Pareto Chart Example with Questions and Answers

The Pareto chart are relatively simple concepts with many applications, including PPC marketing. Knowing Pareto chart definition without having example will be difficult understand the concept.

By exploring Pareto chart example questions and answers, this discussion aims to resolve any confusion regarding these concepts. In particular, we’ll look at Pareto chart examples and how to use this visualization to make sense of your business data.

In this blog you will learn:

• What is a Pareto Chart?
• When Is A Pareto Chart Useful?
• Applying The Pareto Chart To Digital and PPC Marketing
• Pareto Chart Example
• Reading A Pareto Chart
• There is another example of a Pareto chart with grouped data.
• Frequently Asked Questions About Pareto Chart

What is a Pareto Chart?

Before we get into the Pareto chart examples, the first question we need to answer is what exactly is the Pareto Chart. After all, this concept is the basis behind the chart type. If you don’t understand the Pareto, you’ll be lost when reading a Pareto chart example.

The Pareto Chart is commonly referred to as the 80-20 rule. It is a distribution model that suggests that approximately 80% of your results are created through 20% of your efforts.

This 80:20 ratio is a generalization and is not an exact rule. The Pareto Chart essentially suggests that most of your results are created by a small number of your efforts.

A Pareto chart, on the other hand, is used to visually express where the division is between these vital few inputs that are producing the majority of outputs, versus the many remaining inputs that, while useful, are not as crucial to the results.

When Is A Pareto Chart Useful?

To better understand the rules that form the basis of the Pareto chart, here are a few examples of how it may be used:

• When measuring quality, most complaints or detractors come from a small number of defects.
• In project management, an abundance of effort will be spent on a small number of tasks.
• The majority of a sales company’s revenue comes from a small percentage of customers or products.
• Similarly, a small percentage of investors will typically contribute the majority of funding in finance.
• For digital marketing, the majority of website traffic comes from only a few sources.
• In pay-per-click advertising, a small number of keywords will produce the majority of your campaign results.

The Pareto chart can be used whenever you want to identify the most significant causes/effects in a list. It can also be used to detect problems in a process that is governed by time, money or another quantifiable resource.

Applying The Pareto Chart To Digital and PPC Marketing

Since our primary focus is on digital marketing and improving PPC campaigns, let’s take a more in-depth look at how the Pareto Chart can be applied to these areas.

There are many ways that the generalized 80-20 rule appears in digital and PPC marketing. Remember, this 80-20 break down is an approximation.

• 80% of online sales are for 20% of your products.
• 80% of your conversions come from only 20% of your targeted locations.
• 80% of your marketing interactions will take place across 20% targeted hours of the day.
• 80% of search visits come from 20% of keywords.
• 80% of leads in content marketing are the result of 20% of your content assets.
• 80% of social shares are created by only 20% of your social media posts.

Once you identify your best and most vital assets – the 20% of products, keywords, content, targets, etc. that produce the majority of your results – you have a clear vision on how to manage your strategies best.

In other words, what components produce the largest percentage of results? These are the assets you need to focus your time, money and energy on first. You can then pursue the 80% of other assets that create the remaining 20% of results.

Pareto Chart Example

Once you understood the Pareto Chart definition, now it’s time to have its example. Next, let’s take a look at examples of a Pareto chart and answer questions related to how to read and use this diagram.

Let’s have an example of Pareto Chart based on the top impacting keywords in your digital marketing strategies.

In this Pareto chart example, 12 different keywords are being compared by the number of clicks they’ve generated. From this visual representation of the data, you can quickly see which keywords are your best performers when it comes to clicks.

At its core, a Pareto chart is essentially an ordered bar chart, where the bars are organized in order of their values. This places the top performers at the top of the chart.

The main difference between a Pareto chart and a standard bar chart is the cumulative percentage line that you see cascading down the right side of the diagram.

Reading A Pareto Chart

With the added element of this cascading, cumulative percentage line, Pareto charts can be a little troublesome to read, especially if you are unfamiliar with this type of diagram.

To read a Pareto chart, we first need to understand what each part of the chart is showing. There are three axes at play here:

1. Y-axis showing the 12 different keywords
2. Top X-axis showing the number of clicks (from 0 to 145)
3. Z-axis represents the cumulative percentage (from 0% to 100%)

Every horizontal bar represents a keyword. The length of the bar is based on the number of clicks the keyword has received. Keyword1 has the longest bar with 142 clicks.

The cumulative advantage line shows the percentage of all clicks that the keyword receives. For instance, Keyword1’s clicks represent 27% of the total number of clicks across all twelve keywords.

This cumulative percentage allows you to compare how significant (or insignificant) one keyword’s performance is to the rest. Keyword1, Keyword2 and Keyword3 are responsible for a whopping 80% of the group’s clicks.

All three of these keywords are above the gray line that signals your top 20% keywords. This line is used to identify your “vital few” keywords responsible for the majority of your results.

These are the terms you want to focus on!

The keywords that fall below this gray line are the “useful many” that should be a secondary focus.

There is another example of a Pareto chart with grouped data.

Above example is showing how different cities in USA generating profits, Los Angles and Chicago remain best in current and previous period while Boston remained the least in previous period.

Frequently Asked Questions About Pareto Chart

Here are some Pareto chart example questions and answers that people commonly ask about this unique data visualization.

Question #1: Why Do You Use A Pareto Chart?

Pareto charts are helpful in decision-making and management. By identifying the top causes of a problem or the most significant contributors to performance, it’s easy to decide what to do with your time and resources.

Question #2: What Does A Pareto Chart Tell You?

Pareto chart lists your data in order of frequency or value. The highest contributors are listed at the top and then proceed in descending order. You can use the cumulative percentage line to identify your vital few performers against the useful many.

Question #3: What Are The Benefits Of Pareto Analysis?

By identifying your “vital few” and “useful many” components, you can better organize your efforts to capitalize on your campaign’s biggest possible opportunities. It’s crucial to know where to focus your attention and what areas will provide the most significant improvements.

Question #4: How Is Pareto Calculated?

There is a fairly straightforward process involved in creating a Pareto chart.

1. Identify the data you want to analyze and its count.
2. Arrange the data in order of largest to smallest.
3. Calculate the cumulative percentages of each bar.
4. Draw your axes and map the cumulative percentage line.
5. Draw the bars for each data item.
6. Once finished, analyze your Pareto chart and see where your 80-20 division occurs.

Question #7: What Are The Common Limitations Of The Pareto Chart?

There are cases where the frequency of something occurring does not necessarily signal its importance. When using the Pareto Chart in quality management, a severe issue might be overlooked because it doesn’t occur often.

For instance, customer complaints of paint fading on a product may be common and account for the majority of problems. While trying to resolve this issue, the team may not pay attention to a more dangerous defect, like the product catching fire, because this complaint only occurs 1% of the time.

The same can happen with your PPC data. You may look at the Pareto chart example earlier and assume that those top three keywords are the best because of the high clicks. It’s a good indicator, but you need to consider other data as well.

One of the keywords with low clicks may have an exceedingly high conversion rate and lower costs, making it more valuable than Keyword1 potentially.

Question #8: How Do You Draw A Pareto Chart In Google Sheets?

If you want to apply the 80-20 rule to your own keyword data, you can create a Pareto chart right in Google Sheets. To get started, go to the Google Workspace Marketplace and download the ChartExpo add-on for Google Sheets.

Once it is installed, you can go to Extension menu on top, find ChartExpo in the menu and then click on “Open”

Once it is opened you will see ChartExpo library window on right side of the screen, now you can click on Create button to see the list of available charts,

After that you will find list of available charts.

You can find “pareto” on top search bar and then click on it from the filtered list.

Now you will see the detail window of Pareto Chart, now you can click on “click here to add sample Pareto Bar Chart. Then this is what you will get on your sheet.

Sample data along with visualization you will be available on your sheet. You can replace the data with your own data and see your own visualization.

Wrap Up:

This discussion on Pareto chart definition with example, questions and answers forms a strong basis of knowledge for using this Pareto chart with regards to your business campaigns.

When used correctly, the Pareto chart can simplify this otherwise time-consuming and tedious process. Capitalizing on your “vital few” performers is far more effective than trying to optimize everything at once.

Once you identify the most significant parts of your campaigns, you always have a clear vision of where to spend your time and money. ChartExpo is a great library which helps to create a Pareto chart in few easy steps in no time.