What are the 3 types of decision making?

Decision making is an art and a science which has been studied over generations. The secret of marketing lies in learning what the customer wants and how to influence the customers decision making process so that he buys our product above competition.

Behind a simple decision making process, there are many thought processes which influence the decision making. A buyer may take an emotional, spur of the moment decision, or he may take a well thought out and researched decision. Based on his observation, different processes can be defined for decision making.

Decision making mainly depends on the involvement of the customer. There are high involvement products and there are low involvement products. Similarly, there are consumer products and industrial products. Involvement in industrial products will generally be higher as compared to commercial products because the amount of investment in industrial products is also huge.

Thus based on the above arguments, there are mainly 3 types of decision making processes which can be defined.

1) Extensive decision making process –

This type of decision making process is used when the product is a very high involvement product, possible a high investment product as well. Typical examples include buying a house for a consumer, or buying a new manufacturing plant in case of industries. In both cases, there are multiple people involved, and the decision making is extensive as the customer wants to get maximum benefits. There are also risks involved in such endeavours, hence extensive decision making is done.

2) Limited decision-making process –

Buying a television or buying a car will be a limited decision making process. When you are buying such white goods, the investment is nominal and not very high. At the same time, you have some experience with the product as you regularly watch television and you regularly sit in cars.Thus, you do not spend as much time on buying these products. Nowaday, the limited decision making process is further helped with the presence of online media, where people know a lot about the product while sitting at home itself. The speed of the limited decision making is dependent on the customer experience and his knowledge about the product as well as the amount of time he has to make the decision.

3) Routine decision making process –

Routine decision making happens in day to day life like buying a soap or shampoo. In this case, the customer is more likely to stick to a single brand for a long time. He is unlikely to switch to different brands because he wants to invest minimum time in routine decision making. There are a lot of things which influence the routine decision making process, like regular advertising by FMCG companies. This is because, the routine things are brought over and over again. And once the company gets such a customer, they are likely to reap long term profits from the same customer.

Thus, the above 3 are the different type of decision processes. Depending on the type of customer, and the amount of investment in the product, the decision making process may vary from time to time.

Modern cloud-native organizations have constantly growing streams of raw data flowing from every corner of the enterprise. Determining the impact this data has on business performance can be an overwhelming task requiring teams of analysts. That’s where employing business intelligence (BI) can help.

By presenting current and historical data within a business context, the data insights supplied by BI tools enable organizations to make smarter, more confident decisions that provide strategic direction for years to come.

Instead of relying on intuition and “gut feel,” companies can use BI to find new ways to increase revenue, track performance, boost operational efficiency, identify market trends, expose problems, and much, much more.

Before we dig deeper into the primary types of decisions in business intelligence, let’s define what we mean by decision-making in a business context and understand how business intelligence factors into the process.

Decision-making defined

Simply put, decision-making is the process of deciding something, especially with a group of people. From a business decision perspective, the aim is to achieve business objectives to satisfy stakeholder requirements, needs, and expectations.

For the decision to be effective, however, decision makers must forecast the outcome of each option and determine which is best for a particular situation. That makes decision support systems (DSS) like decision intelligence and business intelligence absolute essentials.

What is business intelligence?

Business intelligence refers to the technology tools and processes that enable businesses to organize, analyze, and contextualize business data from around the company. Business intelligence tools and decision-making transform raw data into meaningful and actionable information.

BI is the means through which organizations make smarter business decisions. While data fuels the engine, integrating BI-related infrastructure like a data warehouse, dashboards, reports, data discovery tools, and cloud data services make it possible to extract insights from your data.

The role of business intelligence

Companies make big mistakes when they base business decisions on what they think will happen instead of relying on facts.

Using BI and advanced analytics, organizations can extract crucial facts from the mountain of data, transforming it into information companies can act on to make informed strategic decisions. The result: improved business processes, operational efficiency, and business productivity.

Business intelligence decisions

Business intelligence decisions typically fall into three categories: strategic, tactical, and operational.

An organization needs to gain a complete understanding of these types of decisions in business intelligence to make better-informed decisions that lead to increased customer retention, stakeholder satisfaction, operational efficiency, and revenue.

The relationship between business intelligence and business analytics

Business intelligence tells you what is currently happening and what happened in the past to bring you to that state.

On the other hand, business analytics is an umbrella term for predictive data analysis techniques (can tell you what’s going to happen) and prescriptive (tells you what you should be doing to create better outcomes).

Using business intelligence and analytics efficiently is the difference between companies that succeed and those that fail in the modern environment.

Three primary types of business intelligence decisions

Business intelligence supports the three types of decision-making mentioned above: strategic, tactical, and operational. Its frequency and organizational impact characterize each.

Strategic decisions

Strategic decisions comprise the highest level of organizational business decisions and are usually less frequent and made by the organization’s executives. Yet, their impact is enormous and far-reaching.

Some types of strategic decisions include selecting a particular market to penetrate, a company to acquire, or whether to hire additional staff.

Decisions made at this level usually involve significant expenditure. However, they are generally non-repetitive in nature and are taken only after careful analysis and evaluation of many alternatives.

Tactical decisions

Tactical decisions (or semistructured decisions) occur with greater frequency (e.g., weekly or monthly) and fall into the mid-management level. Often, they relate to the implementation of strategic decisions.

Examples of tactical decisions include product price changes, work schedules, departmental reorganization, and similar activities.

The impact of these types of decisions is medium regarding risk to the organization and impact on profitability.

Operational decisions

Operational decisions (or structured decisions) usually happen frequently (e.g., daily or hourly), relate to day-to-day op­erations of the enterprise, and have a lesser impact on the organization. Operational decisions determine the day-to-day profitability of the business, how effectively it retains customers, or how well it manages risk.

Answering a sales inquiry, approving a quotation, or calculating employee bonuses may be examples of this decision type.

You can summarize these types of decisions in business intelligence this way:

• • Strategic: Long-term, complex, made by senior managers
  • Tactical: Medium-term, less complex, made by mid-level managers
  • Operational: Day-to-day, simple, routine, made by junior managers

How to make the best decisions for your business

How do you make the best business decisions? Some people trust intuition or gut feeling. Others reach out to constituents and experts for advice. Still, others cede decision-making to information systems and automation. However, the smartest business decisions are made by those who look at the numbers.

In a competitive business landscape, where agility, flexibility, and a real-time decision-making process are critical and timely, accurate data analysis is more important than ever. In that respect, relying on the types of decisions in business intelligence is non-negotiable. It is required for long-standing success and market dominance.

Sisu accelerates business analytics workflow

In the big data era, information companies expand rapidly, requiring interactive tools and solutions that make sense of the data and help organizations make effective decisions.

Yet many organizations rely exclusively on descriptive BI systems and tools like Looker and Tableau for organizational decision analysis. While these ad hoc tools can help you visualize changes in your data, they are not designed for today’s wide-ranging, rich data and limit the number of possible dimensions you can explore.

Data volume increases force you to spend more time “dumbing down” your data just to work within the constraints of these tools, which leaves less time for valuable analysis.

The Sisu Decision Intelligence Engine is built to work with the messy, complex, and imperfect data you’re already using for analysis today. Sisu can:

• • Prepare and analyze all your wide, messy data
  • Automate key driver analysis and get personalized results over time
  • Surface actionable, multi-factor insights, and drill down fast

Ready to augment your existing BI tools and start transforming your analytics workflow? Schedule a demo to see Sisu in action and learn how customers like Samsung, Wayfair, Upwork, and Gusto use the platform to drive measurable business value.