EX 5.

1 Customer Behavior Prediction in Sales and Marketing

1. Introduction

In today's highly competitive business landscape, understanding and predicting customer

behavior are crucial for the success of sales and marketing strategies. This project aims to
leverage predictive analytics techniques to forecast customer behavior based on historical
data and improve decision-making processes in sales and marketing.
2 Objectives
The main objectives of this project are:
● Predicting customer churn to proactively address customer retention strategies.
● forecasting sales trends to optimize inventory management and resource allocation.
● Identifying potential high-value customers for targeted marketing campaigns.
● Improving overall marketing ROI by optimizing resource allocation and campaign
effectiveness.

3. Data Collection

Data for this project is collected from various sources including:

● Customer databases containing demographic information.

● Sales transaction records including purchase history and order details.
● Website analytics data capturing user interactions and behavior.
● Email campaign data tracking open rates, click-through rates, and conversions.
● Social media engagement metrics such as likes, shares, and comments.

4. Data Cleaning and Preprocessing

● Missing values are handled through imputation techniques such as mean or median
imputation.
● Outliers are detected and removed using statistical methods or domain knowledge.
● Data is preprocessed by performing feature scaling, encoding categorical variables, and
handling any data transformations necessary for modelling.
5. Exploratory Data Analysis (EDA)

EDA is conducted to gain insights into the dataset:

● Visualizations such as histograms, scatter plots, and heatmaps are used to explore
relationships between variables.
● Key metrics such as customer lifetime value, purchase frequency, and average order value
are calculated and analyzed.
● Patterns and trends in customer behaviour are identified, such as seasonality or purchasing
trends.

6. Feature Selection

● Features are selected based on their relevance to predicting customer behaviour.

● Techniques such as correlation analysis, feature importance from tree-based models, or
domain knowledge are used for feature selection.
7. Model Selection
Several machine learning algorithms are considered for prediction:
● Logistic Regression: For binary classification tasks such as predicting customer churn.
● Random Forest: For its ability to handle nonlinear relationships and feature interactions.
● Gradient Boosting: For its high predictive accuracy and robustness to overfitting.

8. Model Training Models

● The dataset is split into training and validation sets using techniques such as k-fold cross-
validation.
● Hyperparameter tuning is performed using grid search or randomized search to optimize
model performance.
9. Model Evaluation Model performance is evaluated using appropriate metrics:
● For classification tasks, metrics such as accuracy, precision, recall, F1-score, and ROC
AUC are computed.
● For regression tasks, metrics such as mean squared error (MSE) or mean absolute error
(MAE) are calculated.
● Models are compared based on their performance on the validation set.
9. Model Evaluation

Model performance is evaluated using appropriate metrics:

● For classification tasks, metrics such as accuracy, precision, recall, F1-score, and ROC
AUC are computed.
● For regression tasks, metrics such as mean squared error (MSE) or mean absolute error
(MAE) are calculated.
● Models are compared based on their performance on the validation set.

10. Deployment

Predictive models are deployed into production environments:

● Integration with existing systems such as CRM or marketing automation platforms is
established.
● Real-time prediction capabilities are implemented to enable dynamic decision-making.
● Model predictions are used to inform sales and marketing strategies in real-world
scenarios.
11. Monitoring and Iteration
Models are monitored for performance and updated iteratively:
● Feedback mechanisms are established to collect insights from users and stakeholders.
● Model performance is continuously monitored, and retraining is scheduled periodically.
● Iterative improvements are made based on new data and insights gathered from model
performance.
12. Conclusion
In conclusion, this project demonstrates the effectiveness of predictive analytics in
understanding and predicting customer behavior in sales and marketing. By leveraging
historical data and advanced machine learning techniques, businesses can make more
informed decisions, optimize resource allocation, and improve overall marketing ROI.
CODE FOR THE PROJECT:

import numpy as np
import pandas as pd

from sklearn.model_selection import train_test_split

from sklearn.preprocessing import StandardScaler

from sklearn.linear_model import LogisticRegression

data = pd.read_csv('Customer_Behaviour.csv')

data.info()
ef preprocess_inputs(df, engineer_features=False):
df = df.copy()

# Drop User ID column

df = df.drop('User ID', axis=1)

# Binary encode
df['Gender'] = df['Gender'].replace({'Female': 0, 'Male': 1})

# Feature engineering
if engineer_features == True:
income_threshold = df['EstimatedSalary'].quantile(0.95)
df['High Income'] = df['EstimatedSalary'].apply(lambda x: 1 if
x >= income_threshold else 0)

old_age_threshold = df['Age'].quantile(0.75)
df['Old Age'] = df['Age'].apply(lambda x: 1 if x >=
old_age_threshold else 0)

young_age_threshold = df['Age'].quantile(0.25)
df['Young Age'] = df['Age'].apply(lambda x: 1 if x <=
young_age_threshold else 0)

# Split df into X and y

y = df['Purchased']
X = df.drop('Purchased', axis=1)

# Train-test split
 X_train, X_test, y_train, y_test = train_test_split(X, y,
train_size=0.7, shuffle=True, random_state=1)

# Scale X
scaler = StandardScaler()
scaler.fit(X_train)
X_train = pd.DataFrame(scaler.transform(X_train),
index=X_train.index, columns=X_train.columns)
X_test = pd.DataFrame(scaler.transform(X_test), index=X_test.index,
columns=X_test.columns)

return X_train, X_test, y_train, y_test

X_train, X_test, y_train, y_test = preprocess_inputs(data,

engineer_features=False)
X_train

model = LogisticRegression()
model.fit(X_train, y_train)

acc = model.score(X_test, y_test)

print("Test Accuracy: {:.3f}%".format(acc * 100))

Test Accuracy: 80.833%

X_train, X_test, y_train, y_test = preprocess_inputs(data,

engineer_features=True)
X_train

model = LogisticRegression()
model.fit(X_train, y_train)

acc = model.score(X_test, y_test)

print("Test Accuracy: {:.3f}%".format(acc * 100))

Test Accuracy: 85.000%