Journal
EXPERT SYSTEMS WITH APPLICATIONS
Volume 39, Issue 18, Pages 13517-13522Publisher
PERGAMON-ELSEVIER SCIENCE LTD
DOI: 10.1016/j.eswa.2012.07.006
Keywords
Predictive analytics; Time window; Length of customer event history; Predictive customer churn model; Explanatory period; Independent period
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Funding
- IAP research network of the Belgian government (Belgian Science Policy) [P6/03]
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The key question of this study is: How long should customer event history be for customer churn prediction? While most studies in predictive churn modeling aim to improve models by data augmentation or algorithm improvement, this study focuses on a another dimension: time window optimization with respect to predictive performance. This paper first presents a formalization of the time window selection strategy, along with a literature review. Next, using logistic regression, classification trees and bagging in combination with classification trees, this study analyzes the improvement in churn-model performance by extending customer event history from one to sixteen years. The results show that, after the fifth additional year, predictive performance is only marginally increased, meaning that the company in this study can discard 69% of its data with almost no decrease in predictive performance. The practical implication is that analysts can substantially decrease data-related burdens, such as data storage, preparation and analysis. This is particularly valuable in times of big data when decreasing computational complexity is paramount. (C) 2012 Elsevier Ltd. All rights reserved.
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