For mail merges and OLX emails, if Preferred name is NOT populated, it should default to First Name. Currently, you can't merge with Preferred name unless everyone has a Preferred name. But, that is not practical as most people go by their first name with the occasional one who prefers a nickname.
Also, if preferred name/nickname is filled in by default with first name, but remains editable (like gift amount/receipt amount), it would make creating addressee/salutation defaults using the nickname possible.