Knowing your customers is one thing you must pay attention to, especially in SaaS. One of the most powerful tools I have come to rely on is the Customer Decision Tree (CDT). This tool enables businesses to understand customers’ decision-making behavior better.
A CDT graphs customers’ many paths to decide on your product. It helps identify decision points and alternatives. Examining the customer decision tree shows where customers might get bogged down.
Also, a well-defined CDT can help reveal what tempts people to buy. You may tailor your marketing approach for pinpoint precision. This can help you turn prospective visitors into happy customers.
CDTs emphasize the features of your product that customers care about most. It will enable you to hone in on what drives adoption. Identify key customer departure moments to preserve your reputation. In the longer run, it will also lower churn rates.
These are just specific benefits of incorporating CDT into your SaaS strategy.
Such an action provides:
- Superior CX (Customer Experience)
- Customer retention
- Profitable growth
What is a Customer Decision Tree (CDT)?
A Customer Decision Tree uses the familiar tree-like decision tree graph to showcase a prospective buyer’s hierarchical decision-making process.
Let’s take the example of a customer looking to buy a helpdesk tool for their business.
The foremost decision a buyer must make is whether to go with an on-premise helpdesk or a cloud-based SaaS application.
If they choose to go with an on-premise tool, they must make confident decisions about the licensing cost, the duration of the license (whether it renews annually or is available for a lifetime), and whether they need access to the source code for customization.
If the buyer opts for a SaaS-based helpdesk tool, they do not have to make these decisions. However, they must consider other factors, such as how many ‘seats’ they need to purchase, the subscription costs associated with it, the uptime and reliability of this cloud-based product, and so on.
Once these decisions are made, the customer must assess the options based on the specific features they need (support channels available, integrations, macros, analytics, automation, and so on).
Why Understanding CDT is Important?
The CDT is a crucial predictor of everything that goes into making a purchasing decision. It allows you to identify the subtleties of customer purchases and how you can tap that to build a better product.
This knowledge is vital to:
- Increase Customer Loyalty: Understanding all the factors in the decision-making process can help you build a product that your customers would vouch for. This impacts not only conversion but also loyalty.
Let’s take the example of a business video conferencing solution.
Competitive analysis is used to make many of the major features and pricing decisions. However, a well-executed CDT may help uncover subtle factors (like ping speed, or latency that primarily affect remote workers that may be overlooked.
Yet, these elements can tilt the purchasing decision in your favor and make fanboys out of your customers.
- Improve Customer Experience: This will significantly enhance the customer experience and their view of your service and make them optimistic.
If, for instance, your CDT indicated that a large proportion of your target customers use an on-premise software solution over SaaS, then it is likely that they’re more concerned with data security and control.
With this knowledge in your back pocket, you can pivot and focus on answering these perceived weaknesses with your marketing messaging while emphasizing the security provided by using a SaaS product more strongly to turn those customers into long-term buyers.
- User Onboarding: A well-designed CDT helps detect frictions your users might face. It allows you to address them before they become issues. Even seemingly minor changes like replacing a traditional contract with an electronic contract can make a huge difference in establishing a seamless experience.
The bottom line is that a customer decision tree is vital to Customer Success. It will help you learn more about how your customers shop for and buy products in your industry. Analyze purchase data to map customer behavior and decision-making patterns.
How to Make an Excellent CDT for Customer Success?
A Customer Decision Tree may seem unassuming at first glance. But a lot of market research and iterations go into it to get it right. Even a minor error in assumption could mean thousands of dollars in misallocated budgets.
Building a CDT does not have to be an expensive endeavor. You could start off with tools like Canva that let you generate designs with AI. Once you have a basic model ready, perform competitive analysis, and talk to customers to refine it further.
Here are a few factors that can have a material impact on multiple facets of customer success.
- Customer Lifecycle
- Product Adoption
- Customer Health
- Customer Satisfaction
- Churn Rate
a. Customer Lifecycle
Your customers all go through different life cycles. If CDTs have a complex relationship, you may create a new CDT for each decision tree node. This new CDT will be relevant to a customer’s lifecycle.
Knowing how each customer segment decides lets you refine your onboarding. It also helps improve engagement strategies. They aim to meet customers’ needs or wants within an app.
b. Product Adoption
CDT can help you determine your discrete node points. They measure how well a product is adopted. More nodes mean a higher probability of better product fit. Find out which features matter most to your users. Then, improve those to lead to higher adoption.
c. Customer Health
Lead Health is knowing if a lead is good enough to become our customer. You might have guessed. Customer health shows how healthy customers are doing with your product or service. When you analyze a CDT, what potential pain areas or concerns could affect customer health?
For instance, you may notice that many of your customers downgrade their plans too often. Instinctively, you can tell that your customers are price-conscious and want a lower price.
However, if your CDT shows that your target audience is not price sensitive but instead values perceived value for money, then you could work on a different strategy—that is, to pack more features into your existing pricing tiers so that your customers continue to stay with their higher-priced subscriptions.
d. Customer Satisfaction
Customer Satisfaction is a crucial metric in customer success. Analyzing the CDT helps you find areas where customers are delighted and areas where they are dissatisfied.
For instance, if many of your customers choose a SaaS offering instead of an on-premise solution, this could be due to the ease of use and accessibility. Focusing more on these areas can further improve customer satisfaction and retention.
e. Reducing Churn
By definition, churn is the number of customers that have stopped using your product or service.
Understanding this can help you identify potential triggers that could lead to customer churn and give you the confidence to act proactively.
For example, you may notice that your omnichannel contact center receives an unusually high number of complaints from customers in one specific segment. Or, the churn rate among your small business segment is relatively high.
Comparing the CDTs designed for this segment with your other decision trees can tell you why your product has higher acceptance among one kind of audience while not finding acceptance in the other. This could be due to specific features, your marketing message, or other factors the CDT identifies.
f. Improving Product-Market Fit with CDT
A robust CDT boosts the customer-win % and strengthens the product-market fit. If a product helps customers get what they need, then it stands to reason that those customers would want to use the product more. It will lead to increased satisfaction and reduced churn.
The data will allow you to ensure that your product development evolves. Over time, it will help refine your CDT. The cycle continues to spot emerging trends and preferences to ensure long-term success. By focusing on product-market fit, you can reach a returning customer base, increase adoption rates, and reduce churn.
Wrapping up
Mapping out and analyzing the elements in the buyer’s decision-making process will help SaaS businesses improve their offerings. It enhances customer experience with higher satisfaction and retention levels. If adopted as a strategy, CDT ensures your business stays aligned with customers’ wants, paving the road for growth and success.
For SaaS businesses, the top takeaway from this article is that a well-structured customer decision tree can help them with improved customer insights, better onboarding, better product-market fit, proactive customer support, reduced churn rate, and better overall optimization of the customer journey.
Again, you want to know your customers and do more than meet their expectations. Aim to anticipate how their needs will evolve. A structured CDT will allow your SaaS business to provide better customer experiences, help build loyalty, and lead to long-term growth.
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