Analysis of Telecom Customer Churn Prediction by Building Decision Tree

Analysis of Telecom Customer Churn Prediction by Building Decision Tree

Analysis of Telecom Customer Churn Prediction by Building Decision Tree

Chandana S

4AI15CS029

Department of CS & E Adhichunchanagiri Institute of Technology, Chikmagalur

Vineetha G

4AI15CS123

Department of CS & E Adhichunchanagiri Institute of Technology, Chikmagalur

Varun E

Assistant Professor Department of CS & E Adhichunchanagiri Institute of Technology,

Chikmagalur

Dr. Pushpa Ravikumar

Professor & Head Department CS &E Adhichunchanagiri Institute of Technology, Chikmagalur

Abstract:- Telecommunication has become an important for business, enabling companies to communicate effectively with its customers and allowing high standards of customer service. Due to the expansion of telecommunication market day by day and increased competition has resulted in huge loss of revenue as well loss of customers. The process of one customer leaving one telecom company and joining another telecom company is called as Churn.

In this paper we developed a prediction model for telecom customer churn. It represents large dataset in the form of graphs which helps to depict the outcome in the form of various data visualization. Churn is a very important area in which the telecom domain can make or lose their customers hence investing greater time to make predictions which in turn helps to make necessary business conclusions. Churn reduction can be achieved effectively by analysing the past history of the potential customer systematically.

Keywords- Telecommunication, Churn, Churn Prediction, Churn Management, Churn rate, Data mining.

1. INTRODUCTION

   The mobile communication has become the dominant medium for effective communication all over the world. In numerous countries, especially in developed, the telecom market is saturated to the extent that each new customer must be won over from the competitors. Many public policies and standardised procedures of mobile communication allow the customer to easily switch over from one carrier to another. So, instead of winning a new customer it is far better to retain the old customers in the same network. Hence, the telecom carriers have now shifted their focus from customer acquisition to customer retention.

   Churn in terms of telecom industries refers to the customer leaving the current company and moving towards the telecom company. Managing of customer to remain in the particular telecom company is intact a difficult task. Customer churn is a notorious problem for most of the industries, affecting the revenues and standards of a company, subsequently resulting in difficulty for acquiring of new customers. In the customer oriented telecommunication cycle, churn refers to the decision made by the customer about ending up the business relationship with a particular

   telecommunication company due to prevalence of inconvenience over a long duration.

   Churn may also be referred as loss of clients or customers, who are intending to move their custom to a competing service provider. In order to manage customer churn more effectively, a company must build an accurate and more effective churn prediction technique. To keep up in the competition and to acquire as many customers, most of the telecom service providers invest huge amount of revenue to expand their business in the beginning. Therefore, it has become important for the telecom operators to earn back the amount they invested along with at least the minimum profit within a very short period of time.

   The Decision Trees, Nearest Neighbour, and Artificial Neural Networks are sum of the churn analysis techniques which perform two key tasks such as predicting whether a particular customer will churn and reasons for that particular customer to churn. These techniques address only percentage of churn, but they fail to identify the exact number of churners. The problem confronting wireless telecommunications management is that it is very difficult to determine which subscribers leave the company and why. It is therefore more difficult to predict which customers are likely to leave the company, and devise cost effective incentives that will convince likely churners to easy.

2. LITERATURE SURVEY

   1. Churn Prediction

      In the past, churn has been identified as an issue of concern across most industry sectors. In its most general sense it refers to the rate of loss of customers from a companys customer base[2]. The churning out of the customers from the emerging business space like telecom and broadcast providers leads to the loss of revenue. These companies aim at identifying the risk of churn in its early stages, as it is usually much cheaper to retain a customer than to try to win that customer back. If this risk can be accurately predicted, marketing departments can target customers efficiently with targeted incentives to

      prevent them from leaving. Generally the churn refers to the defection of a customer. In the telecom industry, a subscriber is to have churned when he leaves one network and moves towards the other telecom networks. Churn rate is defined as the total number of subscribers who leave the service in the period divided by average total customers in the period. The churn rate of a telecom company is a key measure of risk and loss of revenue in the telecom industry and it should be quoted in the company annual report[2].

   2. Types of Churn:

      Telecom churn can be mainly classified in two types namely voluntary churn and involuntary churn. Voluntary churn also referred to as Active churn occurs when customer initiates service termination. It is purely based on the decision of the customer to unsubscribe from the existing service providers. These are further classified as deliberate and incidental churn. The reasons for the former include un satisfaction with service quality, high costs, privacy concerns, no fault resolution etc. While the latter happens due to changes in circumstances that prevent customer from further continuing with the service e.g. financial problems, change in geographical location of the customer. Involuntary churn means the company suspends the customers service and no longer want them as subscribers of their company. This is usually because of non-payment, service abuse, fraud or non-use of service over longer duration[1].

      Churn can be reduced by knowing the past history of the customers so that they can improve their services to fulfil the demands of the customer. Large amount of information about the customers such as billings, total calls, customer service centre calls and network data are maintained in a telecom companies. The availability of enormous amount of data arises the scope of using data mining techniques in the telecom database. The telecom dataset helps the service providers to easily analyse the data about the customer in different perspectives to predict and reduce the churning.

      Factors Influencing the Customer churn are,

      • Weak customer marketing.

      • Poor customer service.

      • Ineffective relationship building.

      • Bad unboarding.

      • Competitive driven churn.

      • Customer did not achieve their deserved outcome.

   3. Data Set Used: Telecom data set attributes

      Table 1: Telecom Dataset Attributes

      Sl.no	Attributes
      1	Customer
      2	Age
      3	Area
      	Phone
      5	International plan
      6	Day minutes
      7	Day calls
      8	Day charges
      9	Evening minutes
      10	Evening calls
      11	Evening charges
      12	Night minutes
      13	Night calls
      14	Night charges
      15	International minutes
      16	International calls
      17	International charges
      18	Customer service calls
      19	Churn
      20	Occupation
      21	Total calls

   4. Data Mining Techniques

   Data mining is a process of examining of already existing data from a large data set to create a new information. Also, data mining can be defined as the process of reducing, analysing the patterns, predicting the useful and required information from a large database and transform it into an understandable structure for future use. Aside from the raw analysis step, it involves database and data management aspects, data pre- processing, model and inference considerations, interesting metrics, complexity considerations, post- processing of discovered structures, visualization, and online updating. One of the most commonly used analysis step in the Data mining is the Knowledge discovery in databases process, or KDD. And the common data mining technique is Classification, its aim is to classify unknown cases based on the set of known examples into one possible classes. Here, we use Classification technique for the telecom dataset which helps telecom operators to predict whether the particular customer will churn or not.

3. METHODOLOGY

   To find the answer for who and why is likely to churn, an effective classification of customer is much needed. Therefore, churn prediction deals with the identification of the customers who are likely to churn in near future.

   The figure 1 illustrates the process involved in identifying and classifying the customers as churners and non- churners based on different perspectives.

   Figure 1: The process diagram of Churn Prediction

   A. Churn prediction decision tree

   Decision trees are the most commonly used tool for prediction and classification of future events. Each node in a decision tree is a test condition and branching is based on the value of the attribute being tested. The label of the leaf node (churner or non-churner) is assigned to the customer under evaluation.

   The figure 2 illustrates a simplified churn prediction decision tree for a telecommunication Sector,

   Figure 2: A Simplified Churn Prediction decision tree

   Decision trees are more often criticized that they are not suitable for addressing complex and non- linear relationships between the attributes. But many researches have documented that accuracy of decision tree is high.

4. EXPERIMENTAL RESULTS AND OBSERVATIONS

   A. Description of the complete data set

   Table 2: Description of telecom data set

   B. Summary of data set

   Table 3: Summary of data set

   C. Classification tree for all types of calls fit<- rpart(Churn~Customer.ser+Day.calls+Night.calls+ Eve.calls+Int.calls, method="anova", data=data) plot (fit, uniform=TRUE, main="Classification tree for data")

   text (fit, use.n=TRUE, all=TRUE, cex=.7)

   Figure 3: Represents the classification tree considered in churn

   data set

   1. Using Plot function

      Figure 4 represents the graph of age with respect to churn factor and area with respect to churn factors that has two values yes (Y) and no (N)

      plot (Churn ~., data=data, type="c")

      Figure 4: Age and Area with respect to churn factor

      Figure 5 represents the graph of total number of calls with respect to churn factor using plot function.

      Figure 5: Total calls with respect to churn factor

      Figure 6 Represents the set of all possible cost complexity Prunings of a tree from a nested set. For the geometric Means of intervals of values of cp for

      which a pruning is Optimal, a cross validation has been done in initial Construction by rpart. The cp table in the fit contains the mean And standard deviation of the errors in the cross validation prediction against the each of the geometric means, and these are plotted by this function. A good choice of cp for pruning is often the leftmost value for which the mean lies below the horizontal Line.

      fit<-rpart (Churn~Customer.ser+Day.calls+Night.calls+Eve.c alls+Int.calls, method="anova", data=data) plotcp(fit)

      Figure 6: plotcp function

      Figure 7 shows the line chart of Day calls and customer service calls using number as a range and considering the churn factor. The number of churn increased with the number of increase in customer service calls.

      Line chart for Day calls and Customer Service calls

      Figure 7: Line chart with respect to day calls and customer service

      calls

      Figure 8 shows the line chart of age and night calls using number as range and considering factor. The number of night calls increases with decreased age group

      Figure 8: Line chart with respect to age and Night calls

      Figure 9 represents the two curves on a single part in R. First curve (blue) corresponding to the Urban area and second curve (red) corresponding to Rural area

      Figure 9: Line graph of the total number of calls with respect to Urban and Rural areas

      The above line graph indicates that the total number of calls in urban areas is more than the rural areas due to lack of knowledge about the available services and offers providing by the telecom Industries.

      rsq.rpart () plots the approximate R-square for the different splits.

      It produces two plots. The first plots the r-square (apparent and apparent-from cross-validation) versus the number of splits. The second plots the Relative Error (cross-validation) from the cross- validation versus the number of splits.

      Figure 10: Approximate R-square for the different splits.

5. CONCLUSION

The current needs of telecom companies are a tool which can be used to understand customer behaviour and locate churners and to take possible actions to convert the churners to non-churners. The present paper focuses on developing a system which can be easily adopted by telecom Industry to discover the customer patterns, make predictions, Identify possible churners and to increase the net profit. The study predicts that the there is a huge deviations in the line graph of churners by measuring with respect to the customer service calls.

REFERENCES

[1] Manpreet Kaur, Dr. Prerna Mahajan, Churn Prediction in Telecom Using R, International Journal of Engineering and Technical Research (IJER), ISSN: 2321-0869, Volume-3, Issue- 5, May 2015.

[2] Pushpa, G Shoba, Social Network Classifier for Churn Prediction in Telecom Data, 2013 International Conference on Advanced Computing and Communication Systems (ICACCS- 2013), Dec. 19-21, Coimbatore, INDIA.

[3] Applying Data Mining Techniques in Telecom Churn Prediction, International Journal of Advanced Research in Computer Science and Software Engineering, N.Kamalraj Dr.

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