A CTQ tree (Critical to Quality tree) is used to decompose broad customer requirements into more easily quantified requirements. CTQ Trees are often used in the Six Sigma methodology.
CTQs are derived from customer needs. Customer delight may be an add-on while deriving Critical To Quality parameters. For cost considerations one may remain focused to customer needs at the initial stage.
CTQs (Critical to Quality) are the key measurable characteristics of a product or process whose performance standards or specification limits must be met in order to satisfy the customer. They align improvement or design efforts with customer requirements.
CTQs represent the product or service characteristics that are defined by the customer (internal or external). They may include the upper and lower specification limits or any other factors related to the product or service. A CTQ usually must be interpreted from a qualitative customer statement to an actionable, quantitative business specification.
To put it in layman's terms, CTQs are what the customer expects of a product... the spoken needs of the customer. The customer may often express this in plain English, but it is up to the CTQ expert to convert them to measurable terms using tools such as DFMEA, etc.