer and improve the mutual performance of the two companies. These results are strong indications of the benefits of being a preferred customer. They show that becoming more attractive leads to valuable information that suppliers share with the buyer and the supplier’s commitment and efforts to improve the mutual relationship. The results also show that in order to gain attractiveness, buyers can leverage their network of partners and to connect the target supplier to interesting markets. It is also observed that developing an effective feedback system and having regular discussions with supplier about the relationship is very desirable to suppliers and buyers should take it into account in order to gain preferred status. Finally, buyers should consider the strategic fit between the two parties when thinking about becoming closer and gaining preferred status
