Being a preferred customer of leading suppliers and its impact on supplier contribution to innovation

In this chapter, the authors introduce the concept of preferred customer status as a means for creating supply-side induced advantages in highly competitive supplier markets. For the authors, being a preferred customer means that a buyer is awarded preferential treatment of important suppliers compared to what their other customers receive. Taking this into account, having Preferred Customer Status might also have a positive impact on the generation of innovation upstream the supply chain. As there is a lack of knowledge of what motivates suppliers to serve selected buyers better than others, the research presented here focuses on the suppliers’ evaluation of customers and how it can be influenced by buyers. Based on an extensive literature review, an overview is provided of recent contributions on customer attractiveness and supplier satisfaction as the prerequisites for becoming a preferred customer of strategic suppliers. Furthermore, the authors stress the importance of being a preferred customer particularly in a new product development context by empirically testing the impact of preferred customer status on supplier innovativeness in a buyer-seller relationship. They conclude that implementing a preferred customer policy in buying firms can improve the conditions for innovating with suppliers.