Profit-based feature selection using support vector machines – General framework and an application for customer retention

• A novel profit-based feature selection method for churn prediction with SVM is presented.
• A backward elimination algorithm is performed to maximize the profit of a retention campaign.
• Our experiments on churn prediction datasets underline the potential of the proposed approaches.

Churn prediction is an important application of classification models that identify those customers most likely to attrite based on their respective characteristics described by e.g. socio-demographic and behavioral variables. Since nowadays more and more of such features are captured and stored in the respective computational systems, an appropriate handling of the resulting information overload becomes a highly relevant issue when it comes to build customer retention systems based on churn prediction models. As a consequence, feature selection is an important step of the classifier construction process. Most feature selection techniques; however, are based on statistically inspired validation criteria, which not necessarily lead to models that optimize goals specified by the respective organization. In this paper we propose a profit-driven approach for classifier construction and simultaneous variable selection based on support vector machines. Experimental results show that our models outperform conventional techniques for feature selection achieving superior performance with respect to business-related goals.

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