How to Make Better Decisions

In my previous post, I discussed how to make crappy decisions. The key takeaway was that gut-based decision-making is insufficient for companies that need to compete. Now that you know how to make bad decisions, it’s time to talk about how to make better decisions.

Better decisions are better because they are based on accurate information. You can give your customer what they want, when they want it if you simply use your Learning Toolbox to understand their needs and behavior.

The Learning Toolbox is a series of activities that allow you to learn more about your customer. In the Better Decisions world, there are two reasons to use your Learning Toolbox: first, to create hypothesis about what your customers want and second, to validate the hypothesis and determine drives your customers behavior.

Let’s use an example to work through the Better Decisions lifecycle. I’m an online retailer that sells dog bowls. I have a website with where you can come and customize three types of bowls.  I’m interested in expanding my product line and looking for ideas.

When scoping out my competition, I notice that dog bowls often sell in a set with dog collars and leashes. I now have a great idea that perhaps I should offer matching collars and leashes during the checkout process to upsell my customers.

Next, I take my idea and reach out to a few of my best customers. I bring them into my office for a focus group, and ask them about potential leash/collar combinations and customizations to gauge their interest. Now, I’m researching to hypothesize using the focus group component in my Learning Toolbox.

Out of my focus group, I have created a few interesting hypothesis about what products might sell well with my customers. Three concepts bubble to the top during my conversation with my customers:

  1. Sell the matching customized leash and collar (my original idea)
  2. Offer both a customized leash and collar and a generic leash and collar at a lower price point
  3. Sell only the lower price point generic leash and collar

Now I have three ideas to test to see how my customers respond. I purchase a small inventory of both customizable and generic leashes and collars to build my inventory. (I may not make money on these – that’s ok – we’re just determining which my customers really prefer).

Next, I use Google Content Experiments to research to decide. I split the customers going through my checkout process into four groups:

  • 25% of customers are offered no upsell
  • 25% are offered a customized leash and collar
  • 25% are offered the choice of either a higher-priced customized leash and collar or lower priced generic collar
  • 25% are offered only the generic collar and leash set

After running my test for four weeks and gaining statistical significance, I am able to clearly see that users who were offered the generic collar and leash set are more likely to add it to their cart, and the profitability and revenue of those customers are higher than any of the other traffic splits.

Now I know what to do! I launch the generic collars and leash sets to the website as an upsell opportunity, and negotiate contracts with suppliers to ensure that I’m getting the best deal on those products. In addition to launching this to the site, I have a great idea to test again – how can I offer my customers a customizable solution at a higher price point without cannibalizing my generic leash/collar set sales?

As you can see, you can use the Learning Toolbox to gather information about your customers that helps you make better decisions and constantly improve your products, marketing or any other customer-facing aspect of your business.

Please don’t wait – use your Learning Toolbox to research the wants, needs, and test the behaviors of your customers. To show how affordably this can be done, we’ve provided a series of Scrappy Learning Toolbox resources.

Scrappy Learning Toolbox

It isn’t expensive to build a Learning Toolbox. Try these free (or near-free) resources as you Research to Hypothesize and Research to Decide.

Resources to Hypothesize

    • Food + Drink + Facebook Post = Focus Group
    • Twitter, Facebook, Google searches = Market Research
    • Google Alerts = Ongoing Market Research
    • LinkedIn Requests & Groups = Find Customers to Interview
    • Steve Blank’s Startup Tools – an even better list of tools
    • WhichTestWon – learn from others tests – Free
    • Lumzy (UI Prototyping) – Free
    • UseIt (Web Usability) – Free articles
    • Paper Prototyping
    • GutCheck – more expensive, instant focus groups

Resources to Decide

  • Mike_Kiyoshahi

    Most of entrepreneur fails due to make better decisions in their business. The way you have described the component like ‘Toolbox’ ,’Resources to hypothesize’, ‘Researching to hypothesize using the focus group’ & ‘Resources to decide’ really deserves a great thank. Your article helped me to find out my previous mistakes & guides the way to make better decision onwards.

    Thanks again Nick.

  • Dezmod_Raids

    It’s really very informative article. The life cycle process on above image is quite helpful to understand the method.I missed few of those earlier in my initiatives in spite of having business education too.You have perfectly pointed out the necessary steps on making better decisions which seems very helpful.And definitely a big thank for describing the hypothesize process.That’s really awesome.

  • Jamie

    This is an excellent post and so true about how poor decisions are made and what important points are frequently missed when it comes to entrepreneurs making important decisions. 

  • Claire Jones

    Wow great infographic and it is very easy to see how poor decisions are made. Each step needs to be taken into account to make better decisions. 

  • Tammy

    Entrepreneurs especially cannot go and make any kind of huge business decision on their own. They need to consult with other experts and base their decisions on what they learn. 

  • Pam

    Thanks for the infographic. I can see how it is necessary to go through each step listed in the cycle if you want to properly market your product or service. The Learning Toolbox is a must use for business owners and marketers.

  • Craig

    Great info and this is something that all business owners need to understand. Thanks for making this so clear and hopefully less bad decisions will be made.

  • Rich

    As a business owner myself, I can certainly appreciate this. Thank you!

  • Chad

    Excellent infographic and it shows what tools to use to make a better decisions.

  • Tawny

    thanks, this is great to know!