What Is a Scatter Chart and How Does It Help Your Business?

A person typing on a laptop learning more about scatter plots and how they can be used.

Estimated reading time: 4 minutes

In this age of data-driven decision-making, businesses must understand and utilize various graphical representations of statistical data. One such powerful visual tool is the scatter chart. A scatter chart, also known as a scatter plot or scatter diagram, is a type of chart used in statistics that displays values defining two variables along different axes. Below, we delve deeper into scatter plots and how they can benefit your business. Keep reading to learn more about what is a scatter chart.

Interpreting Scatter Charts

A scatter chart maps individual data points on a horizontal and a vertical axis. The position of each dot on the axis indicates the value for an individual data point. Scatter charts are primarily used for visualizing relationships between numerical variables where each axis represents a different numeric value. By displaying a variable in each axis, we can detect if a relationship or correlation exists between the two variables and gauge the relationship’s strength and direction. Scatter charts are particularly useful when we want to explore possibilities for such a relationship, causality, or pattern.

Scatter charts can represent vast data, from simple sets to complex datasets. Analyzing scatter plots can help highlight correlations straight away, display trends, and identify outliers in the data.

Aside from their use as stand-alone visualization tools, scatter charts can sometimes be implemented as mini charts in the margins of larger charts, illustrating the large-scale data. This can help provide valuable context, making it easier to understand and interpret the data presented on the main chart.

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Implementation of Scatter Plots in Business

Scatter charts are invaluable tools in business analytics. In a corporate setting, they can be used in various ways. For instance, scatter plots can reveal connections between different business factors, such as sales vs. marketing expenditures, production vs. income, or client satisfaction vs. employee engagement. The main advantage here is the visual quantification of correlation, which can lead to more informed business strategy and decision-making.

Another common use of scatter plots in business involves monitoring trends and predicting patterns. Businesses can plot historical performance data on scatter charts to identify trends, which can be the foundation for strategy and planning. Also, scatter charts could be used to predict the outcome of certain business decisions based on historical patterns. By identifying and analyzing the relationship between variables, businesses can determine the probable effects of changes in one variable on another.

Moreover, scatter charts can help businesses identify outliers in their data. Outliers might indicate problems or opportunities, and recognizing them can lead to important business insights.

SEE ALSO: How To Create Charts and Graphs in Excel

Scatter Chart vs. Line Chart

Two people pointing at a laptop comparing scatter plots and line charts.

Scatter charts and line charts are two commonly used forms of data visualization, and while they can sometimes display similar data, their interpretation and application can differ significantly. Line charts are primarily used to represent continuous data points over time, which makes them suitable for tracking changes over time. Some common use cases include stock price movements, temperature changes, etc.

On the other hand, scatter charts do not connect data points with lines. Instead, they focus on the relationship between two combined sets of data. A scatter chart could provide clear answers if you want to see whether an increase in your advertising budget is leading to higher sales. Scatter charts emphasize individual data points rather than trends over time and provide a unique perspective.

Understanding the unique strengths of each type of chart can help you determine the best tool for your specific needs.

By carefully considering when and how you apply this tool, you can maximize its potential to enhance your business decision-making process.