Customer Decision Tree

🎓 Definition

Often called CDT (short for Customer Decision Tree), the Customer Decision Tree is the visual translation, in products groups and segments, of the successive logical questions a shopper is asking herself when buying a product in a category.

For the Retailer, the CDT helps define the Category and Segments as well as the product grouping and their adjacencies.

It is not only a tool for understanding shopper buying motives but also a strategical tool that serves as a guiding line for:

• Visual representations of shelf space – planograms, and assigning product positioning on shelves
• Design of efficient store layouts
• Assortment decisions and pricing and promotion strategies.

For the Customers, the CDT helps them to easily read the shelves, measure the choice offered and easily find the products they want.

🧪 Example of Customer Decision Tree

One possible captured customer decision path for the Baby Diaper Shopper from the top down goes like this:

“Diaper for Baby” → Type: Pants → Size: Small → Brand: Mamypoko  → Final Product: X 40 Pcs.

The basic elements of the CDT are simple. We have:

1. A Shopper Needs (“Diaper for Baby”)
2. An appropriate Offer that meets the expectations (“Newborn”, “Small”, “Medium”, “Large”)
3. A Place in the physical store where Retailers provide the solution (“shelf space”).

❓Key benefits of the Customer Decision Tree

Effective Merchandising:  CDT supports Retailers in creating visually appealing and customer-friendly displays. Aligning product displays with customer decision-making patterns can optimize visual merchandising, making it easier for shoppers to navigate the store and discover new products.

Price Optimization: Utilizing CDT, Retailers can determine the ideal pricing for products by gauging the sensitivity of Shoppers to price fluctuations and understanding their comparison metrics against competitors.

For instance, if Shoppers prioritize brand reputation over cost, Retailers can justify a higher price for certain products, setting them apart from more affordable options. Conversely, if Shopper prioritizes cost over brand reputation, introducing discounts or bundled offers might be more appealing.

More effective marketing messages: It can also help design effective promotions for a product by understanding how Shoppers respond to different types of incentives and messages.

For example, if Shoppers are loyal to a specific brand, Retailers can reward them with loyalty programs, coupons, or free samples.

Improved Shelf Layout:  It guides Retailers to place products in a manner that ensures that top-selling or complementary items are conveniently located together, improving overall customer satisfaction.

Market Responsiveness: As shopping behavior evolves, Retailers can use the CDT framework to identify emerging trends and make informed decisions about product selection and placement.