The first step is to gather customer data from your company’s CRM, billing, support and other operational systems. The key data points to collect include:
Customer profile information like age, gender, location, income etc. This will help identify demographic patterns in churn behavior.
Purchase and usage history over time. Features like number of purchases in last 6/12 months, monthly spend, most purchased categories/products etc. can indicate engagement level.
Payment and billing information. Features like number of late/missed payments, payment method, outstanding balance can correlate to churn risk.
Support and service interactions. Number of support tickets raised, responses received, issue resolution time etc. Poor support experience increases churn likelihood.
Marketing engagement data. Response to various marketing campaigns, email opens/clicks, website visits/actions etc. Disengaged customers are more prone to churning.
Contract terms and plan details. Features like contract length remaining, plan type (prepaid/postpaid), bundled services availed etc. Expiring contracts increase renewal chances.
The data needs to be extracted from disparate systems, cleaned and consolidated into a single Customer Master File with all the attributes mapped to a single customer identifier. Data quality checks need to be performed to identify missing, invalid or outliers in the data.
The consolidated data needs to be analyzed to understand patterns, outliers, correlations between variables, and identify potential predictive features. Exploratory data analysis using statistical techniques like distributions, box plots, histograms, correlations will provide insights.
Customer profiles need to be segmented using clustering algorithms like K-Means to group similar customer profiles. Association rule mining can uncover interesting patterns between attributes. These findings will help understand the target variable of churn better.
For modeling, the data needs to be split into train and test sets maintaining class distributions. Features need to be selected based on domain knowledge, statistical significance, correlations. Highly correlated features conveying similar information need to be removed to avoid multicollinearity issues.
Various classification algorithms like logistic regression, decision trees, random forest, gradient boosting machines, neural networks need to be evaluated on the training set. Their performance needs to be systematically compared on parameters like accuracy, precision, recall, AUC-ROC to identify the best model.
Hyperparameter tuning using grid search/random search is required to optimize model performance. Techniques like k-fold cross validation need to be employed to get unbiased performance estimates. The best model identified from this process needs to be evaluated on the hold-out test set.
The model output needs to be in the form of churn probability/score for each customer which can be mapped to churn risk labels like low, medium, high risk. These risk labels along with the feature importances and coefficients can provide actionable insights to product and marketing teams.
Periodic model monitoring and re-training is required to continually improve predictions as more customer behavior data becomes available over time. New features can be added and insignificant features removed based on ongoing data analysis. Retraining ensures model performance does not deteriorate over time.
The predicted risk scores need to be fed back into marketing systems to design and target personalized retention campaigns at the right customers. Campaign effectiveness can be measured by tracking actual churn rates post campaign roll-out. This closes the loop to continually enhance model and campaign performance.
With responsible use of customer data, predictive modeling combined with targeted marketing and service interventions can help significantly reduce customer churn rates thereby positively impacting business metrics like customer lifetime value,Reduce the acquisition cost of new customers. The insights from this data driven approach enable companies to better understand customer needs, strengthen engagement and build long term customer loyalty.