Pareto Analysis: Using the 80/20 Rule - Pyramid Analytics
The article explains how Pyramid Analytics simplifies the creation of Pareto (80/20) analyses—traditionally complex and code-heavy in tools like Power BI and Tableau—by enabling users to generate dynamic, cumulative percentage metrics with just one click, demonstrated through a use case identifying top customers, products, and branches contributing most to sales.
In this second post on a three-part series on contextual calculations, the focus is on how Pyramid can quickly create business calculations like Pareto with just a few clicks.
An Italian economist, Vilfredo Pareto, observed that 80 percent of the land in Italy belonged to 20 percent of the population. He found that this rule applied in many diverse domains. Since then, this principle has been used to find patterns in businesses and in life. With the explosion and availability of data and analytic capabilities, it is now easier to find these 80/20 insights that provide actionable information.
Pareto implementation challenges
Most modern BI tools do not allow for easy, code-free methods of creating flexible calculations like running totals. Like running totals, Pareto analysis requires the calculation of cumulative percentages of totals. The complexity and difficulty in implementing basic formulations make comprehensive analytics challenging for most end-users.
To gauge such complexity, consider the steps needed to add Pareto in competing solutions:
- Power BI
- Tableau
In contrast, Pyramid offers a one-click solution to adding Pareto metrics to analyses that will be usable in any visual.
Identifying your best customers: Pareto in one-click
Apex Cycles wants to identify their top customers that account for most of their sales for the current year. They also want to identify which products and branches contribute most to their sales. How can Pyramid improve, simplify, and speed up this analytical process?
First, build a simple column chart of sales by customer.
Then, by right-clicking on the Sales metric, you can instantly add a Pareto metric based on sales that automatically shows cumulative sales as a percentage of the total.
For added clarity, place this Pareto metric on the secondary axis as a spline chart. The Pareto report is then complete—uncomplicated, intuitive, and entirely dynamic.
Reading from this report, the first five customers account for 80% of all sales.
Focus on products
To perform the same analysis for products, simply swap out customers with product and instantly get the new analysis without further manipulation or code.
Here, four products account for roughly 80% of sales.
Conclusion
With Pyramid, the user can create a Pareto analysis that:
- Does not need any developer input
- Only requires a few clicks
- Can instantly re-use the same function even after changing other selections in the report
Pyramid is a highly versatile, powerful, code-free, and user-friendly tool for creating business calculations like Pareto.