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It’s no news that data visualization is one of the most effective ways of interpreting complex information. And if you’re looking for a way of representing individual problems with the cumulative total of the whole, then the Pareto Chart is your best shot.
Definition: The Pareto Chart is a mix of a bar graph and a line chart. It’s used for demonstrating the 80-20 principle. Individual problems (or data points) are represented using bars, and these bars are arranged in descending order — from the largest to the smallest. A curved line is used to represent the cumulative total of the data set.
Furthermore, there is an 80% cut-off line that shows where the 80/20 principle applies. The 80/20 rule pretty much argues that 80% of the results are determined by 20% of the effort.
Simply put, the Pareto Chart is a visualization tool that helps you pinpoint the most frequent complaints, defects, or other issues that can be easily categorized or counted. Also, the chart follows the Pareto principle — 80% of effects are as a result of 20% of actions or causes.
Other graph types are used for various kinds of quantitative and qualitative measurements. However, the Pareto Chart is the only chart that is used to find defects in a data set. It can also be used to identify the 20% effort that generates 80% of the results.
Now you’ve got a good grasp of what the Pareto Chart is, here are easy ways of reading the chart.
You’ve got a solid understanding of what the Pareto Chart is, the characteristics, and the key points of the chart. It’s time to take a close look at how to read the Pareto Chart below is an example of a horizontal Pareto Chart:
The Pareto Bar Chart above shows the profit generated by various cities in the United States. It’s a robust chart that shows the profit generated both in the current and previous period. From the visual representation above, you can easily pinpoint the cities that generate the most profit both in the current and previous periods.
Los Angeles and Chicago are the two most profit-generating cities in the United States, while Boston remains the least profit-generating city.
To a large extent, the Pareto Chart is an ordered bar chart that has a chain of bars arranged according to their values. Therefore, the top-performing cities are at the top of the chart, while the least-performing cities are at the bottom.
Here comes the big question — what’s the difference between a Pareto Chart and a bar chart?
The Pareto Chart comes with a cumulative percentage line — the line that cascades down the right side of your diagram. You won’t see that in a standard bar chart.
Moving on, here is an easy way of reading the Pareto Chart.
With the cumulative percentage line, it could be somewhat difficult to read the Pareto Chart. And if you’re a newbie in the industry, you may have some trouble reading the chart.
First things first, you’ve got to understand what’s represented on the chart — and you can start by having a good grasp of all three axes displayed on the chart.
Each horizontal bar represents a city. The length of the bar shows the amount of profit generated by the city. Los Angeles and Chicago generated the most profit both in the current and previous periods. For instance, Los Angeles and Chicago generated 26% of the total profits across all cities.
The cumulative percentage shows you how each city is performing in comparison to the rest. You would easily see that Los Angeles, Chicago, New York, Phoenix, Philadelphia, San Francisco, and Miami generated a staggering 80% of the profits in the United States. These seven cities combined for the most profit in the country.
What’s more, all seven cities are above the gray line — and the gray line signals the top 20% of cities in the country. It’s the line that shows the vital few cities responsible for the most profit in the country.
These are the cities the country will most likely focus on!
Cities that fall below the gray line are the useful many — and these should be the secondary focus of the country.
In the next section, we will guide you through the process of creating a Pareto Chart in Excel utilizing the ChartExpo add-in.
You won’t want to miss out on this! Here, we will use a Pareto Chart to illustrate the tabular data provided below.
| Cities | Current | Previous |
| Dallas | 204 | 196 |
| Philadelphia | 244 | 186 |
| Austin | 255 | 199 |
| San Diego | 172 | 252 |
| Chicago | 310 | 338 |
| San Jose | 219 | 236 |
| San Antonio | 226 | 319 |
| Phoenix | 174 | 147 |
| Los Angeles | 318 | 207 |
| Houston | 287 | 222 |
To install ChartExpo into your Excel, click this link.
Imagine you run an e-commerce store. You want to know how your brand performs at the city level by comparing previous and current periods.
Which chart would you use to uncover the 20% of cities driving 80% of the overall brand’s sales?
Yes, you guessed right. This is where a Pareto Diagram comes in. Let’s use the table below for our scenario.
| City | Current Period Sales | Previous Period Sales |
| New York | 540 | 510 |
| Chicago | 550 | 545 |
| San Francisco | 415 | 399 |
| Los Angeles | 572 | 533 |
| Seattle | 193 | 185 |
| Boston | 188 | 163 |
| Phoenix | 497 | 485 |
| Atlanta | 215 | 180 |
| Philadelphia | 489 | 470 |
| Miami | 387 | 267 |
| Dallas | 7 | 5 |
| Houston | 5 | 3 |
| St Louis | 7 | 4 |
| Columbus | 1 | 1 |
| Fresno | 6 | 3 |
| Mesa | 2 | 2 |
| Oakland | 3 | 1 |
| San Antonio | 1 | 2 |
| San Diego | 1 | 1 |
| San Jose | 2 | 3 |
| Austin | 5 | 3 |
| Jacksonville | 3 | 2 |
| Fort Worth | 3 | 3 |
| Charlotte | 2 | 1 |
| Indianapolis | 1 | 2 |
| Denver | 4 | 3 |
| Washington | 5 | 2 |
| El Paso | 7 | 5 |
| Nashville | 5 | 3 |
| Detroit | 3 | 2 |
| Oklahoma City | 2 | 1 |
| Portland | 2 | 3 |
| Las Vegas | 3 | 2 |
| Memphis | 3 | 1 |
| Louisville | 4 | 1 |
| Baltimore | 5 | 3 |
| Milwaukee | 1 | 1 |
| Albuquerque | 2 | 1 |
| Tucson | 1 | 1 |
| Sacramento | 4 | 3 |
| Kansas City | 2 | 1 |
| Colorado Springs | 4 | 3 |
| Omaha | 2 | 1 |
| Raleigh | 4 | 3 |
| Long Beach | 2 | 1 |
| Tulsa | 4 | 3 |
| Tampa | 2 | 1 |
| Arlington | 4 | 3 |
| New Orleans | 2 | 1 |
| Wichita | 4 | 3 |
| Bakersfield | 2 | 1 |
| Aurora | 1 | 2 |
| Anaheim | 3 | 2 |
| Honolulu | 1 | 3 |
| Santa Ana | 3 | 2 |
| Riverside | 1 | 5 |
| Corpus Christi | 3 | 2 |
| Lexington | 1 | 1 |
| Henderson | 3 | 2 |
| Stockton | 1 | 1 |
| Saint Paul | 3 | 2 |
| Pittsburgh | 1 | 2 |
| Lincoln | 3 | 2 |
| Anchorage | 1 | 1 |
| Plano | 3 | 2 |
| Orlando | 1 | 2 |
| Irvine | 3 | 2 |
| Newark | 7 | 3 |
| Durham | 5 | 1 |
| Chula Vista | 2 | 2 |
| Toledo | 5 | 1 |
| Fort Wayne | 2 | 1 |
| Lubbock | 5 | 2 |
| Jersey City | 2 | 2 |
| Scottsdale | 5 | 3 |
| Reno | 2 | 3 |
| Glendale | 5 | 3 |
| Norfolk | 2 | 1 |
| Irving | 5 | 2 |
| Garland | 1 | 2 |
| Hialeah | 4 | 1 |
| Richmond | 1 | 3 |
| Boise | 5 | 2 |
| Tacoma | 1 | 1 |
| Fontana | 5 | 1 |
| Birmingham | 1 | 1 |
| Frisco | 2 | 1 |
| Augusta | 1 | 1 |
| Tempe | 2 | 1 |
| Little Rock | 1 | 1 |
| Overland Park | 2 | 1 |
| Grand Prairie | 1 | 1 |
| Ontario | 2 | 1 |
| Brownsville | 1 | 1 |
| Santa Rosa | 2 | 1 |
| Eugene | 1 | 1 |
| Lancaster | 2 | 1 |
| Palmdale | 1 | 1 |
| Joliet | 2 | 1 |
| Midland | 1 | 1 |
How to draw a Pareto Chart in Google Sheets does not have to be time-consuming. ChartExpo makes the whole process seamless and easy.
You can change the data with your data and draw a new visualization.
The Pareto Chart serves one primary purpose — it highlights the most vital piece of a data set. That is the part that contributes the most to the whole data set. If you use the Pareto Diagram for quality control, it would help you pinpoint the defect(s) that when handled, could lead to the most improvement.
There are various Pareto Chart types, but if you’re using the ChartExpo visualization tool, you would most likely come across the Pareto Bar Chart and the Pareto Column Chart.
Pareto Bar Chart
Pareto Column Chart
If you’re looking for a reliable way of maneuvering conflicting problems, then the Pareto Chart is your best shot. Let’s say you’re in the PPC advertising industry, handling lots of competing keywords may be a difficult task, especially if you’re looking for how to run a campaign on a tight marketing budget.
However, if you use the chart, you can easily pinpoint keywords and the ROI it may likely generate. This way, you get to correlate cost and keyword bids with the potential result it would likely generate.
To do this, you’ve got to use attributed data. But what’s attributed data?
Attributed data (count data) are additive metrics in Google Ads that help you add or count. If you would be running some Google Ads, here are some metrics you’ve got to consider in your Pareto Chart.
When it comes to pay-per-click advertising, the Pareto Diagram helps you to identify areas to focus on. Yes, since 80% of the results are generated by 20% of efforts, you’re better off focusing on areas that yield the most results.
The Charts created using ChartExpo comes with some unique features like the 80/20 gray line. As a digital marketing manager, you can use the charts to boost your data analysis and measure your ad campaign performance. It’s also a reliable way of gaining insight into top-performing keywords. This way, you get to be more prudent with your advertising spending and also reap your rewards at the right time.
But does the Pareto Chart only apply to digital marketing? No, here are other real-life examples of the Pareto Chart.
Pareto Chart is only used to observe qualitative data — it rarely shows the frequency of measurement. Also, Pareto Charts cannot calculate the data average of any data set. The chart cannot be used for calculating mean, standard deviation, and other statistical data. The statistical and quantitative data obtained from these calculations are used for testing the mathematical values of your data set.
However, qualitative statistics pretty much helps you to know if the process can stay within some specification limit.
Here’s the thing, a Pareto Chart helps you to identify the greatest problem, but it does not show the depth of the problem or the magnitude of changes that can overturn the situation.
The cumulative percentage in the Pareto Chart shows the percentage of the defect that can be removed if you want to solve the most important defect types. It also shows what percent contributes the most to the overall data set.
Mathematically, the cumulative percent is obtained by dividing your cumulative frequency by the total number of observations (n). The result is multiplied by 100. The last value of the cumulative percentage should be 100%.
Here are some things you need to understand before performing a Pareto analysis.
The Pareto Chart obeys the Pareto principle (also known as the 80-20 rule). According to the principle, most results are generated from a minority of causes (or sources). The principle was founded by Vilfredo Pareto, an Italian economist who discovered that a whopping 80% of all lands in the country were owned by a mere 20% of the population.
What’s more, the 80-20 rule is relevant today — 80% of the results are generated by 20% of the effort.
The image above shows the profit generated by various cities in the United States. This way, everyone could see that 80% of the country’s profit was generated by 20% of the cities.
The image above is a Pareto Column Chart that shows the profit generated by all cities in the United States. And just like the Pareto Bar Chart, you can easily see that 80% of the profit was generated by 20% of the cities.
All in all, the Pareto analysis always follows the 80-20 rule.
Moving on, here is how to collect data from a Pareto Chart.
Some easy ways of collecting data from a Pareto Chart include gathering raw data about the problem. It could be achieved by collecting a random sample — and the random sample should adequately represent the entire process.
Also, you’ve got to tally your data and get the sum of all observations in the various categories. After that, you would have to label the vertical and horizontal axes.
This is the way the Pareto theory works, in focus:
The Pareto Chart offers an easy way of observing qualitative data. It’s a statistical graphical technique that helps rank business process problems in order of their occurrence — typically from the most frequent data point to the least frequent data point.
The primary difference between a bar graph and a Pareto Chart is in its column ordering. Also, the bar graph does not come with a cumulative percentage line.
A histogram uses a bar graph to illustrate the frequency of an event. In the histogram, the bar height is used as the indicator. However, the Pareto Chart is a type of histogram that demonstrates the Pareto philosophy (the 80-20 rule), and it does that by showcasing the order of impact in an event.
The primary objective of a Pareto Chart is to highlight the most relevant factors in a set. If you’re using the Pareto Chart for your quality control process, it would help you pinpoint defects that if tackled, would lead to a more robust improvement in the data set.
Let’s say you want to calculate the cumulative percent of the total through the fifth contributor. All you’ve got to do is sum the effects of the first five in rank-ordering and divide the result by the overall total. Next, multiply your answer by 100.
The Pareto Chart helps you identify the data points that generate the most results. With the Pareto Chart, you can easily identify the defects that, when handled, yield the most improvement in the system.
Pareto Chart analysis is pretty straightforward — identify the problem and the cause of it, score the problems, group the problems together, add up the scores of each group, and take action.
Yes, its applications span across industries, personal life, and societal structures, showcasing its versatility.
Critics argue its oversimplification and limited applicability in complex scenarios.
Getting a good grasp of the main factors that generate the most results in any analysis is easy. Regardless of your level of expertise, you can do that using a Pareto Chart.
The good news is, that you don’t need any kind of coding skills to create compelling visuals in a Pareto Chart.
If you’ve got a good grasp of how Microsoft Excel and Google Sheets work, you can create a Pareto Chart — and you get to do that without losing sweat.
Although the Pareto Chart helps in pinpointing the frequency of occurrence of a problem, it does not translate to the significance of such a problem — and you’ve got to keep this in mind.
Now you know the nitty-gritty of a Pareto Chart, what data point will you be measuring using the chart?
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