How Does Churn Prediction Contribute to
Customer Retention?
Ly Sreng Lim (102446114)
Faculty of Science, Engineering and
Technology
Swinburne University of Technology
Hawthorn, Australia
102446114@student.swin.edu.au
Keywords — customer churn, customer retention, social
network analysis
I. INTRODUCTION
Customer retention is becoming a complicated issue for
businesses in the contemporary market due to aggressive
rivalry between existing and emerging competitors. This has
been manifested by the endless launch of new products,
competitive promotions, pervasive advertisements, and so
forth [1]. According to Óskarsdóttir et al. [4], retaining
regular customers is a lucrative campaign for businesses that
leads to a sustainable position in the saturated market. The
claim has been justified by the greater prospect of selling
additional products to regular customers, the tremendous
power of word-of-mouth marketing such as satisfying
reviews from existing customers. The way to attracting new
customers, by the campaign, can be paved for the business.
Calzada-Infante, Óskarsdóttir & Baesens [2] also emphasize
that customer acquisition is a more costly campaign
comparing to customer retention one. Retaining regular
customers, therefore, leads to a twofold benefit in terms of
generating stable profit from existing customers
simultaneously reduce the cost for customer acquisition
which is ultimately required for every business. The
customer retention campaign has significantly pertained to
the activities of customer relationship management (CRM)
departments of businesses [2].
One of the foundations of customer retention is the
capabilities of businesses to identify and understand the
likelihood of existing customers to abandon the products or
services of the companies through the use of technology
such as computerized inquiry – churn prediction. This can
be done by analysing the historical information of customers
in the company database and attempting to forecast the
probability of customer's churning behaviour in the future
[1]. The endeavour to establish a variety of methodologies
in churn prediction has become a vigorous research area for
some years. It is generally considered as a classification
issue. In response to this matter, a plethora of data mining
techniques have been proposed [2]. The term ‘customer
churn’ is broadly recognised in many industries especially
telecom (telco), gaming, and banking [3]. Coussement,
Lessmann & Verstraeten [1] revealed that extra profit can
be obtained from exploiting churn prediction in customer
retention, however, churn prediction is still a perplexing
process required many analytical decisions. This paper,
therefore, aims to investigate how churn prediction is being
applied in customer retention by reviewing published
researches in the telco and gaming industries.
II. LITERATURE REVIEW
A. Various Claims
Social network analysis (SNA) has been widely adopted
by the researcher in the telco industry for customer churn
prediction [2][4][5]. Nonetheless, the ways it was carried
into practice are unique depends on the researchers. Al-
Molhem, Rahal & Dakkak [5] claimed to have developed a
breakthrough in using SNA to predict customer churn as
they use the data from call detail records (CDRs) of
customers in telco operators. They can map out the
influential customer by visualizing the connections between
the customers. The influential customers have the potential
to change other customer churning behavior. The salient
aspect of their study is the ability to distinguish multi-sim
subscribers from the same and across different operators
which enables them to improve the accuracy of the results.
Calzada-Infante, Óskarsdóttir & Baesens [2], in a similar
approach, stated that they have proposed a novel approach
in diagnosing the patterns of customer churning behavior.
The novel part of the approach might be the application of
the similarity forests method – a sophisticated method of
data mining with high accuracy. The study, furthermore,
points out the difference in customer churning behavior
between prepaid and post-paid contracts. Óskarsdóttir et al.
[4] asserted that they have worked on an optimized method
of churn prediction by incorporating a machine learning
method called relational learning to the popular SNA. This
resulted in a more accurate model to predict customer churn.
The study, furthermore, embeds network features with
customer datasets for a better performance of customer
churn predicting models. The researcher proof that the
extracted information contains not only the calling
behaviour but also the interaction between customers which
is valuable in churn prediction. A simpler study was
introduced by Coussement, Lessmann & Verstraeten [1]
using data preparation to conduct a comparative analysis
and therefore lead to the optimization of customer churn
prediction. The study also implies that the aim to improve
customer churn prediction largely depends on the
knowledge of the analyst in the data preparation technique.
By synthesising various claims regarding the approaches to
customer churn prediction, it can be seen using that SNA
and with the data from CDRs is a predominant technique
which might be incorporated with some other extended
capabilities to maximize the performance.
B. Root Cause Identification
Milošević, Živić & Andjelković [3] utilized early churn
prediction as a technique to spot churning behavior of newly
registered users for the free-to-play gaming industry. In the
context of a free-to-play game where initially no payment is
required and the profit is made only through the purchase of
additional items. Keeping the users active and entertained,
therefore, is a critical task. The paper proof the effectiveness
by applying the technique in tracking player’s activities and
determining favorite features from the data of two million
players from Top Eleven – Be a Football Manager game.
This also leads to the emphasis on the contribution of churn
prediction in the timely deployment of corresponding
treatment. Another study on customer behavior in the telco
industry was conducted by Calzada-Infante, Óskarsdóttir &
Baesens [2] also employed churn prediction technique in
defining the relationship between customers which has been
claimed to be a major stimulator of customer churn in the
telco industry [4][2][5]. The study also showcased other
factors that impact customer behavior in the telco industry
such as the various choices of providers, unsatisfying
services, and the better mobile plans offered in a highly
competitive market which accelerates the interest of telco
companies to invest in churn prediction [2]. Those factors,
on the other hand, were not investigated into details. Both
studies [3] [2] in different industries, to certain extent,
enable the informed decision and the subsequent strategies
in customer retention campaigns.
C. Effective Treatment
Coussement, Lessmann & Verstraeten [1] found that
customer churn prediction enables telco companies to rank
customers based on the propensity to leave their products or
services. Timely marketing campaigns such as marketing
survey can be developed to target the churning customer
group. Similar concept has been suggested by Óskarsdóttir
et al. [4] as to provide incentives to encourage churning
customers. Likewise, the study in gaming industry has
successfully retained their churning customers up to 28% by
developing strategies according to the behavioural data
acquired through churn prediction [3]. These strategies
include personalizing push notification, and tailoring
players’ experience accordingly which also contributes to
the long run improvement of the game. On the other hand,
the remarkable figure worth noting is the 72% of newly
registered users stop playing the game after a short period.
This indicated that the game company still has the gap
between a greater customer retention campaign.
In another study regarding telco company, Al-Molhem,
Rahal & Dakkak [5] exploited the data from churn
prediction to shape the decision of marketing strategies.
This is to ensure the marketing strategies appropriately
target the influence customer groups in the network. An
influence customer, through the lens of network, is a node
which well-connected and connecting to a variety of other
nodes. The good connection reduces the risk of customer
churn and increases the capacity of product diffusion. The
concept of peer influence is also well supported by Calzada-
Infante, Óskarsdóttir & Baesens [2] as the researchers view
churn as a social phenomenon where customers is
influenced by their churned peers. The study, furthermore,
highlighted the obstacle of churn prediction for prepaid
customers since they are not bonded monthly subscription
and the usage is less frequent. Both studies, in a similar
manner, have come to conclude that targeting the influence
customer groups is beneficial for product up-selling and
cross-selling at the same time reduces the marketing costs
[5][2].
III. METHODOLOGY
A. Control Group (Experimental)
Milošević, Živić & Andjelković [3] conducted an
experiment for predicting early churn of the user in a free-
to-play game called Top Eleven – Be a Football Manager.
This was carried out in 2015 from the data of randomly
picked 2 million users of the online game above. The game
is a simulation of real-life football environment where many
core activities of football are required the player to perform
such as managing a team, building their own stadium and
facilities, competing in daily match, training team, and sell
and buy player. The data from the sampling is input into the
model for predicting customer churn. The errors was
controlled by different ways such as using down-sampling,
eliminating missing data by recording user data in a well-
designed database, features standardization, no data
transformation, no data outlier removal, using 10-fold cross-
validation on the produced results, and so on. Users'
behavior during the game was observe based on three
criteria namely monetization, activities, playing style. When
data is obtained and churners are identified, the experiment
team classify the churner into 3 group namely control group
(no notification is sent), baseline group (non-personalized
notifications are sent), and test group (personalized
notifications are sent). The results reveal that the test group
whose received the personalized notification has the highest
rate of returning to the game.
The experimental method, with regard to this context, is
considered as an appropriate method to be employed.
According to a book called Practical Research: Planning and
Design [6] experimental method is being use in examining
the cause-and-effect relationship which possibly impact
specific phenomenon. In this context, the relationship
between applying churn prediction model and customer
retention is of crucial importance. The way the researchers
assigned 3 groups of user in the experiment is a merit worth
mentioning since generally only two group are good to run
the experiment [6]. This is to manifest the various cases in
the experiment and diversify the findings. In addition,
different control are used to prevent errors from invalidate
the results. The sample size 2 million users is abundant to
generalize the findings of the experiment. The researchers,
moreover, claimed that the generalization of the findings
can also be applied to all sort of mobile application since it
addressed the issue related to user and user activities rather
than limiting to the game specifically. However, only a
minimal hassle existed in the method as the churn prediction
might not be 100% accurate, the message could be found
irritating for normal customers who have been selected for
the experiment [3].
B. Data Analytic (Experimental)
Al-Molhem, Rahal & Dakkak [5] with the assistance of
big data technology built social network and the method to
extract feature. There are two big objectives of this
experiment namely to detect influence subscribers within
the network and to detect multi-sim subscribers across the
two operators. There are four types of data being collected
namely customer data, mobile IMEI, call detail records
(CDRs), cells and tower information. Three months of data
from two telco companies was collected those include more
than 10 million customers data with 1 billion records of
2
CDRs. In order to be usable the data is need to go through
some processes such as cleansing, filtering irrelevant data,
and normalizing. Influencers was identified by the strength
of the connection between other node and the global
location of the node on the graph indicated by the capability
to influence other nodes; multi-sim subscribers was
identified by analyzing and comparing the mutual nodes
with the help of location and IMEI data previously
collected. After identifying the influencers, two bundle
purchasing campaigns were created to target normal
customer group and the influencer group. After two months,
22,255 new customers were obtained by the campaign
related to the influencer while 16,245 new customers were
obtained by the campaign related to the normal customers.
The study concluded that, by identifying the influencers,
various campaigns such as market promotion and customer
churn prevention can be launched more efficiently with the
consideration of multi-sim customers.
The utilizing of experimental method, in particular to
this context, is justified by the need to scrutinize the extent
to which the influencers of a network have on the marketing
campaigns of the telco company. According to the
characteristic of experimental method defined by Leedy &
Ormrod [6], this type of method help researching to proof
and understand ‘what lead to what’. The results of the
experiment significantly helps business especially telco
companies to make inform decisions on the launch of
various campaigns and put the right effort on customer
retention issue. The experiment, however, is not without
limitation. It can be seen that the sample size is tremendous
that required the researchers to put remarkable effort on
preprocessing it multiple times before it became usable.
Therefore, the data, to some degree, lost it authenticity. It
would be a better practice to select a more manageable
sample size for the experiment so that the problem is avoid
and no effort is needed to preprocess the data. Finally, the
method was used to identify multi-sim subscriber should be
optimized as it is too complicated and might not applicable
when the data comes from more than two operators.
furthermore, leads to another worth exploring question –
how can businesses incorporate churn prediction capability
into their enterprise system? It is essential to understand
since customer retention need to be done in parallel with
daily operation.
Word Count: 2371 words
REFERENCES
[1] K. Coussement, S. Lessmann and G. Verstraeten, "A comparative
analysis of data preparation algorithms for customer churn
prediction: A case study in the telecommunication
industry", Decision Support Systems, vol. 95, pp. 27-36, 2017.
[2] L. Calzada-Infante, M. Óskarsdóttir and B. Baesens, "Evaluation of
customer behavior with temporal centrality metrics for churn
prediction of prepaid contracts", Expert Systems with Applications,
vol. 160, p. 113553, 2020.
[3] M. Milošević, N. Živić and I. Andjelković, "Early churn prediction
with personalized targeting in mobile social games", Expert Systems
with Applications, vol. 83, pp. 326-332, 2017.
[4] M. Óskarsdóttir, C. Bravo, W. Verbeke, C. Sarraute, B. Baesens and
J. Vanthienen, "Social network analytics for churn prediction in
telco: Model building, evaluation and network architecture", Expert
Systems with Applications, vol. 85, pp. 204-220, 2017.
[5] N. Al-Molhem, Y. Rahal and M. Dakkak, "Social network analysis
in Telecom data", Journal of Big Data, vol. 6, no. 1, 2019.
[6] P. Leedy and J. Ormrod, Practical Research. Harlow, United
Kingdom: Pearson Education Limited, 2020.

IV. CONCLUSION
There are solid evidences exhibiting the contribution of
churn prediction in customer retention. The paper has
explored many studies recently published by two industries
namely free-to-play gaming and telco. It demonstrates that
the ability to predict early churn of the player bring notable
benefits for the game company in the form of reducing the
churning players and helping the developers to optimize
player experience. In telco industry, the social network
analysis (SNA) technique seems to go hand-in-hand with
churn prediction. This can be illustrated by the incorporation
of these two techniques appears on many research papers as
churn prediction is widely done through SNA to tackle the
core of the issue – influencers of the network. In regard to
this matter, many researches attempt to introduce additional
concepts to facilitate the existing approach for instance the
use of big data, various models, and techniques. By have a
foreseen of customer churn businesses have the capability
to make wise decision about marketing campaign, reducing
cost, and achieve the optimal customer retention.
The answer to the proposed problem statement has been
scrutinized. The significance of predicting customer churn,