Decision Trees: A Simple Tool to Make Radically Better Decisions

Have you ever made a high-stakes decision? If yes, did you contemplate for some time before landing on the “right” decision — and even then, still felt unsure about the best course of action?

In cases like those, you might need a decision tree. It’s more formal than a chat with a friend or a pros-and-cons list.

Here, we’ll show you how to create a decision tree and analyze risk versus reward. We’ll also look at a few examples so you can see how other marketers have used decision trees to become better decision makers.

Table of Contents

What is a decision tree?

Decision Tree Analysis

How to Create a Decision Tree

How to Create a Decision Tree in Excel

Decision Tree Examples

When it comes to marketing, decision-making can feel particularly risky. What is my colleague is so attached to a new product, she doesn’t want to mention any of its shortcomings? What if my marketing team doesn’t mind office growth, but they haven’t considered how it will affect our strategy long-term?

The visual element of a decision tree helps you include more potential actions and outcomes than you might’ve if you just talked about it, mitigating risks of unforeseen consequences.

Plus, the diagram allows you to include smaller details and create a step-by-step plan, so once you choose your path, it’s already laid out for you to follow.

A decision tree contains four elements: the root node, decision nodes, leaf nodes, and branches that connect them together.

The root node is where the tree starts. It’s the big issue or decision you are addressing.
As the name suggests, the decision nodes represent a decision in your tree. They are possible avenues to “solve” your main problem.
The lead nodes represent possible outcomes of a decision. For instance, if you’re deciding where to eat for lunch, a potential decision node is eat a hamburger at McDonald’s. A corresponding leaf node could be: Save money by spending less than $5.
Branches are the arrows that connect each element in a decision tree. Follow the branches to understand the risks and rewards of each decision.

Now let’s explore how to read and analyze the decisions in the tree.

Decision Tree Analysis [Example]

Let’s say you’re deciding where to advertise your new campaign:

On Facebook, using paid ads, or
On Instagram, using influencer sponsorships.

For the sake of simplicity, we’ll assume both options appeal to your ideal demographic and make sense for your brand.

Here’s a preliminary decision tree you’d draw for your advertising campaign:

As you can see, you want to put your ultimate objective at the top — in this case, Advertising Campaign is the decision you need to make.

Next, you’ll need to draw arrows (your branches) to each potential action you could take (your leaves).

For our example, you only have two initial actions to take: Facebook Paid Ads, or Instagram Sponsorships. However, your tree might include multiple alternative options depending on the objective.

Now, you’ll want to draw branches and leaves to compare costs. If this were the final step, the decision would be obvious: Instagram costs $10 less, so you’d likely choose that.

However, that isn’t the final step. You need to figure out the odds for success versus failure. Depending on the complexity of your objective, you might examine existing data in the industry or from prior projects at your company, your team’s capabilities, budget, time-requirements, and predicted outcomes. You might also consider external circumstances that could affect success.

Evaluating Risk Versus Reward

In the Advertising Campaign example, there’s a 50% chance of success or failure for both Facebook and Instagram. If you succeed with Facebook, your ROI is around $1,000. If you fail, you risk losing $200.

Instagram, on the other hand, has an ROI of $900. If you fail, you risk losing $50.

To evaluate risk versus reward, you need to find out Expected Value for both avenues. Here’s how you’d figure out your Expected Value:

Take your predicted success (50%) and multiply it by the potential amount of money earned ($1000 for Facebook). That’s 500.
Then, take your predicted chance of failure (50%) and multiply it by the amount of money lost (-$200 for Facebook). That’s -100.
Add those two numbers together. Using this formula, you’ll see Facebook’s Expected Value is 400, while Instagram’s Expected Value is 425.

With this predictive information, you should be able to make a better, more confident decision — in this case, it looks like Instagram is a better option. Even though Facebook has a higher ROI, Instagram has a higher Expected Value, and you risk losing less money.

How to Create a Decision Tree

You can create a decision tree using the following steps. Remember: once you complete your tree, you can begin analyzing each decision to find the best course of action. 

1. Define your main idea or question.

The first step is identifying your root node. This is the main issue, question, or idea you want to explore. Write your root node at the top of your flowchart.

2. Add potential decisions and outcomes.

Next, expand your tree by adding potential decisions. Connect these decisions to the root node with branches. From here, write the obvious and potential outcomes of each decision.

3. Expand until you hit end points.

Remember to flesh out each decision in your tree. Each decision should eventually hit an end point, ensuring all outcomes rise to the surface. In other words, there’s no room for surprises.

4. Calculate risk and reward.

Now it’s time to crunch the numbers.

The most effective decision trees incorporate quantitative data. This allows you to calculate the expected value of each decision. The most common data is monetary. 

5. Evaluate outcomes.

The last step is evaluating outcomes. In this step, you are determining which decision is most ideal based on the amount of risk you’re willing to take. Remember, the highest-value decision may not be the best course of action. Why? Although it comes with a high reward, it may also bring a high level of risk.

It’s up to you — and your team — to determine the best outcome based on your budget, timeline, and other factors.

While the Advertising Campaign example had qualitative numbers to use as indicators of risk versus reward, your decision tree might be more subjective.

For instance, perhaps you’re deciding whether your small startup should merge with a bigger company. In this case, there could be math involved, but your decision tree might also include more quantitative questions, like: Does this company represent our brand values? Yes/No. Do our customers benefit from the merge? Yes/No.

To clarify this point, let’s take a look at some diverse decision tree examples.

Decision Tree Examples

The following example is from SmartDraw, a free flowchart maker:

Example One: Project Development

Here’s another example from Become a Certified Project Manager blog:

Example 2: Office Growth

Here’s an example from Statistics How To:

Example 3: Develop a New Product

To see more examples or use software to build your own decision tree, check out some of these resources:

IBM SPSS Decision Trees
LucidChart Decision Tree Software
Zingtree Interactive Decision Tree Template

Back to You

Remember, one of the best perks of a decision tree is its flexibility. By visualizing different paths you might take, you might find a course of action you hadn’t considered before, or decide to merge paths to optimize your results.

 

UX vs. UI: What’s the Difference?

UX and UI are two terms that are often mentioned in the same sentence, but that doesn’t mean they are interchangeable. UX and UI are so often conflated that you could come across a job posting for a UX Designer where the job description mistakenly outlines the responsibilities of a UI Designer and vice versa.
 
Although UX and UI are distinct practices, they overlap and complement each other. For this reason, it can be confusing to understand what makes them different and how they work together to create a great product.

UX and UI are two disciplines that work hand in hand to create a product, service, or website that is delightful and intuitive for customers to use.
User Interface (UI) relates to the aesthetic properties of a digital product, including the look, feel, and design of all the elements a user can interface with. Meanwhile,
User Experience (UX) is more big-picture and conceptual. UX considers a user’s journey in engaging with your product, how it solves their problem, and how it makes them feel. UX without UI is like an engine without the car surrounding it. You need both to get where you want to go.
 
To further understand the difference between UX and UI, let’s start with an example: YouTube.
Take a look at the YouTube home page. All the visual elements on the page are the work of a UI designer. That includes the search bar at the top, the choice of fonts and colors, the spacing between videos, the branding, the “Subscriptions” bar to the left, and anything else you can see or interact with on the page. The aesthetic choices that make up the look and feel of the page and the way in which information is presented are encompassed by UI. However, when we consider what information to display in the first place and how the product works when you interact with the UI, we begin to enter the realm of UX.
 
Imagine every YouTube video you click loads slowly. Imagine you search “cats” and nothing comes up. Imagine you can’t search by username, so it’s hard for you to find that girl who sang an acoustic rendition of your favorite Lizzo song.
The above outcomes result in a poor user experience (UX). If the product doesn’t offer the solution you are expecting, then there is a UX designer somewhere with her work cut out for her.
 
Cognitive scientist Don Norman, who first
coined the term UX in the 1990s, and Jakob Nielsen, co-founder of the
Nielsen Norman Group, explains the
difference between UX versus UI this way:
 
“Consider a website with movie reviews. Even if the UI for finding a film is perfect, the UX will be poor for a user who wants information about a small independent release if the underlying database only contains movies from the major studios.”
 
In this example (and in all good products), UX and UI come together to create a hollisictally enjoyable experience. Even the most beautiful UI imaginable can’t be appreciated if the product doesn’t function the way the user wants.
Let’s define UX and UI in more detail now, to further clarify the difference between the two.
 
 
While UI is visual, UX is conceptual and is focused on developing and improving a user’s journey to solve a problem.
A UX designer is responsible for all aspects of a user’s interaction — this means a UX designer is not solely responsible for the technology behind a product. They’re responsible for how a user interacts with a company both on and offline, including customer service and other facets.
 
Essentially, a UX designer must answer the question: “How can my company’s product best meet our user’s needs?”
 
Now, what’s left for a UI designer to do?
 
 
Have you ever visited a website and thought, “Wow, this company is cool and has a great product, but what sold me was their website’s intuitive and sleek layout?”
That’s largely due to their UI designer. 
 
Now that we’ve explored UX and UI separately, let’s see how they function collaboratively.

How do UX and UI work together?

Let’s say your company wants to develop a running app, so your CEO hires a UX designer. The UX designer is first going to conduct research into competitors’ apps and your user’s pain points.
 
With this information, she will decide on the core features of the app (“must monitor heart rate and mileage”) and explore
user personas in-depth to create a site map and initial prototype.
 
From there, a UX designer will create wireframes, which they will test, refine, and convert into mockups. Then, the UX designer will conduct research and refine the product for the market. Throughout all stages, the UX designer is focused on the structure and value of the product and how that product is or isn’t meeting the user’s needs.
 
Towards the end of development, a UI designer will then take control over the app’s appearance, including on-screen forms, images, buttons, links, and icons.
The primary difference between UX and UI is their goals: a UX designer is focused on the users’ entire journey in using a product to solve their problem or meet their needs. This includes anything that might motivate or frustrate them, why they would or wouldn’t enjoy the product, and what the product needs to include to make for a pleasant experience.
 
A UI designer is given those constraints — she’s told what the app must include and exclude, and how it’s going to work. Using those constraints as a guideline, she designs an interface that is intuitive to use and materializes all of the users’ needs on the screen.
 
You can’t create an exceptional product without both UX and UI. Without a UX designer, YouTube would appear beautiful and appealing but completely unusable. And, without a UI designer, YouTube would be a great idea in theory but would be difficult and confusing to navigate on the screen.
 
Editor’s note: This post was originally published in June 2018 and has been updated for comprehensiveness.
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How to Use the Goal Seek Excel Function (With Pictures)

Goal-seeking helps you calculate backwards from an end goal. It’s a powerful way to understand how you should best allocate resources. If you use Excel to evaluate data, here’s how to plan ahead with the Goal Seek Excel function.

To use the Goal Seek function in Excel:

Let’s run through that with a simple example.

I want to bring in 130 new customers. But I don’t know how many visits I’ll need to reach my goal.

Before doing the Goal Seek analysis, I organize my data to find the average MoM visit-to-customer percentage.

Step 1: Select the cell with the output you want to change

In this case, I’ll select the customer goal.

Step 2: Navigate to the “Data” tab

Step 3: Select “What-if Analysis”

Step 4: Click “Goal Seek”

Pro Tip: You can also get here with the Goal Seek Excel shortcut. Press Alt + A on your keyboard, followed by key W, then G.

Step 5: Type the number you want to hit into the “To value” field

My goal is 130 customers, so I’ll type in that number.

Step 6: Select the variable you want to change in the “By changing cell” box

I’m changing Projected Visits so I’ll place the cursor in the “By changing cell” box, then scroll down to select the corresponding cell.

Step 7: Click “OK” to see the Goal Seek analysis

Voila! I find that to get 130 customers, I need to attract 5000 visits.

Use the Goal Seek Function In Excel for Smarter Marketing Insights

Take control of the variables that seem out of your control with the Goal Seek function. You’ll gain respect within your company for predicting your needs and hitting your goals.

You’ll also be ready if the unexpected happens. And you’ll know how to make informed decisions or tweak your strategy with your new what-if analysis skills.

Editor’s note: This post was originally published in [Month Year] and has been updated for comprehensiveness.