Industrial Marketing Management 41 (2012) 1186–1193

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Industrial Marketing Management

Becoming a preferred customer one step at a time

Jean Nollet a,⁎, Claudia Rebolledo a, 1, Victoria Popel b
a
HEC Montréal, Department of Logistics and Operations Management, 3000, Chemin de la Côte-Sainte-Catherine, Montréal (QC), Canada H3T 2A7
b
HEC Montréal, Canada

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

Article history: A preferred customer is a buying organization who receives better treatment than other customers from a supplier,
Received 24 October 2011 in terms of product quality and availability, support in the sourcing process, delivery or/and prices. The decision to
Received in revised form 26 September 2012 become a preferred customer implies a continuous commitment by the purchaser to a complex, expensive and
Accepted 10 October 2012
often uncertain process. It is important to use a strategic approach, as well as appropriate tactics. Based on well-
Available online 7 November 2012
known models on the development of buyer-supplier relationship, on customer portfolio analysis and on the emer-
Keywords:
gent literature in customer attractiveness and preferred customer status, we suggest four steps to become – and
Preferred customer remain – a preferred customer: initial attraction, performance, engagement and sustainability. The process takes
Attraction the perspective of a buyer willing to obtain the preferential status and focuses on the strategies and tactics that
Supplier satisfaction could influence the supplier's decision of granting this status. The proposed process considers that the supplier is
Buyer–supplier relationship continuously comparing the value offered by the customer to its expectations, and to the value offered by other cus-
tomer relationships.
© 2012 Elsevier Inc. All rights reserved.

1. Introduction
It is usually considered that the initiator of the relationship between
sellers and buyers is the potential vendor. The salesperson tries to con-
vince a client to do business with his/her organization; and, over time,
the efforts can eventually be oriented towards becoming a preferred
supplier. However, the increased dependence of buying firms on their
suppliers is changing the dynamics between the selling and the buying
parties (Dyer & Singh, 1998; Johnson, Leenders, & Flynn, 2010). To be
able to get the attention of the best suppliers and the make sure they
are willing to contribute to their customer competiveness, purchasers
have to know better than before how to make their organization become
a preferred customer (Schiele, 2012). Suppliers, particularly those recog-
nized as excellent or exceptional, are wooed by potential clients, and
even by existing ones who want to increase their business with them.
Such a reality gives little choice to purchasers, who now have to
come up with more proactive supply strategies, while improving their
relative position towards suppliers. Otherwise, security of supply and
supply chain competitiveness might become an even more challenging
issue.
Although product substitution or changing suppliers is recommended
when a supplier's power is higher than the purchaser's (Lindwall, Ellmo,
Rehme, & Kowalkowski, 2010), developing a long-term relationship with
an existing supplier constitutes a better avenue when the dependence
⁎ Corresponding author. Tel.: +1 514 340 6279; fax: +1 514 340 6834.
E-mail addresses: Jean.Nollet@hec.ca (J. Nollet), Claudia.Rebolledo@hec.ca
(C. Rebolledo), Victoria.Popel@hec.ca (V. Popel).
1
Tel.: +1 514 340 6928; fax: +1 514 340 6834.
level is high (Caniëls & Gelderman, 2005). The purchaser should then
strive to stimulate and improve exchange processes (Ellegaard, 2006),
as well as to modify supplier behavior and improve supplier performance
(Ghijsen, Semeijn, & Ernstson, 2010). A survey aimed at determining the
most appropriate buying strategies support this approach. Out of 100 pur-
chasers who were interviewed, 72% indeed answered that becoming
a “preferred customer” should be a priority for some goods or services
where demand exceeds supply; according to the other interviewees, sup-
pliers give priority to higher selling prices rather than to which customer
orders (Kanter, 2008). However, a supplier survey by Bew (2007) indi-
cates that customer status carries more importance than economic or
monetary capabilities:
- 75% regularly offer “rare” products/services to their preferred
customers (this is also confirmed by Ivens & Pardo, 2007);
- 82% indicate that this type of customer is the first one to have access
to product innovations and new technologies;
- 87% offer better prices to their preferred customers.
As mentioned by Steinle and Schiele (2008, p. 11): “In the same way
that suppliers strive for “preferred supplier” status with their most im-
portant customers, buyers may want to become their core supplier's
customer of choice, that is, their “preferred customer.” Considering the
statistics just mentioned, having achieved this status also helps in times
when capacity exceeds demand, since a preferred customer could also
be perceived as continuing to contribute very positively to a supplier's
success; in fact, this could even be considered as a “favor returned.”
Such an approach by the customer clearly helps to consolidate the rela-
tionship with a supplier.

0019-8501/$ – see front matter © 2012 Elsevier Inc. All rights reserved.
http://dx.doi.org/10.1016/j.indmarman.2012.10.003
 J. Nollet et al. / Industrial Marketing Management 41 (2012) 1186–1193 1187

Although becoming a preferred customer might not always be critical,
it “is very important for the buying firms and, potentially, essential for
future success” (Schiele, Veldman, & Hüttinger, 2010, p.2). However, as
discussed subsequently, becoming a preferred customer shares some
common characteristics with becoming a preferred supplier, but there
are differences as well (Nyaga, Whippke, & Lynch, 2010). The concept
of preferred customer, which is also labeled “interesting customer”
(Christiansen & Maltz, 2002), “attractive customer” (Ellegaard & Ritter,
2006) and “customer of choice” (Bew, 2007; Ramsay & Wagner, 2009),
has been studied since the 1980s, but there is no consensus on its defini-
tion and especially on the steps and strategies on how to become a pre-
ferred customer (Lindwall et al., 2010).
Considering these gaps in the literature, we first come up with a def-
inition of the term “preferred customer.” Then we will answer the fol-
lowing question: How does a buying organization become a preferred
customer? We develop a four-step model and propose specific tactics
that could help customers obtain and keep this preferential status.
Clearly, the intent of the four-step process is to show how an organi-
zation can achieve the “preferred customer” status. This can be done over
little time or many years, depending on the context, but most often than
not, suppliers do not grant this status rapidly. Also, even if we suggest tac-
tics for each of the steps, a customer might choose to use tactics from
other steps; it is a matter of strategy, and wanting to accomplish too
much too rapidly could well backfire.
2. Understanding better what a preferred customer is
A preferred customer is a purchaser (buying organization) who
receives better treatment than other customers from a supplier, in
terms of product quality and availability, support in the sourcing
process, delivery or/and prices. These privileges are possible thanks
to a preferential allocation of resources and time (Steinle & Schiele,
2008). They are conditioned by a deep relationship between pur-
chasers and suppliers, endowed with instruments and organization-
al principles that ensure the effectiveness of the relationship and
protect the purchaser against its competitors, whom a supplier
may eventually turn to (Hüttinger, 2010). Details of these privileges
are presented in Table 1.
Suppliers do not treat all their customers equally (Krapfel, Salmond,
& Spekman, 1991). Using more or less sophisticated customer portfolio
analysis, they classify customers according to different variables such as
strategic importance, attractiveness, cost to serve and relationship value
(Eng, 2004; Salle, Cova, & Pardo, 2000). Only a small group of customers
will obtain a preferred status, resulting in a special treatment and a
privileged allocation of resources (Ivens, Pardo, Salle, & Cova, 2009).
From the supplier's point of view, the status of preferred customer will
be granted to those who will assist its development and help it to be
more competitive (Fiocca, 1982; Pels, 1992). The selection of these key
customers is based on the possibility of increasing volume, the capacity
to develop the supplier's image, the know-how which it can transfer or
help to create and the network effect (Turnbull, 1990), i.e. the access
which a customer can provide to new markets or market segments
(Eng, 2008).
Becoming a preferred customer requires a structured – albeit some-
times complicated – approach. It implies process and operations transfor-
mations, as well as a change in the usual approach used by purchasers
and even by other members of personnel. In fact, the purchaser must
“sell” the organization, while it is usually the role of the potential supplier
to do so about his own organization. The approach used could be sim-
ilar to the one called “reverse marketing” (Leenders & Blenkhorn,
1988), where a purchaser attempts to convince a potential supplier to
make a product that is not part of that supplier's regular product line.
However, selling one's own organization does not necessarily imply
that the product required has special features, but rather that the sup-
plier will give priority or provide some other favors to the purchaser.
In the following sections, we present a four-step process by which
a buyer becomes a preferred customer.
3. The process to become and maintain the status of preferred
customer
The proposed process is mostly based upon social exchange theory
(SET), which has been used extensively to explain business to business
relational exchange. Seminal papers explaining the development of
buyer-supplier relationships rely on SET (Anderson, Håkansson, &
Johanson, 1994; Anderson, 1995; Dwyer, Schurr, Sejo, & Oh, 1987;
Ford, 1993; Wilson, 1995). SET postulates that exchange interactions
involve social and/or economic outcomes. Over time, each party in
the exchange relationship compares the outcomes from these inter-
actions to those from exchange alternatives (Lambe, Wittman, &
Spekman, 2001). Thibaut and Kelly (1959) developed the concepts of
comparison level (CL) and comparison level of alternatives (CLalt)
to offer a conceptualization of how one compares the rewards of an
exchange relationship to that of alternative options. CL represents

Table 1
Advantages to be a preferred customer.

Source of value for the buyer Supplier's contribution

Product quality and innovation • Customize products according to the customer's specifications.
• Deliver consistent quality levels.
• Suggest or/and initiate quality improvements and innovations for the products required by the customer.
• Increased technological capability applied to products sold to the customer
Support • Provide the appropriate information on a timely basis:
o Sharing information about products and markets.
o Sharing of new solutions to solve problems at a lesser cost.
• Be available and responsive:
o Physical presence.
o Speed of response.
o Speed of adaptation to the customer's needs (ex.: customize processes).
• Accept to perform steps that are not part of the customer's core business.
Delivery reliability • Give priority to the customer when overall demand exceeds supply.
• Adjust to changes in delivery schedules due to peaks in demand or changes in delivery requested.
• Take particular care for the orders delivered to that customer.
• Be ready to deliver missing components within reasonable time.
• Keep safety stocks or locate warehouses close to the customer's facilities.
Price • Offer one of the lowest prices on the market.
• Be more receptive to further price negotiations with the customer.
Costs • Contribute to the reduction of the costs incurred by the customer:
o Acquisition costs (transportation costs, inventory management, order handling, product checking);
o Operational costs (product costs, manufacturing process costs, tooling and warranty costs).

Source: Adapted from Christiansen and Maltz (2002), Hald et al. (2009), Schiele, Veldman, and Hüttinger (2011), Ulaga (2003), Ulaga and Eggert (2006). Also based on our own ideas.
1188 J. Nollet et al. / Industrial Marketing Management 41 (2012) 1186–1193
the benefit standard that one feels is deserved in a given relation-
ship; it is then compared to the outcomes that one receives from
the relationship. For example, a supplier compares the benefits of a re-
lationship with a particular customer in terms of profit, or any other eco-
nomic or social benefit, to some expected level. If the customer's buying
conditions do not translate into profits above what the supplier expects,
then some dissatisfaction will be experienced. CLalt is the overall benefit
available from the best possible alternative exchange relationship. As
long as one's outcomes exceed CLalt for a given exchange relationship,
the supplier will want to maintain the exchange relationship. However,
if an alternative customer can provide greater benefits, the supplier
will consider switching customers. The key activity that drives relation-
ship development, and allows firms to make outcome comparisons to
CL and CLalt, are exchange episodes, or interactions, that occur during
the various states of relationship development (Anderson, 1995).
As the conceptual process models on relationship development men-
tioned, we suggest that the status of preferred supplier is obtained by
successive steps over time. Clearly, considering the topic under study
in this article, we assume that the buyer has examined the options avail-
able and that it has been decided that it was definitely worth the effort to
become a preferred customer of the targeted supplier. If so, the buying
organization attempts to develop the supplier's initial interest. In many
business settings, it is still easy to place an order at a given price and to
have the product delivered; however, some buyer-markets are becom-
ing supplier–markets, for instance due to mergers and to the tightening
of raw material supply. In this case, the buyer should make an effort to
attract the supplier, even before the first exchange. Two factors will influ-
ence the attraction between the buyer and the supplier: the buyer's abil-
ity to attract supplier's attention and the value it can offer. The buyer
becomes a selected customer as soon as there is a first transaction with
the supplier (Fig. 1).
After trial exchanges and exploratory relationships, the supplier
will likely continue to do business with the purchaser, if satisfied by
the value received and by the interaction, two prerequisites to the re-
current client status. This constitutes the second step of the process.
However, in order for the third step to take place, the purchaser has to
be aware of the existence of at least one significant element that will mo-
tivate the supplier to get more involved in the relationship and to grant
the purchaser some distinct advantages. Consequently, the purchaser
must improve its attractiveness, its potential to create more value and
its relational capabilities in order to differentiate itself sufficiently from
the other clients.
Clearly, it is preferable to proceed systematically, following a process
such as the one suggested in Fig. 1, in order not only to get the status of
Supplier’s
decision
1. INITIAL
Selected
ATTRACTION
customer
Attraction of supplier’s
attention
No
Fig. 1. The four steps in the process of becoming a preferred customer.
preferred customer, but also to maintain it afterwards. Performing this
fourth step well can prove to be challenging, since other clients also
see the advantages of being a preferred customer. Therefore, in the
fourth step, a client must continue or/and adapt the strategy and tactics
used in the first three steps, and not simply take its status for granted.
In Sections 4 to 7, we will provide more information about each of
these four steps, including some tactics to move from one step to the next.
4. Step 1: Initial attraction
At one point or another in time, it all begins with attraction, par-
ticularly when the context is one where demand exceeds supply or
when a supplier can offer significant advantages to potential clients,
and has to decide which ones offer the most potential. According to
Schiele, Veldman, and Hüttinger (2010), in order for a supplier to
pay attention to a purchaser, it must be aware both that the purchas-
er exists and what some of its characteristics are, as well as have a
positive expectation towards the purchasing organization. Whether
this attraction has taken place recently or previously is not impor-
tant, since a relationship begins at some point in time. Actually, it
could even have begun without too much attraction, since getting
to stage 2 is more or less difficult depending on the context (for in-
stance, the supplier has enough capacity or the customer is already
an established company).
Among the important attractiveness factors are: the potential client's
market share, growth and influence on the market, as well as financial,
technological and sociopolitical factors (Fiocca, 1982). Pardo and Naudé
(2006) also mention geographical closeness and buyer's image. Since
“value” is the basis of all business relationships (Anderson, 1995; Ulaga
& Eggert, 2005; Walter, Ritter, & Gemünden, 2001), the higher the
expected value, the more motivated the supplier will be to accept an ini-
tial exchange. Consequently, the purchaser's ability to present a credible
offer that would surpass the supplier available alternatives will influence
the supplier's decision to participate in the exchange (Ramsay & Wagner,
2009). However, since the concept of attraction is very subjective, the
buyer will have to understand the supplier's perception of value and
align its actions accordingly by using the appropriate tactics (Hald,
Cordón, & Vollmann, 2009). The objective of the buyer actions in this
stage is to be recognized as a feasible exchange partner (Dwyer, Schurr,
& Sejo, 1987). Buyer–supplier attraction will be relevant in all the steps
leading to a preferred status (Ellegaard & Ritter, 2006), but in this first
step the challenge is to present itself as a valuable partner before any pur-
chase. In order to do so, they will have to try to understand what the
No
2. PERFORMANCE No
Satisfaction of the basic
value 4. SUSTAIN-
Relationship quality ABILITY
Yes Continuous
reassessment of the
supplier’s needs so as
Recurrent to fulfill and even
customer exceed them
3. ENGAGEMENT
Yes Preferred
Operational excellence
Synergy and relationship customer
Mutual adaptation
 J. Nollet et al. / Industrial Marketing Management 41 (2012) 1186–1193
supplier values in an excellent customer, discussing business possibilities,
developing trust, etc.
The supplier's decision to select the customer will be on its reputation,
as a substitute for experience of its abilities (Ford, 1993). Purchasers use a
variety of tactics to manage a supplier's impressions; in the following par-
agraphs, we will discuss some of those mentioned in Table 2.
Tactics are means used to attain one's objectives. Clearly, no tactic
is suitable all the time, or with all suppliers. For example, some indi-
viduals prefer face-to-face meetings. Being present at events or using
social media increases awareness by others, as well as credibility. Not
only can the purchaser then provide additional information about the
organization, but it is also possible to influence what is being said and
perceived. In a supplier's selection process, impression management
should therefore guide a supplier about the advantages to deal with a
potential customer, thus providing a more favorable opinion. It implies
for a purchaser to motivate a supplier to assess positively the congru-
ence between its own objectives and business model, and the buyer's.
Impression management can be done in a variety of ways (Mohamed,
Gardner, & Paolillo, 1999). For instance, adopting a pleasant attitude
and demonstrating one's availability to a supplier can be used
while discussing how committed an organization is towards sustain-
able development. Since suppliers often favor long-term relation-
ships in order to secure revenues (Lai, Cheng, & Yeung, 2005;
Ramsay & Wagner, 2009), they will normally give priority to a pur-
chaser who appears to be sincerely interested in the supplier's activ-
ities, development plans and values.
Corporate advertising is another impression management strategy,
particularly useful when demonstrating the purchaser's competence
and experience through the recognition obtained from partners and
other suppliers. The promotion of successful programs implemented
with suppliers through word of mouth is also very effective to convey
the message to potential suppliers; this could be done well through
the purchaser's employees. Although this step might appear to be trying
too hard simply to be accepted as a customer, there are situations where
a supplier really has a choice as to which potential clients it will deal
with. Participation in trade fairs offers the opportunity for a first contact
with potential suppliers (Blythe, 2002).
In summary, step 1 is about signaling its presence to a supplier
and creating positive expectations on its part. Once the supplier is
aware of the potential value of the customer, and accepts the first
exchange, it is time to perform continuously!
5. Step 2: Performance
The second step to become a preferred customer is to satisfy the
supplier's expectations. Consequently, understanding the supplier's
Table 2
Tactics available to purchasers for initial attraction (step 1).
• Participate at events (for example trade fairs and conferences).
• Communicate, in a consistent fashion, realizations and growth potential.
• Put forward the organization's uniqueness or the exclusiveness of its products
and services by highlighting their distinct advantages.
• Organize meetings between top management members from both
organizations.
• Be a member of associations in the industry.
• Take part in relevant social media (Facebook, Linked In, Twitter, etc.).
• Revise and update website content (content, cross links, languages etc.) to grow
traffic from suppliers.
• Develop a system of impression management with that supplier.
• Set up and send pertinent information on a regular basis (infoletter, information
bulletin, articles, etc.).
• Regularly involve satisfied clients in the promotional effort.
• Organize events with partners.
• Develop extensive field contact by inviting the supplier at the buyer's site.
• Visit the supplier's premises.
Source: Adapted from Blythe (2002), Hald et al. (2009), Mohamed et al. (1999),
Mortensen, Freytag, and Arlbørn (2008). Also based on our own ideas.
1189
expectations is essential, since this allows the purchaser to anticipate
and better assess the supplier's behavior. In fact, it is a matter of
achieving a performance level that will satisfy the supplier. If the
level reached is one of delight, then step 3 and the recognition as a
preferred customer should come more easily.
Already, at step 1, a potential customer might have analyzed what
value means for the supplier. If this was not done before the transac-
tions began between both parties, and considering that there are only
a limited number of meaningful sources of value for the supplier, it
would really be appropriate now to ask questions such as: What are
the supplier's expectations in terms of value creation? What are its
real objectives? How does the supplier perceive the purchaser's poten-
tial for creating value? In practice, the answers are mostly intuitive, un-
less the purchaser has already dealt with the supplier at least a few
times. For instance, the buyer might then perceive the type of intangible
contributions that are – or seem to be – valuable to the supplier.
Although there is ample research on what constitutes value for cus-
tomers, there are very few conceptual or empirical studies on what it is
according to the suppliers' point of view (Ramsay & Wagner, 2009).
However, it is clear that profit is a key contributor to value. This is
why suppliers prefer purchasers who are willing to pay the asking
price or buy in large quantities. Ramsay and Wagner (2009) also discuss
about the non-monetary benefits that suppliers might favor; these in-
clude: the possibility for suppliers to maintain their autonomy and
power when dealing with buyers, reputation, buyer's trustworthiness
and fairness, timely information-sharing, and effective and harmonious
relationships among personnel from both organizations.
Supplier satisfaction has two levels: operational and strategic. At the
operational level, the purchaser needs to identify the key elements that
the supplier values the most in terms of the ordering, receiving and pay-
ment conditions and procedures (Essig & Amann, 2009). Few studies
explore the operational elements that could be relevant from the
supplier's point of view. Walter et al. (2001) studied the mechanisms
of value creation for suppliers and found that it can be achieved through
the direct or indirect functions customers accomplish. The direct func-
tions (profit, volume and safeguard) have an immediate positive impact
on the supplier, namely on its profit margin. However, indirect functions
(innovation, market scout and access) have a hidden impact on value,
because the real impact will be known later or will be achieved due to
third parties accessible by the purchaser.
Looking at key supplier relationships, Ulaga and Eggert (2006)
found that offering benefits in the form of product quality, delivery per-
formance, service support, personal interaction, know-how and time to
market is more important to increase the value perceived by the cus-
tomer than cost considerations. Applying their findings to the buying
side, customers could add value to their suppliers by improving their
buying conditions in terms of price and volume but also by offering
long-term benefits in terms of know-how, reputation, innovation or ac-
cess to new markets.
From a SET perspective, the initial transactions are crucial in deter-
mining whether the customer could eventually obtain a preferential
status. If the level of performance in this stage is deemed acceptable, fu-
ture interactions may occur and the relationship could expand. And if a
purchaser does not carry enough weight for a supplier, it could well be
labeled in the “low-performing relationships” category. According to
Walter et al. (2001), this situation could be attributed to new relation-
ships for which the value-creation pattern has not yet emerged, or to
existing ones because there was never a high potential in those anyway.
In the long term, the supplier will likely end such relationships. Even if
the relationship is classified as “medium”, this is likely not sufficient to
be equated to a potential “preferred customer.” Therefore, when a cus-
tomer strives for that status, there is little choice but to act accordingly.
“High-performing relationships” are those where the customer plays
direct and indirect functions. Often, this type of relationship develops
into a strategic alliance (a component of step 3). In addition, according
to Smals and Smits (2012), despite the fact that the value created
1190 J. Nollet et al. / Industrial Marketing Management 41 (2012) 1186–1193
through direct functions is more obvious to suppliers, they might never-
theless prefer the value created through indirect functions, since it pre-
sents growth opportunities not only with the existing purchaser, but
also with other purchasers and in other markets.
Purchasers should not only perform well at the operational level, but
also be able to develop a good relationship with the supplier. Benton
and Maloni (2005) found that supplier satisfaction with the relationship
in the automotive industry seems to be driven primarily by the nature
of the buyer–supplier relationship rather than by performance. Aside
from delivering the operational performance expected by the supplier,
the purchaser should also work to develop a relationship characterized
by mutual trust, collaboration, socialization and information sharing
(Noordewier, John, & Nevin, 1990). In an empirical study exploring
the different perceptions between buyers and suppliers, Nyaga et al.
(2010) found that supplier's satisfaction is strongly linked to trust and
commitment; to demonstrate their commitment to suppliers, buyers
need to initiate and participate in collaborative activities such as infor-
mation sharing which has already been proven to be more important
to suppliers than to buyers (Whipple, Frankel, & Daugherty, 2002).
In Table 3, we present some tactics customers could use to satisfy
their suppliers. The emphasis should be on avoiding hassles for the
supplier, on limiting additional costs to the supplier while offering
what it values the most, and developing at least a good – even if it
is not an excellent – relationship.
So, in this second step, the purchaser will strive to fulfill the
supplier's priorities, so that the latter really perceives clearly the ad-
vantages of continuing to deal with the purchaser. By performing
well and consistently, the purchaser is on solid grounds to begin
step 3. However, the same way as satisfied customers nevertheless
change suppliers (Jones & Sasser, 1995), it is plausible to expect
that supplier satisfaction will not be enough to obtain the preferred
customer status and keep it.
6. Step 3: Engagement
For instance, is the customer willing and capable to standardize
and simplify its supply chain practices? Is there openness to reassess
processes and find creative solutions to problems? Intentions are
great, but the ability to perform at a high level must also be there.
Unless a supplier clearly sees its own advantage rapidly, it is rare
that a purchaser will become a preferred customer without making
much effort. Since the supplier is continuously looking for ways to
improve its competitive position, the fact that a customer is perceived
as contributing more and performing better than the others will
motivate a supplier to invest more. And since it is partly about percep-
tion – not only about facts, – it is important for a customer to consider
the impact that some of its actions appear to have on the supplier's
satisfaction, whether expressed clearly or based on the supplier's
Table 3
Tactics available to purchasers for performing well (step 2).
• Order in large quantities and use no haggling.
• Make timely payments.
• Ensure equitable treatment.
• Fulfill all contract obligations without hassle or argument.
• Make confidentiality an important part of the approach.
• Behave fairly.
• Give the supplier full inventory visibility.
• Use face-to-face contact at both the buyer's and the supplier's sites (training,
support for problems, etc.).
• Be open to share relevant information.
• Assign the best people to impress the supplier and to increase success in the
transactions.
• Recruit buyers with a solid technical background, thus making communication
easier and more effective.
Source: Adapted from Christiansen and Maltz (2002), Essig and Amann (2009),
Morash and Clinton (1998), Nyaga et al. (2010), Ramsay and Wagner (2009), Ulaga
and Eggert (2006), Walter et al. (2001). Also based on our own ideas.
reactions. Fortunately, relationship value creation constitutes a compet-
itive advantage for both parties (Anderson, 1995; Håkansson, 1982;
Krapfel, Salmond, & Spekman, 1991). However, this approach is costly
and implies both additional investments and involvement in the rela-
tionship, not only from a willing customer, but also from the supplier.
This is why the purchaser's ability to create relational value and synergy
with the supplier will likely increase the supplier's commitment. Many
customers might try to do well at step 3, but this does not imply that
they will succeed. Also, it is important for a customer to clearly assess
the costs associated with the efforts made to try to obtain the coveted
status; it might be tempting to see more easily the advantages than
the disadvantages and costs. The buying firm needs to assess its impor-
tance vis-à-vis the supplier in order to decide if it is feasible to obtain
the preferential status (Schiele, 2012). Here too the concept of tradeoff
exists!
A supplier analyzing the value provided by its existing customers
might want to determine the ones worth continuing doing business
with, but also those that might warrant more efforts in order to strength-
en the relationship. Clearly, such an approach opens or shuts the door for
a client attempting to become a preferred customer. In addition, a suppli-
er might not respond positively to the efforts made by a customer striving
to demonstrate its commitment. The purchaser would then normally
choose to stop investing that much in the relationship, unless it perceives
that there is real potential for the future.
In step 3, the extent to which the supplier will be willing to invest in
the relationship depends in particular on the development level that the
relationship is at, on the supplier's “account value” strategy and on the
role that the purchaser might play in the supplier's value chain. Value
creation activities in this step provoke changes in the respective port-
folios and increase the likelihood of a closer collaboration — possibly a
partnership.
To become a preferred customer, the buyer needs to consistently
provide outcomes that meet or exceed the customer expectations (CL)
and are superior to those available from alternative customers (Calt).
Since high-level outcomes reduce the number of options the supplier
might use as a replacement, its motivation to maintain the relationship
increases (Dwyer et al., 1987). Once the customer preference status is
attained, the supplier could be still open to other alternatives, but the
mutual dependence with the customer virtually precludes other cus-
tomers to provide similar benefits. Supplier loyalty is achieved.
Specific investments deployed by the supplier play a key role in as-
suring supplier commitment (Jap & Ganesan, 2000). It is difficult and
costly to shift those investments to other relationships, whether they
take the form of operational linkages (Cannon & Perreault, 1999), IT in-
tegration efforts (Wilson & Vlosky, 1998), or product and process adap-
tations (Håkansson, 1982; Hallén, Johanson, & Seyed-Mohamed, 1991).
Since the supplier cannot redeploy these investments elsewhere, they
create dependence vis-à-vis the customer and constitute one more rea-
son to keep the relationship. The challenge for the customer is thus to
entice the supplier to make specific investments with a long-term
perspective.
A natural strategy for the customer would be to invest first, in
order to prove its own commitment to the relationship. For example,
supplier development efforts have been proven to favor supplier
commitment (Ghijsen et al., 2010; Krause, Handfield, & Tyler, 2007).
The problem is that the supplier will not necessarily reciprocate
these investments and the customer could then be encouraging an
opportunistic behavior on the supplier's part (Joshi & Stump, 1999).
Therefore, purchasers should be aware of the risks associated with
making idiosyncratic investments before having established a strong
and close relationship with the supplier (Barnes, Naudé, & Michell,
2005; Jap & Ganesan, 2000). Furthermore, the customer should assess
if the market and situational contingencies justify those specific in-
vestments. There are suppliers who do not need or want to develop
strong ties with some specific customers, whatever the effort level
made by those clients (Cannon & Perreault, 1999).
 J. Nollet et al. / Industrial Marketing Management 41 (2012) 1186–1193
In the context of stage 3, there are many advantages in establishing
synergic relationships with the targeted supplier (Hüttinger, 2010), in-
cluding to be well-positioned strategically in the supplier's client port-
folio, so that the customer becomes nearly indispensable. At this stage,
potential synergies are not only limited to the supplier–buyer relation-
ship but include other organizations. Through this network effect, the
customer may offer access to resources beyond the focal relationship
(Eng, 2008).
Morash and Clinton (1998), who have studied the principles of
supply chain integration, indicate that synergy must exist in order
for both operational excellence and closeness between the members
of the dyad to happen. Therefore, tactical and strategic decisions
must be taken not only about operations, but also about interpersonal
relationships as well. Suppliers indeed desire relational value, since it
provides them with more security and more possibilities of develop-
ing process capabilities and markets. In order for a long term synergy to
take place, a purchaser must also determine how this relationship fits
with the other relationships (Ford & McDowel, 1999; Knoppen &
Christiaanse, 2007), manage the dynamics of the relationship and make
sure that it evolves so as to keep the supplier satisfied (Knoppen &
Christiaanse, 2007). In sales terminology, one could say that the
purchaser's success guarantees the supplier's as well. Geographical prox-
imity between buyer and supplier favors joint action and may be a rele-
vant factor to obtain a preferred status (Steinle & Schiele, 2008).
So, as evidenced by the discussion above, there are a number of
tactics that a purchaser could use in order to become a serious con-
tender to the “preferred customer” status. Table 4 lists some of the
tactics discussed above, as well as some others which might prove
useful. It should be pointed out though that the tactics selected
should be integrated within a clearly-defined strategy.
If the purchaser has done well in step 3, at some point the targeted
efforts might well be rewarded by being recognized as a “preferred
supplier”. This is not the end of the road, but simply a stepping
stone to the advantages that this status will bring… only as long as
the buying organization can maintain its position. Therefore, the
next section deals with this important step.
7. Step 4: Sustainability
The harsh reality of step 4 is that no customer rests assured of
maintaining its status for long: “Buyers need to recognize that they,
Table 4
Tactics available to purchasers for increasing supplier's commitment (step 3).
• Ensure operational excellence
o Standardize and simplify supply chain practices.
o Reassess processes to find creative solutions to problems.
o Assess the potential use of reverse marketing with that supplier.
• Create relational value
o Motivate the supplier to invest in the relationship.
o Invest in the relationship with parsimony.
o Motivate the supplier to adapt some of its products to make them more suited
to the characteristics desired by the purchaser.
o Redesign end-products in order to concentrate business with the supplier.
o Keep the supplier informed of innovations, market developments, etc.
o Be committed to causes considered important to the supplier (sustainable
development, ethical procurement).
o Initiate common projects.
o Plan joint activities.
o Locate closer to the supplier's premises.
o Involve higher-ranked personnel (president, vice-presidents) in
problem-solving, so as to build and maintain supplier relationships.
o Share performance measurement results with the supplier.
o Make joint research.
o Make some staff exchanges.
o Promote exchanges with partner organizations that could benefit the
supplier.
Source: Adapted from Christiansen and Maltz (2002), Eng (2008), Ghijsen et al. (2010),
Jap and Ganesan (2000), Knoppen and Christiaanse (2007), Morash and Clinton (1998),
Steinle and Schiele (2008). Also based on our own ideas.
1191
together with other firms competing for resources from their sup-
pliers, are continuously being evaluated and consequently, getting
differential treatment” (Lindwall et al., 2010, p.5). Therefore, the pur-
chaser must ensure that it continues obtaining a better evaluation by
the supplier than its competitors. And this implies having the right
mechanisms in place to do so. For instance, good communication is
a key condition to remain a preferred customer (Hald et al., 2009).
Also, beyond setting objectives jointly, both parties have the possibil-
ity to create a realistic vision about what needs to be accomplished,
on the resources required, on the action plan, and on the project eval-
uation afterwards. These are some of the tactics mentioned in Table 5.
Since the customer is already a “preferred customer,” it has easier
access to the supplier and knows more about its philosophy, process-
es and systems; it can even influence some of the supplier's decisions
based on the frequent interactions. This clearly creates an advantage
over other potential preferred customers.
It is also possible that routine ways of dealing with the customer will
cease to be questioned at this stage. As a consequence, it could be diffi-
cult to assess the supplier's real requirements, which may change over
time (Ford, 1993). At this point, it is also possible that other recurrent
customers are offering greater benefits and that the CLalt becomes
higher (Dwyer et al., 1987). In order to keep its preferred customer sta-
tus, the buyer needs to continually assess the supplier's needs and ex-
plore innovative ways to improve its value proposition.
The purchaser must do its best to fulfill the supplier's expectations
and to create opportunities to get closer to the supplier, so as to re-
main ahead of its competitors. It is also necessary to strive for increas-
ing the value of the relationship in the supplier's eyes. This can be
done in a variety of ways. For instance, assigning a very competent
and motivated team to projects with that supplier should greatly in-
crease the likelihood of success. Also, having an easier access to the
supplier due to the preferred customer status, the purchaser can
more easily reassess the initial objectives, advancement on the pro-
jects and operations, as well as the quality of the relationship with
the supplier. It is important not to forget that at the basis of any rela-
tionship, there are individuals and that even if all economic indicators
are positive, the perception by one of the (or both) parties might have
changed (Hald et al., 2009). This is why the members of the dyad
should more than ever consider that the past is no guarantee of the
future.
However, a preferred customer might subsequently find out that it
is simply too costly to maintain the “preferred” status; it might then
decide to go back to step 2, i.e. performing well as a good customer.
Clearly, in that case, it would be the customer's decision. Sometimes,
the pasture is greener closer to home, i.e. that a reasonable effort is
sufficient to get what is required from the supplier, without going
the extra mile. The freed up resources could even be used to become
another supplier's preferred customer!
8. Conclusion
8.1. Summary: steps to become a preferred customer
With the reduction of the number of suppliers and the increasing
outsourcing of key activities, purchasers need to attract the best sup-
pliers in order to maintain or increase their own competitiveness.
In this article, we have suggested a pragmatic approach making it
possible to become a preferred customer, through a four-step pro-
cess: initial attraction, performance, engagement, and maintenance.
For some customers, obtaining the preferential status will be easier
than for others. The effort needed to pass from one step to the other
will be less if the customer can easily offer operational benefits such
as price and volume. We believe though that even powerful customers
should be aware of the potential attraction that other customers might
have on important suppliers, since creating appropriate conditions fa-
voring a key supplier's commitment is a must in many industries. Less
1192 J. Nollet et al. / Industrial Marketing Management 41 (2012) 1186–1193
Table 5
Tactics available to purchasers for sustaining a preferred customer status (step 4).
• Participate actively to the evaluation of the dyad's needs and to setting its
objectives.
• Participate to the planning of events with the supplier.
• Follow-up of the results in comparison to the initial objectives.
• Anticipate risks and problems in the realization of objectives.
• Communicate problems and changes regularly and reassess objectives when
required.
• Measure performance frequently.
• Share performance results with the supplier.
• Evaluate regularly and take into consideration the supplier's perception of the
extent of having reached the objectives.
• Create disincentives for relational dissolution
• Manage reputation through:
o Regularly monitoring opinions about the purchaser and prepare means to
modify negative opinions.
o Reassess the external environment of the organization (other partners and their
tactics).
Source: Adapted from Ford (1993), Dwyer et al. (1987),Hald et al. (2009), Ulaga and
Eggert (2006). Also based on our own ideas.
powerful customers need to be more creative and choose appropriate
tactics in line with their resources (Christiansen & Maltz, 2002). The
suggested tactics for each step (see Tables 2–5) include some that are
accessible to smaller customers.
8.2. Research contribution
The concept of “preferred customer” is relatively new. We have
explained what it entails, by proposing a broader definition of the concept
and by structuring the main components of how to become one. We have
relied on well-known models on the development of buyer-supplier rela-
tionship, on customer portfolio analysis and on the emergent literature in
customer attractiveness and preferred supplier status to propose a
four-step process for becoming a preferred supplier. The process takes
the perspective of a buyer willing to obtain the preferential status and fo-
cuses on the strategies and tactics that could influence the supplier's de-
cision of granting this status. The proposed process assumes that at each
step the supplier is comparing the value offered by the customer to its ex-
pectations (CL), and to the value offered by other customer relationships
(CLalt). Considering this perspective, the proposed process is mostly pro-
active, i.e. it assumes that the buyer is ready to take specific actions to ob-
tain the preferential status. Nevertheless, we also consider the potential
risks that a relational exchange could involve, in particular in step 3,
when specific investments are required. We thus take general models
of the evolution of buyer–relationships to explain the particular case of
the process of becoming a preferred supplier. As in the Dwyer et al.'s
(1987) model, the proposed process underlines the importance or rela-
tional variables in building a strong buyer–supplier relationship. Howev-
er, we clearly take the purchasing firm's perspective and suggest that the
customer may take at any time the decision to stop the process and con-
sider that obtaining the preferred status is not worth it, without necessar-
ily ending the business relationship. Furthermore, the proposed process
emphasizes the efforts that need to be made in order to maintain the pre-
ferred status (step 4).
8.3. Managerial implications
Because of their increase dependence on suppliers, buying firms
need to realize that obtaining the collaboration of best suppliers if
not an easy task, becoming a preferred customer would be desirable
for some organizations, but a must for others. The proposed process
offers relevant insights to supply managers on how to become a pre-
ferred customer, since many tactics are suggested for each of the four
steps (see Tables 2 to 5). The tactics evolve from relatively less expen-
sive efforts to signal its value to the supplier, to significant invest-
ments that will make very difficult to other customers to become a
better alternative. Increasing investments mean also increasing risks
for the buyer willing to become a preferred customer. As a conse-
quence, it is important to continually assess the supplier's response
to these efforts and decide if becoming a preferred customer of the
particular supplier is still a priority.
Considering the changes taking place in the world supply market
and their impact on the positioning of the purchasing organizations,
the principles supporting the four-step process suggested could help
supply managers use the appropriate tactics according to the specific
context. Understanding that the concept is important and that it re-
quires a coherent strategy to become a preferred supplier is one thing;
making it happen by using the appropriate tactics could prove to be
much more challenging.
8.4. Limitations of the study
Our analysis is based on other conceptual and empirical studies deal-
ing with the concept of preferred customer. In addition, since this theme
is relatively recent in the supply field literature, we have used research in
tangent fields as well. Therefore, the results of the study might appear to
be mostly descriptive, and the factors that we have identified and the re-
lationships among them are suggested, but cannot be tested at this point.
Also, it is very likely that there are specific contextual elements (the in-
dustry type, the country, the business model) which could help explain
better the concept of preferred customer and which influence how to ob-
tain this status. Our model also assumes that the customer considers that
obtaining the preferential status is worth implementing purposeful strat-
egies and that the supplier will be receptive to them. These are important
questions that the customer should ask in all four steps. This paper does
not give insights about how to assess the desirability and the feasibility
of using the proposed model with a particular supplier. This is why, in
the following sub-section, we suggest some avenues for future research.
8.5. Avenues for future research
In order to better understand how to obtain the preferred custom-
er status, conclusions observed in the changes to supply practices, as
to which product and industry types are more impacted, but as well
about purchasers' and suppliers' perceptions could prove useful.
It would be interesting to determine which supplier characteristics or
tactics would be more important than others when seeking to become a
preferred customer. Ultimately, to what extent could the preferred cus-
tomer status constitute a valuable strategy of influence? More research
is needed about the suitability of starting, continuing or stopping the pro-
cess with a particular supplier. This should be a conscious decision to be
made before taking any of the proposed 4 steps. Assessing the moderat-
ing effect of variables out of the customer's control, for instance small
market size, environmental uncertainty and size asymmetry (Johnsen
& Ford, 2008) could be another avenue of research.
On a final note, since becoming a preferred customer might become a
must for the future success of many organizations, it would make sense
that buyers consider such a business approach soon but, mostly… before
their competitors. Otherwise, they might not be around for long, but their
competitors will, being protected partially by their preferred customer
status!
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Jean Nollet is Full Professor at the Department of Logistics and Operations Management at
HEC Montréal, as well as the Chairholder – Chair in Supply Management. He has published
in Operations Management, most specifically in the areas of Supply and Service Operations.
Claudia Rebolledo is Associate Professor at the Department of Logistics and Operations
Management at HEC Montréal. Her research focuses mainly on inter-firm relationships
in supply chains and distribution channels. She has published in recognized academic
journals such as International Journal of Production Economics, International Journal of
Operations and Production Management, Production Planning and Control, and
Technovation.
Victoria Popel is a graduate of the M.Sc. program at HEC Montréal.