Neural Network and Social Network to enhance the customer loyalty process Carlos Andre Reis

Pinheiro School of Computing Dublin City University cpinheiro@computing.dcu.ie Markus

Helfert School of Computing Dublin City University markus.helfert@computing.dcu.ie
Abstract –Due to the increased competition in the telecommunications, customer relation and
churn management is one of the most crucial aspects for companies in this sector. Over the last
decades, researchers have proposed many approaches to detect and model historical events of
churn. Traditional approaches, like neural networks, aim to identify behavioral pattern related to
the customers. This kind of supervised learned model is suitable to establish likelihood assigned
to churn. Although these models can be effective in terms of predictions, they just present the
isolated likelihood about the event. However these models do not consider the influence among
the customers. Based on the churn score, companies are able to perform an efficient process to
retain different types of customer, according to their value in any corporate aspects. Social
network analysis can be used to enhance the knowledge related to the customers’ influence in an
internal community. The approach we propose in this paper combines traditional predictive
model with social network analysis. This new proposition to valuate the customers can arise
distinguishes aspects about the virtual communities inside the telecommunications’ networks,
allowing companies to establish a action plan more effective to enhance the customer loyalty
process. Combined scores from predictive modeling and social network analysis can create a
new customer centric view, based on individual pattern recognition and community overview
understanding. The combination of scores provided by the predictive model and the social
network analysis can optimize the offerings to retain the customer, increasing the profit and
decreasing the cost assigned to the marketing campaigns.

I.TELECOMMUNICATIONS ENVIRONMENT AND THE NEW CHALLENGES The

telecommunications market is characterized by an increased competitive environment. In order
to maintain the customer base growing, or at least stable, all telecommunications companies
should provide valuable offers, suitable product plans and a range of pricing discounts. Most
often, these actions are based on the customer’s behavior and also their values in a corporate
perspective. Those aggressive offers can be quite expensive to the companies. According to
those high expenditures and aiming to keep the companies in a profit operation, it is quite
important to establish an effective and efficient customer loyalty program. This program, when
well performed, can become a real competitive advantage in such arduous market. Establishes a
likelihood assigned to the possibility of churn is not enough. Defines a customer value according
personal information or billing behavior is not suitable anymore. In order to optimize the
customer loyalty operation it is necessary to discern the differences between the customers and
highlight those characteristics more relevant based on the corporation perspective. The fast
market has changed the more dynamically should be the company to adapt itself in these new
scenarios. And one of the most important changes certainly is concern about the customer
behavior and the way how telecommunications has been used for them. New ways of
communications and novel patterns of usage have been established new business issues and
hence new threats and opportunities. Realizing these changes and creating new approaches to
address them is one of the most suitable methodologies to transform those changes in
opportunities. These brand new approaches should be based on the creation of new predictive
models due distinct variables, new methodology to valuate the customers according distinguish
perspective of usage and so on. Ii is possible to use the same traditional techniques, or combined
them in order to achieve this main goal. The key factor of success here is realize that the
customer behavior has been changing quickly, and therefore the models to recognize their pattern
and to assess their corporate values should change as well. An effective customer loyalty
program passes through by the right understanding of the customer’s behavior and by the
establishment of an accurate corporate value for the customers. The aforesaid models can address
these issues creating a graph related to the customers interactions and connections a churn
prediction likelihood, respectively assigned to the social network analysis and to the artificial
neural networks. Telecommunication’s customers left an understandable track about their
behaviors, showing to the companies how they use the services and products, how the call each
other, how they pay their bills, how they acquire and consume new offers and how often they
complain about something. This track is quite important to realize the customer’s needs and to
understand the churn’s behavior so this kind of event could be predicted. Monitoring and
following these tracks is a suitable way to prevent the churn events from the customers. All
customers create naturally a community of relationship. Among others, one indicator about the
relationship may be the frequency of calls between their members. Those communities can be
viewed as social networks, where each individual have T. Sobh (ed.), Innovations and Advances
in Computer Sciences and Engineering, DOI 10.1007/978-90-481-3658-2_16, © Springer
Science+Business Media B.V. 2010
connections, stronger or weaker, with the other members of the community. In that way any
individual can exert some influence over the other members, and particularly, over the events
which happens in a social network. Some events within the network can be influenced by
activities of other customers. In the example of churn, word of mouth, rumors, commentaries and
mostly activities of churn of other customers may create a chain process. This chain process can
be started by a strong node of the social network, even by a less revenue value customers but
high influent one, which can causes severe impacts in the customer loyalty’s process. Telecom
companies should be able to recognize the high value customers, not in terms of revenue, usage
or billing, but in terms of influence. The influence represents the impact which some customers
can exert over the others within a virtual community or a social network. All customers
identified as central or strong nodes in a social network can be offered distinguish loyalty
promotions, not based on what they are, but based on what they represent, how they can
influence several distinct customers to follow them in a chain’s event like churn. In general, the
telecommunications market is very stable in terms of customer base, and due the quite expensive
process to acquire new customers, an effective customer loyalty program could be a considerable
competitive advantage, allowing companies to retain their best customers and also their best
virtual communities. The retention process is a new concept in telecommunications which means
in corporate terms not just retain the best or profitable customers but also retain the relations and
connections among them, and hence, keeping the service usage and the revenue assigned to this.
Traditional predictive modeling based on artificial neural networks and new pattern recognition
method like social network analysis can be used in conjunction in order to create a distinguish
approach to manage the customer relationship and the loyalty

II.TRADITIONAL PREDICTIVE MODELS BASED ON ARTIFICIAL NEURAL

NETWORKS Artificial Neural Networks can be used as a supervised learning model [4] to
predict the churn events which usually happens in the telecommunications environment.
Predictive modeling can establish a very good approach to assigned likelihoods to the customer’s
events, indicating for each customer the propensity that they will terminate their business
relation. Neural network is a data basis modeling, which means that is necessary a specific
timeframe of observation and a target class definition. The class in this case will be the event of
churn, and the time frame will be used to train the neural network. It will be composed by
historic calling information plus demographic and corporate data about the customers. That
model will recognize the pattern assigned to the customers which leave the company, and also to
those ones to keep on it. Using this target class the predictive model mighty prevent future
events, establishing for each customer a likelihood related to the possibilities that they have to
quite the company or to keep on them. Learning with the past and creating rules which can be
applied to current customers, inferring the chances that they have to leave, make the companies
able to anticipate some events and prevent it. Neural network model provides a likelihood
assigning to each class event occurrence. In that case, the occurrences are the customers and the
predicted class is the churn event. Therefore the likelihood provided by the model is an
indication about the distance of the occurrence to that the predicted class. This distance will
establish how close the customers are to make churn or to stay in the company. That score shall
be used to create specifics approaches to retain customers, allowing establish distinct offerings
according to the risk of churn assigned to them. Each customer, or a group of them based on a
range of scores, can be managed through different ways, maximizing the retention rate and
minimizing the cost of operation. The offering will be based on the risk of churn instead a
generic overview. In spite of the predictive model can make the companies able to identify the
more propensity customers to leave and then proceed focused actions to try to retain them, there
is an additional way to enhance that approach. By using the churn score companies can direct the
effort toward to the high likelihood customers to churn. But what happens when two distinct
customers have the same likelihood? How to differentiate them in terms of value and hence rank
them in an actions perspective? Valuate the customers is the best way to rank them in a massive
retention actions. The question is which the best wise to value them is. However, customers who
tend to leave the company may have distinct values. Therefore, in order to optimize the
retention’s process, it is mandatory to know the customers’ value and cross this information with
the propensity of churn. Aware about those differences, companies are able to offer retention
plans adjustable for the customer value and the churn propensity at the same time, increasing the
retention rate and reducing the operational cost.

III.SOCIAL NETWORKS IN THE TELECOMMUNICATIONS ENVIRONMENT The main

feature of any community is the relationship events between their members [1,3,6,8]. Any kind
of community is established and maintained based on this kind of relation events. According
these brand new technologies and communication devices available currently, this type of
characteristic have been increasing in relevance and becoming more evident in
telecommunications scenery. From novel options for communications and relationships, like
smart phones and personal digital assistants, with flexibility and mobility, those communities
gained new boundaries, creating new means of relationships and social networks. Based on
different ways to communicate, people are ready to create new

NEURAL AND SOCIAL NETWORKS

   

     Neural networks (also referred to as connectionist systems) are a

computational approach, which is based on a large collection of neural units
(AKA artificial neurons), loosely modeling the way a biological brain solves
problems with large clusters of biological neurons connected by axons. Each
neural unit is connected with many others, and links can be enforcing or
inhibitory in their effect on the activation state of connected neural units. Each
individual neural unit may have a summation function which combines the values
of all its inputs together. There may be a threshold function or limiting function
on each connection and on the unit itself: such that the signal must surpass the
limit before propagating to other neurons. These systems are self-learning and
trained, rather than explicitly programmed, and excel in areas where the solution
or feature detection is difficult to express in a traditional computer program.
     Neural networks typically consist of multiple layers or a cube design, and the signal path
traverses from front to back. Back propagation is where the forward stimulation is used to
reset weights on the "front" neural units and this is sometimes done in combination with
training where the correct result is known. More modern networks are a bit more free flowing
in terms of stimulation and inhibition with connections interacting in a much more chaotic
and complex fashion. Dynamic neural networks are the most advanced- in that they
dynamically can, based on rules, form new connections and even new neural units while
disabling others.
     The goal of the neural network is to solve problems in the same way that the human brain
would, although several neural networks are more abstract. Modern neural network projects
typically work with a few thousand to a few million neural units and millions of connections,
which is still several orders of magnitude less complex than the human brain and closer to
the computing power of a worm.

SOCIAL NETWORKS

  
      A social network is a social structure made up of a set of social actors (such as
individuals or organizations), sets of dyadic ties, and other social interactions between
actors. The social network perspective provides a set of methods for analyzing the structure
of whole social entities as well as a variety of theories explaining the patterns observed in
these structures. The study of these structures uses social network analysis to identify local
and global patterns, locate influential entities, and examine network dynamics.
Social networks and the analysis of them is an inherently interdisciplinary academic field
which emerged from social psychology, sociology, statistics, and graph theory. Georg
Simmel authored early structural theories in sociology emphasizing the dynamics of triads
and "web of group affiliations". Jacob Moreno is credited with developing the
first sociograms in the 1930s to study interpersonal relationships. These approaches were
mathematically formalized in the 1950s and theories and methods of social networks became
pervasive in the social and behavioral sciences by the 1980s. Social network analysis is now
one of the major paradigms in contemporary sociology, and is also employed in a number of
other social and formal sciences. Together with other complex networks, it forms part of the
nascent field of network science.

DEMOCRATIC INTERVENTIONS
"Democracy is one of the most important principles for a better world. In its
truest sense, a democracy is a community in which all members have an equal
say in the running of that community. Unfortunately in reality, democratic
societies have fallen short of this ideal. Nevertheless, because of its very nature,
once a democracy is established, its citizens can work together to make their
society more and more democratic, if they choose to do so." – Robert Alan
Silverstein

POLITICAL CORRUPTION
     There is an increase disenchantment of the state of society in our
globalized world. In a study about democratic participation in different
countries in the globe, 44 out of 47 countries that took part in the study
asserted that the conditions of a good society were not met (Barry Knight:
2002, p. 107)
     Undemocratic practices breed social ills that haunt societies in the
planet. Dissatisfaction of citizens with their governments include: a. failure
to meet their basic needs that create profound insecurities,b. failure to
protect them from the sweeping winds of economic change where they lose
their customs and traditions, andc. failure to involve its citizens in its
policies and programs.
Basic Needs
     Failure to meet basic needs is a common complaint among many
societies in the world today. There was a growing gulf between rich and
poor droving the former to extra-legal activities such as theft and
prostitution.
Association
     Undemocratic practices undermine the traditional bonds of family and
kinship threatened by the pressures of work, urbanization and migration.
The distancing of government concerns from the lives of ordinary people
weakened customary forms of accountability and led to a highly corrupt,
self-seeking, inefficient, and partisan state.
Participation
     Citizens play they part by (1) engaging in collective action to perform
voluntary work with others in order to tackle problems and (2) participating
in political processes to play an active role in relation to the state in order to
ensure that the state opened itself up to the influence of citizens

INFORMATION COMMUNICATION TECHNOLOGY (ICT)

    
     The twenty-first century has been characterized as the information age.
No doubt, one of the greatest achievements of this age has something to
do with the technology, especially the increasing power of
communications. ICT is providing an extra-ordinary opportunity to hone our
critical thinking and problem-solving skills. communication skills, creativity
and innovation.
How has ICT positively affected the life of the members of the society
or the digital citizens? The following can serve as an example:
Education – Many educators are already using and infusing technology as
a teaching-learning pedagogy through the use of different platforms.
Business – Most entrepreneurs are making use of the internet and
different social networking sites to promote their businesses and products.
Government – In the Philippines, many transactions with government
offices are now possible and available online. Application for birth
certificates, passport, NBI and like are maximized by some Filipinos.
    Computers, e-mail, internet, fax machines, mobile phones are only
among the information communication tools that can be considered an
integral part of work activities in almost all companies or institutions in the
Philippines and abroad. The development and access of different
technologies like wireless networking and mobile devices significantly
transformed user into content producers.
ICT and Global Networks
     With ICT in our schools, learners are not only consumers but content
creators as they write, edit, publish, participate, co-create and collaborate
with others through the use of technologies. ICT hastens global and
democratic network across the planet. The Internet is an apparatus for
causal connection as well as open spaces where individuals can voice out
their issues. ICT can generate global social awareness through social
network sites. Social networking sites also facilitate the mobilization of
grassroot movements and advocates especially among the younger
generation. ICT promotes social development by sharing knowledge,
fostering cultural activity, increasing democratic participation, and
enhancing social cohesion. Technological advances have improved life and
brought the world’s people closer.

PLANETARY NETWORKS: CLIMATE CHANGE

Global Warming
"The ecological crisis is a moral issue…. Respect for Life and for the
dignity of human person extends also to the rest of creation… We cannot
interfere in one area of the ecosystem without paying due attention both to
the consequences of such interference in other areas and to the well-being
of future generations." – John Paul II 1990

     One of the most important issues of our time is in relation to the

environment. Humanity has disturbed the fundamental beat of nature.
Some of the problems that relate to environmental issues: air and water
pollution, toxic wastes, improper garbage disposal, destruction of wildlife
habitats, deforestation and mining. These problems were indeed
devastating. The pollution of international waters, the irreversible
destruction of the world’s forests and increased toxic emissions in the air
we breathe, among other things, leave us to ponder our relationship with
the environment.

"The most important about global warming is this: Whether humans are
responsible for the bulk of climate change is going to be left to the
scientists, but it is all our responsibility to leave the planet in better shape
for the future generations that we found it." – Mike Huckabee

     The fact remains that people’s lifestyles have largely contributed to

some of the environmental problems that confront the world today remains.
One concrete effect of this lifestyle is global warming. The use of coal and
oil in generating electricity for industrial and residential settings is a big
factor in increasing levels of carbon dioxide in the atmosphere, which
contributes to the warming of the planet.

Climate Change
     One of the big questions in the climate change debate: Are humans
any smarter than frogs in a pot? If you put a frog in a pot and slowly turn up
the heat, it won’t jump out. Instead, it will enjoy the nice warm both until it is
cooked to death. We humans seem to be doing pretty much the same
thing. – Jeff Goodell

     The United Nations Forum Convention on Climate Change (UNFCCC)

defines climate change as “a change of climate which is attributed directly
or indirectly to human activity that alters the composition of the global
atmosphere.” The Intergovernmental Panel on Climate Change (IPCC)
noted that over the past 200 years, the burning of fossil fuels and the
destruction of forests have caused the concentrations of heat-trapping of
the greenhouse gases to increase significantly in our atmosphere. With
more of these gases in the atmosphere, more radiation is absorbed and
radiated back to Earth as heat. Thus, as the concentrations of these gases
continue to increase in the atmosphere, the Earth’s temperature also
continues to increase.
Today, the impact of climate change is one of the most significant environmental challenges
facing the global planet.

“Mitigating this impact requires profound changes in energy production and

use, since emission of greenhouse gases from combustion of fossil fuels is
the dominant human contribution to climate change.” – Nick Hanley and
Anthony Owen on The Economics of Climate Change

     It is clear that human activities are driving the current rate of climatic
change. When people burn fossil fuels to heat their homes or fuel their
cars, and when land is converted from forests to the other uses,
greenhouse gases are emitted to the atmosphere.

     As reported by experts, the effects of climate change will not be the
same across sectors, the world, or even within many countries. Some
areas could have benefits while other could have damages. Some sectors
may see ‘positive’ effects while other sectors may see ‘negative’ effects.
Effects may also evolve as climate change continues, altering the nature
and distribution of these effects across sectors and regions.

Climate Change Solutions

     The last two decades have witnessed expanding political and economic
discussions over the ways of reducing greenhouse gases or, at least,
exploring ways of adapting to the predicted climatic changes. In order to
avoid the most serious impacts of climate change, humans will have to
significantly reduce the amount of greenhouse gas emissions being put into
the atmosphere. There are different approaches to make these decreases,
including optimizing vehicles proficiency, expanding access to and
utilization of open travel, overhauling building protection, supplanting fossils
with renewable energy, and diminishing deforestation. Numerous
legislatures, organizations, and people are starting to execute some of
these techniques and hence gradually decreasing emissions. The use of
cleaner production technologies and change of lifestyle are desired to
impact a change in climate.

The Global Labor Migration Network

The Center for Global Migration Studies has created a global, interdisciplinary, network of
scholars focused on contemporary and historical labor migration. This network seeks to generate
intellectual dialogue, faculty and student exchanges, collaborative projects, virtual communities,
workshops, conferences, and publications.

The CGMS is committed to studying migration through interdisciplinary collaborations and

through a global framework. It is also committed to a model of engaged scholarship and
pedagogy that seeks to illuminate contemporary social problems. The conditions surrounding
global labor migration today--unprecedented in world history--provide the challenge and
opportunity for precisely this model of engaged scholarship and pedagogy.

Labor migration is a vast, global, and highly fluid phenomenon in the 21st century. There are
more labor migrants working in areas beyond their birth country or region than ever before.
According to the United Nations, 232 million people, more than 3% of the world’s population,
are living today outside their country of citizenship. More than half of these are migrant workers.
If we include internal labor migrants, the numbers soar much higher. In China alone, according
to the International Labor Rights Forum, there are today 262 million internal labor migrants. This
fluid system of migration is shaping most parts of the globe, from South and North America to
Europe, Asia, and Africa.

Labor migrants are vulnerable: they are exploited more easily by recruiters and employers, and
are less likely to benefit from union representation. They often face arrest or deportation when
attempting to fight for their rights, and are bound to special documents that limit their ability to
change jobs. They can become enmeshed in debt bondage, and routinely face separation from
family members as well as social isolation. Roughly half are women. And although there are
many efforts underway to regulate and improve the conditions migrants workers face by such
organizations as the United Nations and the ILO, as well as various NGO’s and regionally-based
efforts, so far they are not effective.

Labor migration is not only a pressing social issue; it is also a growing area of scholarship and
research in a wide variety of disciplines. In sociology, anthropology, public health, education,
and public policy, there is renewed and energetic attention to labor migration. And global labor
migration concerns not only social scientists but also humanities scholars. Historians are
lavishing attention on the journeys of those who moved to make their living, whether under
conditions of coercion, such as slaves or indentured laborers, or voluntarily. From the Irish and
Chinese who laid railroad tracks in the 19th century, to contemporary Filipina care workers, or
South Asians building soccer arenas, labor migrants’ experiences form a major concern for
humanities and social science scholars alike.

Because today global labor migration is shaping the lives of millions, and because it is receiving
unprecedented attention by scholars, the time is right for an international and interdisciplinary
scholarly network. This network unites social scientists and humanities scholars because
connecting the work being done on labor migration in the contemporary world with those
historicizing the phenomenon will lend the project much power, insight, and cross-fertilization. It
involves scholars from diverse parts of the globe because only that will fully illuminate the
continuities and contrasts facing diverse workers, while also allowing for global exchange about
the range of intellectual cultures and methodologies available for expanding knowledge on this
topic. This project will bring international attention to one of the world’s most pressing issues,
generate scholarly dialogue and new research agendas, and propose policies that can improve
conditions for migrants.