Part 2. MM4XL Tools > 1. Strategic Tools > Decision Tree > Decision Tree in a Nutshell

Decision Tree

Decision Tree in a Nutshell

Decision trees provide a framework for analyzing decision problems that involve uncertainty. They present all important aspects of the problem in a concise and structured pictorial representation showing: decision alternatives, expected outcomes, probabilities of occurrence, and chronological order of events.

Common problems in marketing management approached with decision trees include new product launch, marketing research go/no go, investment planning and allocation, pricing issues, strategy selection, and any other decision that may put the business at risk.

Trees are made of nodes, decisions or chances, and nodes are made of branches. Filling out the tree structure with your own values returns an analytical view of the decision problem. This view can help fact-and-data driven managers to make better-informed decisions because problems are framed in a well organized manner, they are evaluated objectively, and they can be easily modified.

Decision-makers can be risk averse, neutral, or risk takers. Thanks to utility functions, MM4XLs Decision Tree, DTree, allows you to incorporate risk attitude in the model, so that the end result reflects the propensity toward risk of the decision-maker.

Decision Tree Software for Business and Management Model Making

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