Procurement professionals often use models such as Kraljic’s matrix and Porter’s Five Forces to understand suppliers, markets, risk, and bargaining power.

That is good procurement practice.

But there is one important question buyers sometimes forget:

How does the supplier see us as a customer?

This matters because the buyer’s view and the supplier’s view do not always match. You may see a supplier as strategic, critical, or difficult to replace. But the supplier may see your company as low-margin, difficult to serve, slow to decide, administratively heavy, or less attractive than other customers.

When that happens, your supplier strategy may be based on the wrong assumption.

This article explains how suppliers and sales teams segment customers, how those models relate to Kraljic and Porter, and why procurement professionals should understand their own attractiveness as a customer.

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LHTS framework

Role: Tactical
Supporting role: Management
Process: Supplier market analysis, category strategy, sourcing strategy, negotiation, supplier relationship management
Level: Advanced
Related course: Kraljic and Portfolio analyses by Paul Rogers
Supporting course: Get to know Kraljic and his matrix

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Quick answer: what is supplier preferencing?

Supplier preferencing is a way to understand how a supplier views your company as a customer.

While Kraljic helps procurement assess suppliers based on supply risk and business impact, supplier preferencing turns the perspective around. It asks whether the supplier sees you as attractive, profitable, strategically important, easy to work with, and worth prioritizing.

This matters because suppliers do not treat all customers equally.

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The real problem: your supplier may not value you as much as you value them

A common procurement mistake is to assume that importance is mutual.

If a supplier is important to us, we may assume that we are important to the supplier.

But supplier relationships do not work that way.

A supplier may be critical to your production, project, or service delivery. At the same time, your company may represent only a small part of the supplier’s revenue. Or you may be a large customer but difficult to serve. You may demand short lead times, frequent changes, custom documentation, long payment terms, urgent support, and aggressive price reductions.

From the buyer’s side, that may look like normal procurement work.

From the supplier’s side, it may look like high cost-to-serve and low attractiveness.

This mismatch can create practical problems:

• The supplier does not prioritize your orders.
• The supplier gives better people to other customers.
• The supplier is slow to respond to your RFQs.
• The supplier protects capacity for more attractive customers.
• The supplier gives you standard service when you expected partnership.
• The supplier negotiates harder because they do not fear losing you.
• The supplier does not bring innovation ideas to your company first.

The problem is not always supplier performance. Sometimes the problem is that procurement has not understood the supplier’s customer strategy.

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The buyer’s view: Kraljic and Porter

Procurement professionals often start with two useful perspectives.

Kraljic’s matrix

Kraljic helps buyers classify purchases or suppliers based on two dimensions:

Profit impact: How much the category affects business performance
Supply risk: How difficult, risky, or constrained the supply market is

This creates four common categories:

Non-critical items: Low impact and low supply risk
Leverage items: High impact and low supply risk
Bottleneck items: Low impact and high supply risk
Strategic items: High impact and high supply risk

The purpose is to avoid one-size-fits-all procurement. A leverage category may need competition and price pressure. A strategic category may need partnership, risk sharing, and long-term supplier management.

Porter’s Five Forces

Porter helps buyers understand market power.

In procurement, the most relevant parts are often:

Supplier power: Can suppliers increase prices, limit supply, or dictate terms?
Buyer power: Can buyers create competition, switch suppliers, or influence the market?
Substitutes: Are there alternative technologies, materials, or services?
New entrants: Can new suppliers enter the market?
Rivalry: How competitive is the supplier market?

Together, Kraljic and Porter help procurement understand how important the category is and how much power the supplier market has.

But they still do not answer the supplier’s internal question:

Which customers deserve our best attention?

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The supplier’s view: how sales teams segment customers

Sales teams also segment their market.

They may not use the same words as procurement, but the logic is similar. Sales leaders need to decide where to spend time, which accounts deserve senior attention, which customers should receive technical support, which opportunities are worth pursuing, and which customers are expensive or risky to serve.

Common sales and account management questions include:

• How much revenue does this customer generate?
• How profitable is the account?
• How much does it cost to serve this customer?
• Is there future growth potential?
• Is the customer strategically important?
• Is the relationship easy or difficult?
• Can this customer become a reference customer?
• Does this customer help us enter a new market?
• Does this customer create risk, complexity, or unpaid work?
• Will this customer help us develop new products or capabilities?

That means the supplier may look at you through several models.

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Model 1: Supplier Preferencing Matrix

The Supplier Preferencing Matrix is the most useful mirror model for procurement.

It normally uses two dimensions:

Account value: How financially valuable your business is to the supplier
Account attractiveness: How attractive you are as a customer beyond immediate revenue

This creates four customer positions.

1. Nuisance customer

Low value and low attractiveness.

From the supplier’s perspective, this customer creates little benefit and may consume too much time. The supplier may give low attention, standard service, slow response, or even try to move away from the relationship.

A buyer can become a nuisance customer by having low spend, unclear requirements, late changes, slow decisions, poor forecasts, many disputes, or difficult administration.

2. Development customer

Low current value but high attractiveness.

This customer may not buy much today, but the supplier sees future potential. The supplier may invest time because the account could grow, open a new market, create innovation, or become strategically useful.

A buyer in this position should communicate future plans clearly and show why the relationship is worth developing.

3. Exploitable customer

High value but low attractiveness.

This customer buys a lot, but the supplier may not like the relationship. The supplier may see the account as demanding, low-margin, risky, or difficult. The supplier may still want the revenue, but may not invest in collaboration unless necessary.

This is a dangerous position for procurement. The buyer may think volume creates power, but the supplier may respond with higher prices, limited flexibility, or defensive behavior.

4. Core customer

High value and high attractiveness.

This is where many buyers want to be with strategic suppliers. The supplier sees the account as important, profitable, strategically aligned, and worth protecting. Core customers are more likely to receive better attention, earlier information, innovation ideas, capacity support, and senior management involvement.

For procurement, this is the preferred position when the supplier is important and the market is constrained.

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Model 2: Customer portfolio analysis

Sales teams may also use customer portfolio analysis.

This means they look at the customer base as a portfolio of accounts. Some customers may be large but unprofitable. Some may be small but strategically promising. Some may be easy to serve and highly profitable. Others may require too much support compared with the return.

For a buyer, this is important because your annual spend is only one part of the supplier’s assessment.

A supplier may also consider:

• Gross margin
• Payment terms
• Forecast quality
• Order stability
• Technical complexity
• Number of complaints
• Administrative workload
• Contract risk
• Potential for future growth
• Strategic fit
• Reference value
• Relationship quality

This is why a buyer should not only ask, “How much do we spend with this supplier?”

A better question is:

How profitable and attractive are we compared with the supplier’s other customers?

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Model 3: Cost-to-serve

Cost-to-serve is especially important.

A customer may generate high revenue but also high internal cost for the supplier. This cost can come from:

• Small or irregular orders
• Frequent changes
• Custom packaging
• Special reports
• Complex invoicing
• Long payment terms
• Urgent deliveries
• Technical support
• Quality disputes
• Many meetings
• Unclear specifications
• Late forecasts
• Contract deviations

From procurement’s perspective, some of these requirements may feel normal. From the supplier’s perspective, they reduce the attractiveness of the account.

This is why suppliers sometimes prefer a smaller customer that is easier to serve over a larger customer that consumes too many resources.

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Model 4: Key account management

Sales teams also use key account management.

A key account is not always the largest customer. It is usually a customer that is strategically important to the supplier.

A supplier may treat a customer as a key account because the customer:

• Generates high revenue
• Generates high profit
• Has strong growth potential
• Is a reference in an important market
• Helps develop new technology
• Gives access to new segments
• Has a long-term strategic fit
• Creates stable and predictable demand

For procurement, the key question is:

Are we a key account because we are genuinely attractive, or do we only assume we are important because we buy from this supplier?

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How the models correlate

The most useful way for procurement to think about this is to compare the buyer’s view and the supplier’s view.

Procurement view	Supplier sales view	Risk if ignored
Kraljic strategic supplier	Core customer	Good basis for partnership and joint development
Kraljic strategic supplier	Nuisance customer	High risk: you need the supplier more than they need you
Kraljic leverage supplier	Core customer	Opportunity: you may have more influence than expected
Kraljic leverage supplier	Exploitable customer	Risk of short-term commercial tension and limited collaboration
Bottleneck supplier	Development customer	Opportunity to build attraction and secure future support
Bottleneck supplier	Nuisance customer	Serious supply risk: low supplier motivation and high dependency
Non-critical supplier	Core customer	Possible overinvestment from supplier; useful but not always strategic
Non-critical supplier	Nuisance customer	Usually acceptable if alternatives exist

The most dangerous mismatch is this:

You see the supplier as strategic, but the supplier sees you as nuisance or exploitable.

That means you depend on a supplier that may not prioritize you.

The best position is this:

You see the supplier as strategic, and the supplier sees you as core.

That creates the foundation for supplier relationship management, joint improvement, innovation, and long-term value creation.

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Practical example: when buyer and supplier views do not match

Imagine a manufacturing company buying a critical electronic component.

From the buyer’s perspective, the supplier is strategic:

• The component is technically important.
• There are few qualified suppliers.
• Switching supplier would take time.
• The component affects production continuity.
• The supplier has strong engineering knowledge.

The buyer therefore expects priority, flexibility, and technical support.

But from the supplier’s perspective, the buyer may not be very attractive:

• The buyer represents only 1% of the supplier’s turnover.
• Orders are irregular.
• Forecasts change often.
• The buyer pushes hard on price.
• Payment terms are long.
• Engineering changes are frequent.
• The account requires many meetings.
• The supplier has other customers with higher margins and clearer forecasts.

The buyer thinks: “This supplier is strategic.”

The supplier thinks: “This customer is difficult and not very profitable.”

That mismatch explains why the supplier does not act like a strategic partner.

The solution is not only tougher negotiation. The solution is to understand the supplier’s view and decide whether to improve attractiveness, reduce dependency, create alternatives, or change the relationship strategy.

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How buyers can become more attractive customers

Being an attractive customer does not mean being soft in negotiation. It means being professional, predictable, fair, and worth doing business with.

A buyer can improve customer attractiveness by:

• Providing better forecasts
• Reducing unnecessary order changes
• Paying according to agreed terms
• Making specifications clear
• Involving suppliers early when appropriate
• Reducing administrative friction
• Being transparent about future demand
• Creating realistic RFQ timelines
• Making decisions when promised
• Respecting supplier capacity constraints
• Sharing improvement opportunities
• Using fair and consistent evaluation criteria
• Building relationships beyond price negotiation

This is especially important with strategic and bottleneck suppliers.

In leverage categories, buyer power may be enough to create competition. But in constrained supply markets, attractiveness can become a source of supply security.

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How this connects to the procurement role

This topic is mainly connected to the tactical procurement role.

A tactical buyer, sourcing manager, or category manager needs to understand both sides of the buyer-supplier relationship. It is not enough to classify suppliers internally. The buyer must also understand how suppliers classify the buying organization.

For procurement managers, this topic is also important because supplier attractiveness can influence risk management, category strategy, supplier relationship management, and long-term competitiveness.

Operative buyers are also affected. Daily behavior such as late orders, unclear communication, poor data, or repeated urgent requests can influence how attractive the company becomes to suppliers.

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Where this fits in the procurement process

Supplier preferencing connects to several procurement process steps:

Supplier market analysis
Understand the supplier’s market, alternatives, capacity, and customer base.

Category strategy
Decide whether supplier attractiveness matters for the category strategy.

RFQ preparation
Design RFQs that are professional, clear, and worth responding to.

Negotiation
Understand your real power position before choosing negotiation tactics.

Contract management
Avoid terms that make the account unattractive unless they are truly necessary.

Supplier relationship management
Develop strategic relationships where mutual value is important.

Supplier development
Invest in supplier improvement where the relationship is important to both sides.

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Common mistakes in customer segmentation from a procurement view

Mistake 1: Assuming spend equals attractiveness

Large spend helps, but it is not enough. If the account is low-margin, difficult, unpredictable, or administratively heavy, the supplier may still view the customer as unattractive.

Mistake 2: Using only Kraljic

Kraljic is useful, but it is incomplete if used alone. It shows how procurement views the supplier. It does not show how the supplier views procurement.

Mistake 3: Treating supplier relationships as one-sided

Buyers often discuss supplier performance, but rarely discuss customer performance. Suppliers also experience good and bad customers.

Mistake 4: Believing tough negotiation always improves results

In some categories, tough negotiation may create savings. In others, it may reduce supplier motivation, limit access to innovation, or damage long-term support.

Mistake 5: Ignoring cost-to-serve

If your organization creates unnecessary supplier workload, the supplier will eventually recover that cost through price, reduced service, lower flexibility, or lower priority.

Mistake 6: Asking for partnership without being partner-worthy

A buyer cannot demand strategic supplier behavior while behaving transactionally. Partnership requires mutual value, trust, competence, and commitment.

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A simple buyer checklist: how does the supplier see us?

Before deciding supplier strategy, ask:

• How important are we to the supplier’s revenue?
• How profitable are we as a customer?
• Are we easy or difficult to serve?
• Do we give reliable forecasts?
• Do we pay on time and according to agreement?
• Do we involve suppliers early enough?
• Do we create unnecessary changes or administration?
• Do we have growth potential?
• Are we strategically relevant to the supplier?
• Would the supplier choose us over another customer if capacity became limited?

If you cannot answer these questions, you do not yet understand the full relationship.

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Related online course

If you want to go deeper into supplier segmentation and procurement portfolio thinking, the Learn How to Source course Kraljic and Portfolio analyses by Paul Rogers is the natural next step.

The course connects the four Kraljic quadrants to practical sourcing strategies and helps buyers understand how portfolio analysis supports procurement decisions.

The course Get to know Kraljic and his matrix is also relevant if you want a structured introduction to the model and how it fits into procurement work.

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FAQ

What is supplier preferencing?

Supplier preferencing is a model that shows how a supplier views a customer. It normally considers account value and account attractiveness.

How is supplier preferencing different from Kraljic?

Kraljic shows how the buyer views suppliers or categories based on profit impact and supply risk. Supplier preferencing shows how the supplier views the buyer as a customer.

Why should buyers care how suppliers segment customers?

Because suppliers prioritize customers. A customer that is attractive and valuable may receive better service, capacity, innovation, and management attention.

Can a large customer still be unattractive to a supplier?

Yes. A large customer can be unattractive if margins are low, requirements are complex, payment terms are long, forecasts are poor, or the account is expensive to serve.

What is a core customer?

A core customer is valuable and attractive to the supplier. These customers are more likely to receive high attention, better support, and stronger collaboration.

What is an exploitable customer?

An exploitable customer provides high value but low attractiveness. The supplier may want the revenue but may not invest in the relationship beyond what is necessary.

How can procurement become a more attractive customer?

Procurement can improve attractiveness by being professional, predictable, fair, clear in specifications, reliable in forecasts, reasonable in negotiations, and efficient to work with.

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Conclusion

Procurement professionals are trained to assess suppliers. That is necessary, but it is only half of the picture.

Suppliers also assess customers.

When buyers use Kraljic and Porter, they understand the supplier market from the procurement side. But when they also understand supplier preferencing, customer attractiveness, and sales segmentation, they begin to see the full relationship.

The practical question is not only:

How important is this supplier to us?

It is also:

How important and attractive are we to this supplier?

That question can change the sourcing strategy, negotiation approach, and supplier relationship plan.