What is a Pareto chart? Definition, parts and when to use one
A Pareto chart is a bar chart with one extra ingredient — a cumulative percentage line — that turns a list of counts into a decision about where to focus first. Here is exactly how to read one.
· 5 min read
Example Pareto chart data: reasons for order cancellations
| Reason | Cancellations |
|---|---|
| Shipping delay | 240 |
| Found cheaper | 130 |
| Ordered by mistake | 70 |
| Changed mind | 40 |
| Payment issue | 20 |
Illustrative sample — replace it with your own numbers in the chart below.
The three parts
Categories with counts become bars, sorted tallest first. A line shows the running percentage of the total. A threshold — usually 80% — marks where the vital few end.
- Bars: how much each category contributes
- Line: how much the top N categories contribute together
- Threshold: the cut-off between the vital few and the useful many
Where the name comes from
Economist Vilfredo Pareto observed around 1906 that roughly 80% of Italy's land belonged to about 20% of the population. Quality pioneer Joseph M. Juran later generalised the pattern into "the vital few and the useful many" and named the chart after Pareto.
When to use it — and when not to
Use a Pareto chart when you have categories and counts and need to prioritise: defects, complaints, causes, channels, products. It answers "where is the leverage?"
Do not use it for trends over time (use a line chart), for relationships between two numbers (use a scatter plot), or when categories overlap so much the counts double-count the same events.
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Example Pareto chart data: reasons for order cancellations
- Total
- 500
- Categories
- 5
- Vital few
- 3
- Top 20% share
- 48%
Priority #1
Shipping delay
48% of total · 240
| # | Category | Value | Share | Cumulative |
|---|---|---|---|---|
| 1 | Shipping delay Vital few | 240 | 48% | 48% |
| 2 | Found cheaper Vital few | 130 | 26% | 74% |
| 3 | Ordered by mistake Vital few | 70 | 14% | 88% |
| 4 | Changed mind | 40 | 8% | 96% |
| 5 | Payment issue | 20 | 4% | 100% |
3 of 5 categories account for 88% of total impact.
Vital few: Shipping delay, Found cheaper, Ordered by mistake.
Shipping delay is the largest contributor at 48%.
Shipping delay represents 240 of a total of 500.
Moderate concentration: the top 20% of categories hold 48%.
There is a leading group, but the long tail still matters.
2 categories share the remaining 12%.
These are the trivial many under the Pareto principle.
Review Shipping delay first.
It is the single largest contributor at 48% of total impact.
Review opportunities across the wider process.
Impact is spread out — the top 20% only accounts for 48%.
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Key takeaways
- Bars + cumulative line + threshold, or it is just a bar chart.
- It answers one question: where does effort pay off most?
- Named by Juran, after Pareto's 80/20 land observation.