TELECOMMUNICATION

CUSTOMER CHURN

Group Members (Group 9)

● Savi Pahwa (FE 1934)

● Harshita Goyal (FE1912)
● Ruchi Saini (FE1931)
● Shobhit Goel (FE1936)
INTRODUCTION
Churn Rate: The churn rate, also known as the rate of attrition or customer churn, is the rate at which
customers stop doing business with an entity. It is most commonly expressed as the percentage of service
subscribers who discontinue their subscriptions within a given time period.

For a company to expand its clientele, its growth rate (measured by the number of new customers) must
exceed its churn rate.
OBJECTIVE
● To find out the reasons of losing customers by measuring customer loyalty to regain the
lost customers.
● Highlighting the main factors or variables which are affecting the customer churn.
● Using various Machine learning algorithm to build the model and evaluate the accuracy
and performance of the model.
● Providing the insights and recommendations.
METHODOLOGY
Exploratory
Exploratory Data
Data Analysis
Data Cleaning
Data Cleaning
Analysis(EDA)
(EDA)
Exploratory data analysis is
an approach to analyzing
data sets to summarize their
main characteristics, often
with visual methods.
Feature
Selection
Data is not an oil but crude
oil which needs to be
refined.This is also known
as refining part.
Data cleaning is the process
of preparing data for
analysis by removing or
modifying data that is
incorrect, incomplete,
irrelevant, duplicated, or
improperly formatted.
FeatureModelling
Feature selection is the
process by which a subset
of features, or variables, are
selected from a large
dataset for building
machine learning models.
Selection
A machine learning model
is a file that has been
trained to recognize certain
types of patterns. Train a
model over a set of data,
providing it an algorithm
that it can use to reason
over and learn from these
data.
DATA VISUALIZATION
● A histogram is a graphical representation that organizes a group of data points

01 Histogram into user-specified ranges. It is similar in appearance to a bar graph. The

histogram condenses a data series into an easily interpreted visual by taking many
data points and grouping them into logical ranges or bins.

● A box and whisker plot—also called a box plot—displays the five-number summary of a set
of data. The five-number summary is the minimum, first quartile, median, third quartile,

02 Box Plot ●
and maximum.
In a box plot, we draw a box from the first quartile to the third quartile. A vertical line goes
through the box at the median. The whiskers go from each quartile to the minimum or
maximum.

● A heat map (or heatmap) is a graphical representation of data where values are

03 Heat Map ●
●
depicted by color.
Heat maps make it easy to visualize complex data and understand it at a glance.
The heatmap style correlation matrix is a very effective tool when used properly.

04
● A count plot can be thought of as a histogram across a categorical,
Count Plot instead of quantitative, variable
HISTOGRAM

• Histogram shows data for the account length is normally distributed.

BOX PLOT
• Night calls are mostly made by the
churned customers.

• We can Notice for Voice-Mail Feature

when there are more than 20 voice-mail
messages then certainly there is a churn
indicating improving the voice-mail
feature or setting a limit and check
whether a customer is retained.

• We can infer here that on an average a

100 calls are made which is a good
indication for the company. But we can
also note that for the churn customer the
median is slightly higher than 100
which indicates there are call drops
which may lead to more calls in a
morning.

• International Calls clearly indicate that

clients without International Plan Suffer
and May Leave the Operator.

• Different Pricing Strategy and

International Calling Rate Optimization
would lead to lower churn rate.
COUNT PLOT

• While some customers are lazy and hence without

resolving the issue they have jumped to other network
operator, while the customers who have called once also
have high churn rate indicating their issue was not solved
in first attempt.
• Those who don't have Voice mail plan and International
plan are more likely to churn.
HEAT MAP
The heatmap is a way of representing the data in a 2-dimensional form.
The data values are represented as colors in the graph. The goal of the
heatmap is to provide a colored visual summary of information.

Correlation: Dependence or association is any statistical

relationship, whether causal or not, between two random variables or
bivariate data.
With the help of Correlation matrix, we can find interdependency
between variables.

Least dependency of variables for predicting churn are account length

and number vmail messages.
Churn variable is depending more on voicemail plan.
DATA CLEANING
● Amount of outliers found in dataset were insignificant (Non-removal
of outliers).
● There are few variables that need to be removed from our columns.
Not all the variables are useful in predicting if a customer will churn.
For example, the customer’s information (phone number or area code)
or geographical information (state) are completely useless in predicting
churn.
● Missing Value Treatment
MISSING VALUE TREATMENT
Before Treatment After Treatment

Since, the number of missing

values was not significant.
Therefore, we dropped all the
missing values.
DECISION TREE
Classification Report Confusion Matrix

From the confusion matrix,

TP= 677, FP= 39, FN= 28, TN= 85

Accuracy= TP+TN/ TP+TN+FN+FP = 762/829= 91.91%( 92 correct predictions out of 100).

But it does not tell full story when we are working with class- imbalanced data set. We will look at two better metrics for evaluating
class-imbalanced problems: precision and recall.
 RANDOM FOREST
Classification Report Confusion Matrix

● The fundamental reason to use a random forest instead of a decision tree is to combine the predictions of many decision trees into a
single model.
● A random forest can reduce the high variance from a flexible model like decision tree by combining many trees into one ensemble
model.
● It overcomes the problem of overfitting by averaging or combining the results of different decision tree
● Random forests are very flexible and possess very high accuracy.

For this churn analysis, I did not use accuracy for evaluation since it can be misleading for imbalanced classes such as ours. For the evaluation
of out model, I used precision and recall instead.
 FEATURE SELECTION
Feature importance refers to techniques that
assign a score to input features based on how
useful they are at predicting a target variable.

Feature selection using Random forest comes

under the category of Embedded methods.
Embedded methods combine the qualities of
filter and wrapper methods. They are
implemented by algorithms that have their
own built-in feature selection methods. Some
of the benefits of embedded methods are :

● They are highly accurate.

● They generalize better.
● They are interpretable

According to feature importance, customer churn is highly impacted by voicemail plan and account length has almost negligible impact on
customer churn.
MULTI-COLLINEARITY BETWEEN VARIABLES

● The variance inflation factor (VIF) quantifies the extent of

correlation between one predictor and the other predictors in a
model.

● Higher values signify that it is difficult to impossible to assess

accurately the contribution of predictors to a model. So
variables having high VIF is removed.

● Total Day Calls, Total night calls, Total Eve calls had a VIF
above 20. So, they have to be removed.

● Total Night Charge and Total Eve Charge also removed as VIF
is approximately 12 for both variables.
LOGISTIC REGRESSION
WITHOUT BALANCING WITH BALANCING

• Logistic regression is an effective model for binary classification tasks, although by default, it is not effective at imbalanced
classification. Given dataset is highly imbalanced.
• We have applied over-sampling technique as it performed better than under sampling technique.
• Balancing the dataset we faced the tradeoff between accuracy and Precison-Recall but clearly, the balanced dataset gives a
better result which can also be seen through ROC curve(model validation tool)
• Precision and recall is quite low when data is imbalanced but it increases significantly after balancing the dataset i.e, from
16% to 76% (recall).
 (Receiver Operating Characteristic)ROC CURVE
ROC curves are frequently used to show in a graphical way the trade-off between
sensitivity and specificity for every possible cut-off for a test or a combination of
tests.The AUC-ROC curve , where AUC is area under the ROC curve tells how
better has the classification mechanism worked.

In the Roc curve ,

x-axis shows :
= 1 – specificity
= false positive fraction = FP/(FP+TN)

The y-axis showing :

= sensitivity
= true positive fraction = TP/(TP+FN)

The closer an ROC curve is to the upper left corner, the more efficient is the test.
Meaning , maximising the True Positive rate and minising the False Positive rate.

Thus we can clearly deduce that balancing the data had a better classification of
1’s and 0’s using logistic regression
INSIGHTS
From data visualization we found that those who don't have Voice mail plan and International plan
are more likely to churn.

Out of all the algorithms used , Random Forest gave the best results. According to the model the
most significant variables affecting the churn are:

1. Voice Mail Plan

2. International Plan

3. Customer Service Calls

4. Total Int Calls

5. Total Int Charges

RECOMMENDATIONS WHICH WILL LEAD TO
LOYAL CUSTOMER
• Should focus more on International plan and voice-mail plan for reducing the customer churn.
• Try to offer the better service for the churn customers ,see how much this impact before and
later .Some may use your service better move them to your active customers.
• Take the feedback and suggestions with in period of time and improve it , strive for better
communication.
• When you're taking the any change in plans of your business just predict the positive and
negative share of that plan. If it is negative prepare the solution before so you can handy
easily.
• The pricing policy of the company for the various customers need to be revisited according
the to the analysis and should be altered to reduce the churn rate.
• Offer incentives.
• Be proactive with communication.
• Define a roadmap for new customers.
• Retention marketing such as Facebook, Google Ads, Twitter etc.