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# Pareto Analysis

Community Team Member

## Analytical Need

Pareto analysis is a technique based on the Pareto Principle which states that 80 percent of problems or effects are produced by 20 percent of causes. This type of analysis can be useful in the stage of decision making, to identify the root causes (or attributes) of the problem you are trying to address.

## Modeling Challenge

How can we identify the customers that are responsible for 80% of total sales?

## Solution

To answer this question we will need to use a column chart with the relevant category we would like to analyze (customers) and add more values (running contribution and sales ) to it, to better visualize the answer to our question.
Next, add the calculation of the value that needs to be measured. We will use total sales for this scenario:
Our next step will be to add a value which will contain the running contribution of the total sales formula we previously created, wrapped by a running sum function, to sum up the percentage of sales per customer:
Finally, we add a value line to represent the 80%:
Our final result will present a column chart of total sales by customer, along with a running sum and 80% values to visualize the Pareto analysis. This enables us to quickly identify the point where the contribution and running sum values overlap, to create the 80%:
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Last update:
‎03-02-2023 08:30 AM
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