Part 2. MM4XL Tools > 2. Analytical Tools > Descriptive Analyst > 2. Output Report > Pareto analysis

Descriptive Analyst

Pareto analysis

When exploring data, two typical tools statisticians use are frequency tables and histograms. Pareto analysis brings both together, and it is a tool mostly applied when it is required a look at the spread of data over a range of values. We might be interested in analysing sales from a list of, say, 450 stores, rather than the spread of prices, or any other describing characteristic.

In the example below we look at the selling price of 191 PCs. The table shows the range of possible values has been arranged in 15 classes (Bin range) equally scaled and sorted in ascending order. The frequency count of prices falling in each class is reported under the heading Frequency. In the class $2418, for instance, fall 20 items, which average $2274 in price and represent 10.5% of 191 items in the list, which adds up to 11.5% in cumulative form (class one plus class two).

 Pareto Chart, Box-Whisker Plot and Descriptive Statistics Software

The Pareto chart in the picture below shows Frequency and Cumulative% from the table above, which is a good aid for grasping the overall distribution shape of the data we are interested in.

 Pareto Chart, Box-Whisker Plot and Descriptive Statistics Software

From the frequency table and chart we can see at a glance that 87.4% of prices fall within $3871. If we, for instance, were planning to buy a new PC for a price between $2500 and $3500, we see there are 119 products () that may be of our interest. The same analysis repeated on different characteristics of the same data set may help refining the look and selecting the products only that exhibit the profile most appealing to us.

If you want to use an equally spaced bin range in value that makes sense to you, for instance, from 0 to 10000 scaled with intervals of $1000, proceed as follows. Type 0 in cell A1 and 1000 in cell A2.Select with the mouse the range A1:A2, put the arrow of the mouse on the small black box in the lower right corner of the selected range. Press the mouse right button and, keeping the button pressed, pull down the selection since you reach cell A10 then release the mouse button. Use the newly created range as bin range to Pareto analysis with categorical data.

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