Building comprehensible customer churn prediction models with advanced rule induction techniques

Abstract

Customer churn prediction models aim to detect customers with a high propensity to attrite. Predictive accuracy, comprehensibility, and justifiability are three key aspects of a churn prediction model. An accurate model permits to correctly target future churners in a retention marketing campaign, while a comprehensible and intuitive rule-set allows to identify the main drivers for customers to churn, and to develop an effective retention strategy in accordance with domain knowledge. This paper provides an extended overview of the literature on the use of data mining in customer churn prediction modeling. It is shown that only limited attention has been paid to the comprehensibility and the intuitiveness of churn prediction models. Therefore, two novel data mining techniques are applied to churn prediction modeling, and benchmarked to traditional rule induction techniques such as C4.5 and RIPPER. Both AntMiner+ and ALBA are shown to induce accurate as well as comprehensible classification rule-sets. AntMiner+ is a high performing data mining technique based on the principles of Ant Colony Optimization that allows to include domain knowledge by imposing monotonicity constraints on the final rule-set. ALBA on the other hand combines the high predictive accuracy of a non-linear support vector machine model with the comprehensibility of the rule-set format. The results of the benchmarking experiments show that ALBA improves learning of classification techniques, resulting in comprehensible models with increased performance. AntMiner+ results in accurate, comprehensible, but most importantly justifiable models, unlike the other modeling techniques included in this study. © 2010 Elsevier Ltd. All rights reserved.