Model Optimization Analysis of Customer Churn Prediction Using Machine Learning Algorithms with Focus on Feature Reductions

Abstract

Currently, Customers are struggling to retain their business in today’s competitive markets. Thus, the issue of customer churn becomes a significant challenge for the industries. In order to achieve this, it is vital to have an efficient churn prediction system. In this paper, we discuss methods for reducing features using PCA, Autoencoders, LDA, T-SNE, and Xgboost. In this paper, a model for predicting light GBM churn is proposed. The model consists of five steps. The first step is to preprocess the data so that missing and corrupt values can be handled and the data can be scaled. Secondly, implementing a comprehensive feature reduction system based on popular algorithms reduces the features and selects the most suitable one. In the third step, light GBM’s hyperparameter is tuned using Bayesian hyperparameter optimization and genetic optimization algorithms. Lastly, interpreting the model and evaluating the impact of the features on model outputs by using the SHAP method, and finally ranking the churners by customer lifetime value. Aside from evaluating and choosing the best feature reduction methods, the proposed method is also evaluated using four famous datasets. It outperforms other ensemble and ML algorithms like AdaBoost, SVM, and decision tree on over seven evaluation metrics: accuracy, area under the curve (AUC), Kappa, Mathews correlation coefficient (MCC), Brier score, F1 score, and EMPC. In light of the evaluation metrics, our model shows a significant improvement in handling imbalanced datasets in churn prediction. Finally, in this paper, interpretability and how the features affect the model’s output are presented by the SHAP method. Then CLV ranking is suggested for better decision-making.