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Title: New insights into churn prediction in the telecommunication sector: a profit driven data mining approach
Authors: Verbeke, Wouter ×
Dejaeger, Karel
Martens, David
Hur, Joon
Baesens, Bart #
Issue Date: 2012
Publisher: Elsevier
Series Title: European Journal of Operational Research vol:218 issue:1 pages:211-229
Abstract: Customer churn prediction models aim to indicate the customers with the highest propensity to attrite, allowing to improve the efficiency of customer retention campaigns and to reduce the costs associated with churn. Although cost reduction is their prime objective, churn prediction models are typically evaluated using statistically based performance measures, resulting in suboptimal model selection. Therefore, in the first part of this paper, a novel, profit centric performance measure is developed, by calculating the maximum profit that can be generated by including the optimal fraction of customers with the highest predicted probabilities to attrite in a retention campaign. The novel measure selects the optimal model and fraction of customers to include, yielding a significant increase in profits compared to statistical measures.

In the second part an extensive benchmarking experiment is conducted, evaluating various classification techniques applied on eleven real-life data sets from telecom operators worldwide by using both the profit centric and statistically based performance measures. The experimental results show that a small number of variables suffices to predict churn with high accuracy, and that oversampling generally does not improve the performance significantly. Finally, a large group of classifiers is found to yield comparable performance.
ISSN: 0377-2217
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center for Management Informatics (LIRIS), Leuven
× corresponding author
# (joint) last author

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