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Preferred customer status (also often referred to as customer of choice, preferential resource allocation, resource mobilization, supplier satisfaction, customer attractiveness) is a term describing a buyer receiving preferential resource allocation of a supplier.

Definition & Background
Preferred customer status refers to a supplier's choice to classify its customer as preferred, standard, or not suitable for further business. The main goal of a buyer should be to satisfy its suppliers and achieve preferred status of key suppliers. Preferred customer status is directly related to supplier satisfaction, since satisfied suppliers are a precondition for achieving preferred status. summarized this phenomenon as “a counter-intuitive inversion of the classical marketing approach”. Hence, companies increasingly focus on the question: how to gain and keep access to capable suppliers, since capabilities and resources of these suppliers are key in the development of competitive advantages.

Rising importance of "Reversed Marketing"
Over the last decades the role of purchasing has advanced from an administrative function towards a value adding activity. This advancement has been fueled by three trends: Firstly, many firms allocate more responsibilities to suppliers, to increase the firm’s focus on its core abilities. Secondly, many supply markets become more mature and the number of suppliers decreases, reducing the availability of alternatives. Finally, companies increasingly shift from traditional in-house innovation efforts to open innovation, which increases dependencies on suppliers. As a result, more and more oligopolistic supply market structures evolve, in which customers compete for capable suppliers and access to their innovations. Schiele et al. (2012) summarized this phenomenon as “a counter-intuitive inversion of the classical marketing approach”. Hence, companies increasingly focus on the question: how to gain and keep access to capable suppliers? .

Benefits of preferred status
Gaining preferred customer status through supplier satisfaction has been discussed as crucial for buying firms. A buyer enjoying preferred customer status attains access to supplier resources and preferential treatment, which includes additional benefits such as earlier access to innovations, better prices and delivery in times of scarcity. Preferred customer status provides strategic leverage and increases the potential to achieve sustainable competitive advantages over competitors. Detailed benefits of a preferred customer status can be distinguished between economic, operational, interactional as well as technology & innovation benefits

Economic benefits
Economic benefits are those having an impact on the company´s financial performance and are expressed in monetary terms. To start is assumed that PCS leads to benevolent pricing behavior of suppliers, meaning that customers are offered more favorable prices and suppliers are not engaging in opportunistic pricing behavior. Next to this, PCS may in-crease the suppliers conception for further price negotiations. Furthermore PCS can lead to a decrease of transaction and negotiation cost as it reduces behavior related uncertainties. Another benefit related to PCS are avoided losses from supply disruption. Finally, PCS can result in higher cost efficiencies of the sup-plier´s and buyer´s operations. On the one hand higher efficiencies might lead to lower product costs, manufacturing process costs, tooling costs and warranty costs. On the other hand supplier benevolence can lead to the take-over of transportation costs, inventory management costs, order handling cost and product checking costs. Economic benefits of PCS are assumed to provide the buying firm with competitive advantage, since they are likely to have a direct impact on the buyer’s financial performance.

Operational benefits
Operational benefits are those impacting the operational efficiency of the buyer or supplier. Operational benefits that can be obtained through PCS among others include customization of products, the standardization of products and processes as well as consistency in product quality. In addition it is assumed that suppliers of preferred customers show higher engagement in process improvement initiatives for example leading to a reduction of lead times. Similarly, literature indicates that suppliers of preferred customers are more engaging into logistics improvement initiatives including inventory reduction through responsible supply chain, supply chain visibility, vendor managed inventory, just-in-time or just in sequence. Lastly, prioritized delivery of goods and services in situations where the supplier faces production capacity constraints is assumed to be another benefit of PCS. In these situations suppliers of preferred customers may take special care for the delivery of their customers ensuring the supply of the buyer´s operations. The impacts mentioned above are assumed to have a direct impact on the operational efficiency of a buyer and supplier, providing competitive ad-vantage and eventually generating more cost savings potential.

Interactional benefits
Interactional benefits are those benefits arising through daily interactions between suppliers and their preferred customers. Interaction benefits from PCS include access to the suppliers best employees, buyer priority , as well as reorganization and lending of supplier personnel. Next to this, suppliers are more likely to engage in larger, riskier, long-term projects with their preferred customers. Another benefit of PCS is competence development of the buyer in situations where the supplier is providing personnel training and engaging in knowledge sharing. Next to this, PCS may lead to higher motivation of suppliers as they potentially show higher engagement in NPD-projects or production process improvement. Lastly, increased information sharing is seen as another benefit of PCS. Suppliers of preferred customers are more likely to share strategic information and possibly show higher engagement in knowledge and information exchange for example by providing information concerning the procurement market. To conclude, interaction benefits are assumed to provide buyers with competitive ad-vantages in several aspects, which in turn might improve operational efficiency and financial performance.

Technology and innovation
Technology and innovation benefits form the last category in identifying benefits of PCS. First, Schiele et al. (2011) and Pulles, Veldman, and Schiele (2014) assume that PCS enhances supplier innovativeness. Furthermore it is assumed that preferred customers are granted an increased access to a suppliers innovations and technologies. Increased innovation access is expressed by the fact that preferred customers might be offered innovations first or preferential access to breakthrough innovations is granted. Next to this, increased technology access is expressed through a higher willingness of the supplier to share newly developed technologies with preferred customers as well as the suppliers willingness to provide preferred customers with more technological input. Another benefit of PCS is the acceleration of the buyers development process through decreases in time-to-market or closer R&D collaboration. Finally, supplier commitment to an exclusive agreement regarding innovations might be the ultimate benefit of PCS. Similar as the prior categories, technology and innovation benefits are assumed to provide competitive advantage, enhancing operational efficiency and financial performance of both parties involved.

The cycle of preferred customership & Antecedents of preferred customer status
In order to exhibit the antecedents of a preferred customer status, the overarching framework by Hüttinger et al. (2012) can be adopted, which sees customer attractiveness and supplier satisfaction as preconditions of a preferred customer status. Obviously, it is possible to identify strong ties between these three concepts: A first assessment of the attractiveness of a potential customer determines whether an exchange relationship is established  and is thus regarded as a precondition for the achievement of supplier satisfaction. Supplier satisfaction is in turn inevitable for achieving a preferred customer status, because a dissatisfying past will never lead to a positive outlook. Hüttinger et al. (2012) also constituted additional factors which influence the achievement of preferential treatment by suppliers that are related to the comparison of value creation with competing buyers.

Customer Attractiveness
Customer attractiveness relates to the perceptions of suppliers about the future interaction with a particular customer. Attractiveness is based on suppliers’ expectations, which are founded on external judgement of the customer by the supplier prior to business interaction. Hence, in order to become an attractive customer, it is inevitable that suppliers are aware of the existence of a potential customer and its corresponding attributes. Ellegaard and Ritter (2007) postulated that attractiveness is created by one party binding itself to another party. However, attractiveness must also be adjusted to supplier demands. Hald et al. (2009) regarded it as important that customers understand how their suppliers view customer attractiveness as to be able to direct their endeavours towards appearing more attractive. Thus the duty of becoming attractive in a buyer-supplier relationship is more and more that of the customer rather than the supplier. In order to become more attractive buyers can address a number of drivers. These have been summarized in the literature review by Hüttinger et al. (2012) as embracing (1) market growth factors, (2) risk factors, (3) technological factors, (4) economic factors and (5) social factors.

Supplier Satisfaction
Wong (2000) was among the first researchers, who regarded supplier satisfaction in a close buyer-supplier relationship as enhancing supplier commitment. Other scholars perceived supplier satisfaction even as inevitable for manufacturers to maintain market responsiveness

In a more detailed assessment of antecedents, Hüttinger, Schiele, and Schröer (2014) and Vos et al. (2016) identified several antecedents and consequences of supplier satisfaction, for example, early supplier involvement, profitability and communication. Moreover, concluded that four fundamental antecedents exist in supplier satisfaction. The four antecedents are: growth opportunity, profitability, relational behaviour and operative excellence of the buyer. Satisfaction has generally been defined as involving the adequate attainment of needs, desires or goals, which may represent the supplier expectations in a buyer-supplier relationship. Consequently, supplier satisfaction can be achieved by fulfilling the supplier’s expectations of the exchange relationship. The expectations that have to be fulfilled to satisfy a supplier have been categorized: They are (1) growth, (2) supply value, (3) mode of interaction and (4) operational excellence as driving the attainment of supplier satisfaction.

Preferred Customer status
Once a customer has posed itself attractive and a subsequently initiated business relationship contents both customer and supplier, buyers may aim at becoming a preferred customer. Williamson (1991) encouraged customers to do so as the movement from contract management to more flexible supply base optimization can provide against contingencies that cannot even be captured in a ‘mammoth contract’ (p. 80). Increasingly, factors related to volition and ‘value creation’ with suppliers have been stressed in the literature as mitigating the effect of these eventualities. A preferred customer status is in the end attained by offering suppliers higher value than competing buyers. The dimensions on which customers have to offer a higher value than competing buyers have been outlined by Hüttinger et al. (2012). They stated that the drivers of a preferred customer status encompass (1) economic value, (2) relationship quality (3) strategic compatibility and (4) instruments of interaction. Many of these factors coincide with drivers identified earlier as antecedents of customer attractiveness and supplier satisfaction.

State of the Art and future research
The growing importance of the preferred customer status concept is indicated by the increase of publications over the last decade in both academic and professional publications. The most detailed assessments of this topic was presented in two PhD dissertations of 2014 by Lisa Hüttinger (2014) and of 2017 by Frederik Vos (2017).

Both studied extensively the antecedents and consequences of supplier satisfaction and preferred customer status. The dissertations were published at the University of Twente (under the supervision of Prof. Holger Schiele), which continues to be the Center of Excellence in supplier satisfaction and preferred customer research. Current research efforts focus on dependency effects, cultural influences on supplier satisfaction and perception differences of relational aspects as well as the intersection between Industry 4.0 and preferred customer status.