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The Relevant Length of Customer Event History for Churn Prediction: How long is long enough?

Author

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  • M. BALLINGS
  • D. VAN DEN POEL

Abstract

The key question of this study is: How long should the length of 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 1 to 16 years. The results show that, after the 5th 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 datarelated burdens, such as data storage, preparation and analysis. This is particularly valuable in times of big data where computational complexity is paramount.

Suggested Citation

  • M. Ballings & D. Van Den Poel, 2012. "The Relevant Length of Customer Event History for Churn Prediction: How long is long enough?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/804, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:12/804
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. M. Ballings & D. Van Den Poel & E. Verhagen, 2013. "Evaluating the Added Value of Pictorial Data for Customer Churn Prediction," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 13/869, Ghent University, Faculty of Economics and Business Administration.
    2. Matthias Bogaert & Michel Ballings & Martijn Hosten & Dirk Van den Poel, 2017. "Identifying Soccer Players on Facebook Through Predictive Analytics," Decision Analysis, INFORMS, vol. 14(4), pages 274-297, December.
    3. Fan, Zhi-Ping & Sun, Minghe, 2015. "Behavior-aware user response modeling in social media: Learning from diverse heterogeneous dataAuthor-Name: Chen, Zhen-Yu," European Journal of Operational Research, Elsevier, vol. 241(2), pages 422-434.
    4. Matthias Bogaert & Lex Delaere, 2023. "Ensemble Methods in Customer Churn Prediction: A Comparative Analysis of the State-of-the-Art," Mathematics, MDPI, vol. 11(5), pages 1-28, February.
    5. Gattermann-Itschert, Theresa & Thonemann, Ulrich W., 2021. "How training on multiple time slices improves performance in churn prediction," European Journal of Operational Research, Elsevier, vol. 295(2), pages 664-674.
    6. Hemlata Jain & Ajay Khunteta & Sumit Srivastava, 2021. "Telecom churn prediction and used techniques, datasets and performance measures: a review," Telecommunication Systems: Modelling, Analysis, Design and Management, Springer, vol. 76(4), pages 613-630, April.
    7. Ballings, Michel & Van den Poel, Dirk, 2015. "CRM in social media: Predicting increases in Facebook usage frequency," European Journal of Operational Research, Elsevier, vol. 244(1), pages 248-260.
    8. Schaeffer, Satu Elisa & Rodriguez Sanchez, Sara Veronica, 2020. "Forecasting client retention — A machine-learning approach," Journal of Retailing and Consumer Services, Elsevier, vol. 52(C).
    9. De Caigny, Arno & Coussement, Kristof & De Bock, Koen W., 2018. "A new hybrid classification algorithm for customer churn prediction based on logistic regression and decision trees," European Journal of Operational Research, Elsevier, vol. 269(2), pages 760-772.

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    Keywords

    Predictive Analytics; Time window; Length of customer event history; predictive customer churn model;
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