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• Churn rate 0.5% per month (skewed class distribution!)
• Weighted edges: number of seconds called during 3 months
• About 8.000.000 edges
• Total data set about 300 Gigabytes in size
The Markov assumption
• The class/behavior of a node in the network only depends upon the class/behavior of its direct neighbors
• Aka homophily, guilt by association
– Birds of a feather, flock together attributed to Robert Burton (1577-1640)
– (People) love those who are like themselves Aristotle, Rhetoric and Nichomachean Ethics
• Needed to facilitate computations (cf. Markov chains)
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Local versus Network Variables
• A network variable aggregates information that is contained within a network structure and makes a differentiation in the destination of outgoing links or the origin of incoming links
• Examples:
– the number of contacts (local variable)
– the number of contacts with churners (network variable)
– the number of international calls (network variable)
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Local versus Network variables
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A Basic Network Model: Featurization
• Featurization or propositionalization: translate network into traditional attributes
• Network attributes can be included in traditional model (e.g. logistic regression)
• Create as many as possible and do stepwise regression
• A simple, interpretable social network classifier!
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Example Network Model: Featurization
Example Network Model: WVRN
Results: Finding 1
• Network models boost performance and profit compared to a local model
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Incremental profit increase
compared to no network effects
• Non-Markovian network effects – incorporating the impact of higher order neighbors leads to improved predictive power and profit!
Results: Finding 2
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Incremental profit increase
compared to first order network
effects
Note: higher order effects previously
discovered in the spreading of happiness
and obesitas (N. Christakis, ‘Social
networks and happiness’)
Results: Finding 3
• Network models detect other types of churners compared to traditional models!
Synergy opportunities!
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Fraction of the churners detected by the
network models (as a function of the
selected fraction of customers, ranked
according to their predicted probability to
churn), that are NOT detected by the
local model
Different curves represent different network
models (induced by different techniques)
Ensemble approach : Combining Local and Network models
• Use two models in parallel by selecting customers indicated by the local model and the network model
• Decide upon optimal fraction (current research)
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Network
model
0.24
0.68
0.18
0.92
0.22
Ensemble model output
Local model
0.13
0.54
0.34
0.84
0.29
Ensemble approach: 2D Lift Curve
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Current Research Topics
• Extensions towards regression context (e.g. CLV)
• Applications in other contexts (e.g. credit risk, anti-money laundering, customer acquisition, …)
• Integrating local information in a network learner
• Quasi-Social Networks
• Community mining
• Backtesting
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Key lessons learnt • Introduced a three-layer social network learning
• Introduced featurization as a basic social network learner
• Discussed how non-Markovian behavior can be modelled in a straightforward way
• Illustrated the theoretical concepts using a real-life case study about churn prediction in the Telco sector
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References • VERBEKE W., DEJAEGER K, MARTENS D., HUR J., BAESENS B., New insights into churn prediction in the
telecommunication sector: a profit driven data mining approach, European Journal of Operational Research, forthcoming, 2011.
• DEJAEGER K., VERBEKE W., MARTENS D., BAESENS B., Data Mining Techniques for Software Effort Estimation: a Comparative Study, IEEE Transactions on Software Engineering, forthcoming 2011.
• MARTENS D., FAWCETT T., BAESENS B., Editorial Survey: Swarm Intelligence for Data Mining, Machine Learning, Volume 82, Number 1, pp. 1-42, 2010.
• VERBEKE W., MARTENS D., MUES C., BAESENS B., Building customer churn prediction models with advanced rule induction techniques, Expert Systems with Applications, Volume 38, pp. 2354-2364, 2011.
• BAESENS B., MUES C., MARTENS D., VANTHIENEN J., 50 years of Data Mining and OR: upcoming trends and challenges, Journal of the Operational Research Society, Volume 60, pp. 16-23, 2009.
• GLADY N., CROUX C., BAESENS B., Modeling Churn Using Customer Lifetime Value, European Journal of Operational Research, Volume 197, Number 1, pp. 402-411, 2009.
• MARTENS D., BAESENS B., VAN GESTEL T., Decompositional Rule Extraction from Support Vector Machines by Active Learning, IEEE Transactions on Knowledge and Data Engineering, Volume 21, Number 1, pp. 178-191, 2009.
• GLADY N., CROUX C., BAESENS B., A Modified Pareto/NBD Approach for Predicting Customer Lifetime Value, Expert Systems With Applications, Volume 36, Number 2, pp. 2062-2071, 2009.
• BAESENS B., SETIONO R., MUES C., VANTHIENEN J., Using Neural Network Rule Extraction and Decision Tables for Credit-Risk Evaluation, Management Science, Volume 49, Number 3, pp. 312-329, March 2003.
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FYI • Advanced Analytics for Customer Intelligence Using SAS
• Lecturer: prof. dr. Bart Baesens
• 3-day course offered
• Many companies have gathered huge amounts of customer data about marketing success, use of financial services, online usage, and even fraud behavior. Given recent trends and needs such as mass customization, personalization, Web 2.0, one-to-one marketing, risk management, and fraud detection, it becomes increasingly important to extract, understand, and exploit analytical patterns of customer behavior and strategic intelligence. This course helps clarify how to successfully adopt recently proposed state-of-the art analytical and data-mining techniques for advanced customer intelligence applications. This highly interactive course provides a sound mix of both theoretical and technical insights as well as practical implementation details and is illustrated by several real-life cases. Background material such as selected papers, tutorials, and guidelines are provided.
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Acknowledgments • Jerry Oglesby, Director Global Academic Program & Global
Certification Education Division
• Larry Stewart, SAS Education Vice President
• Sean O’Brien, Director, Business and Curriculum Development
• Bob Lucas, Statistical Training and Technical Services Director
• Karen Washburn, Business Knowledge Series Manager
• Patsy Poole, Project Manager
• Hillary Kokes, former Business Knowledge Series Manager
• Lieve Goedhuys, former Academic Program Manager, SAS Institute Belgium-Luxembourg
• All the other great SAS folks for the excellent collaboration during the past years!