Nobody in business enjoys seeing good customers go elsewhere. Obtaining new customers is typically the primary focus of a company in its early stages. Subsequently, the company expands its operations by providing existing customers with a broader range of products or working to increase the frequency with which they buy those products.

If everything continues to go according to plan, there will come a time when the company will reach a size where it will need to decide on a slightly more defensive strategy and concentrate on maintaining relationships with its existing clientele. Despite providing the best user experience possible, there will always be a subset of customers who are dissatisfied and opt to stop using the service.

Following this, the company is faced with the challenge of figuring out how to most efficiently stop these departures (voluntary or otherwise). The churn model, among other similar models, can help in this situation.

In this article, you will learn about Churn Prediction Model on Retail Data and how to build one, including how to fix and delete a prediction.

What is Churn Prediction Model?

Churn Prediction Model is a predictive model that calculates, on an individual customer basis, the likelihood (or susceptibility) that a customer will stop doing business with the company. It gives you an indication, for each customer at any given time, of how high the risk is that you will lose them in the future.

It’s a binary classifier, which means that it divides customers into two distinct groups (classes) based on whether or not they leave the company. In most cases, in addition to placing them in one of the two groups, it will also tell you the likelihood that the customer is a member of that group.

Uses of Churn Prediction Model

When you have a better idea of which customers are most likely to defect, you can direct your efforts to save more of those customers. You could, for instance, reach out to these customers using a marketing campaign, pointing out to them that they haven’t made a purchase from us in quite some time, or we could even present them with an incentive.

The Churn Prediction Model allows us to determine which customers to target, and to compute the highest possible benefit price at which the investment will still be profitable. If we know, for instance, that the estimated probability of a particular client leaving is 10 percent and that their annual revenue is $100, then the expected value of future annual revenue is $90. Therefore, an offer that can typically reduce the probability of leaving to 5 percent (the expected value of the revenue is then $95, which means that it will be worthwhile as long as it does not cost more than $5) will be worthwhile for this client.

Replicate Data in Minutes Using Hevo’s No-Code Data Pipeline

Hevo Data, a Fully-managed Data Pipeline platform, can help you automate, simplify & enrich your data replication process in a few clicks. With Hevo’s wide variety of connectors and blazing-fast Data Pipelines, you can extract & load data from 100+ Data Sources straight into your Data Warehouse or any Databases. To further streamline and prepare your data for analysis, you can process and enrich raw granular data using Hevo’s robust & built-in Transformation Layer without writing a single line of code!

GET STARTED WITH HEVO FOR FREE

Hevo is the fastest, easiest, and most reliable data replication platform that will save your engineering bandwidth and time multifold. Try our 14-day full access free trial today to experience an entirely automated hassle-free Data Replication!

Building a Churn Predictive Model on Retail Data Process

One of the most important aspects of the Unified Customer Profile is the retail channel churn prediction model, which employs an AI-based model to assist omnichannel retailers in utilizing cross-channel data to determine the likelihood that a customer will churn, or stop actively buying.

Prerequisites

The prerequisites of building a Churn Prediction Model are as follows:

  • Components geared toward the retail market are offered by Microsoft Cloud for Retail and can be found in the Microsoft Cloud Solution Center. 
  • An understanding of what the term “churn” means in the context of your organization. When the purchase value or volume of a customer falls below the thresholds that you set, you can consider that customer to have churned.
  • Entities with fields that map to inputs for your retail churn prediction model:
    • Customer data
    • Session data
    • Transaction data

Create a Churn Prediction Model on Retail Data

Follow the steps below to create a churn prediction model on retail data:

  • Step 1: The first step in Churn Prediction Model is to choose Intelligence > Predictions from the drop-down menu in the Dynamics 365 Customer Insights portal.
  • Step 2: Choose the Retail Channel Churn Tile, and then pick the Use model from the drop-down menu.
Churn Prediction Model: model name
Retail Channel Churn

The screen for entering the Model name appears.

Model Name

The next step in building Churn Prediction Model is setting the model name.

  • Step 1: Choose the Name option, then provide your churn model with a name that is clear and concise.
  • Step 2: Choose the Output entity name option, then type in a name for the entity that will be produced by your model, using only letters and numbers (no spaces). The predictions that your model generates will be saved in this entity.
  • Step 3: Click the Next button located at the bottom of the screen.

Model Preferences

The next step in Churn Prediction Model is to configure the model so that it can generate predictions that are appropriate for your company. These preferences include the number of days’ worth of data to evaluate and the input value thresholds that indicate churn.

  • Step 1: On the screen labeled Preferences, choose the Prediction period option, then enter the number of days you would like the model to consider when determining the likelihood of churn in Churn Prediction Model.
  • Step 2: Choose the threshold for the decline in transaction volume, and then determine the percentage of transaction frequency that represents churn (for example, if you set it to 0.2, the model will interpret an 80 percent drop in transaction frequency as churn).
  • Step 3: Choose the threshold for the decline in transaction value, and then select the percentage of total transaction value that represents churn in Churn Prediction Model (for example, if you set it to 0.1, the model will interpret a 90 percent drop in transaction value as churn).
  • Step 4: Click the Next button located at the bottom of the screen.

Required Data

The next step in Churn Prediction Model is to add required data:

  • Step 1: Find the customer, session, and transaction entities that you determined are necessary first.
  • Step 2: Select “Add data” for each entity, and then select the entity that you determined to be its source.
  • Step 3: Choose the corresponding customer, session, or transaction input that you determined to be necessary for each of the fields on the form. These are the prerequisites.
  • Step 4: Click the Save button once all of the fields have been filled in.
  • Step 5: Click the Next button located at the bottom of the screen.
What makes Hevo’s ETL Process Best-In-Class

Providing a high-quality ETL solution can be a difficult task if you have a large volume of data. Hevo’s automated, No-code platform empowers you with everything you need to have for a smooth data replication experience.

Check out what makes Hevo amazing:

  • Fully Managed: Hevo requires no management and maintenance as it is a fully automated platform.
  • Data Transformation: Hevo provides a simple interface to perfect, modify, and enrich the data you want to transfer.
  • Faster Insight Generation: Hevo offers near real-time data replication so you have access to real-time insight generation and faster decision making. 
  • Schema Management: Hevo can automatically detect the schema of the incoming data and map it to the destination schema.
  • Scalable Infrastructure: Hevo has in-built integrations for 100+ sources (with 40+ free sources) that can help you scale your data infrastructure as required.
  • Live Support: Hevo team is available round the clock to extend exceptional support to its customers through chat, email, and support calls.
Sign up here for a 14-day free trial!

Data Updates

In this section of Churn Prediction Model, you will choose how frequently your model will undergo retraining. The accuracy of predictions can be improved through retraining.

  • Step 1: Choose between weekly and monthly options. Most companies can retrain their employees once per month and still achieve a high level of accuracy in their predictions. Choose to Show Example for a little bit more assistance in making a decision.
  • Step 2: Choose the Next option at the very bottom.

Review and Run

To review and run model details in Churn Prediction Model:

  • Step 1: Review your model details. You can change any value by selecting Edit next to it, or you can select an earlier step in the process on the left.
  • Step 2: If everything appears to be in order, you can skip this step. Choose Save from the drop-down menu in the bottom-right corner of the window if you are not yet prepared to run your churn model. When you are ready to continue working on it, go to the Customer Insights navigation pane and select Intelligence > Predictions. After that, go to the My predictions tab and select the edit icon that is located next to the name of the draught model’s Prediction.
Churn Prediction Model: my predictions
Edit Model
  • Step 3: To get started with the prediction process in Churn Prediction Model, select the Save and run option. You can view the current status of your predictions by clicking the tab labeled “My Predictions.” The amount of data utilized in the prediction will determine how long it will take to finish the process, which could take several hours.

Review Prediction Status and Results

To check the current state of a prediction and its results in Churn Prediction Model:

  • Step 1: Select the My predictions tab after navigating to the Intelligence > Predictions menu option.
  • Step 2: Choose View from the menu that appears after you select the three dots that are located next to the name of the prediction whose results you wish to review.
Churn Prediction Model: Review prediction results
Review Model
  • Step 3: On the results page of Churn Prediction Model, the most important parts of the data are organized as follows:
    • The performance of the training model could receive a score of A, B, or C. This score indicates how accurate the prediction was and can assist you in determining whether or not to make use of the results that were saved in the output entity. The following guidelines are used to calculate each player’s score:
    • A when the model accurately predicted at least fifty percent of the total predictions and when the percentage of inaccurate predictions for customers who became inactive was less than ten percent.
    • B when the model accurately predicted at least fifty percent of the total predictions, and when the percentage of inaccurate predictions for customers who became inactive was more significant than ten percent.
    • C is assigned when the model correctly predicted less than half of the total predictions.
    • Churn risk as a percentile: Categorizing customers into groups according to the likelihood that they will leave your service. If in the future you decide you want to create a segment of customers who have a high propensity to churn, you can use these data as a guide. These types of segments help you understand, for instance, where the cutoff point should be for the customer retention segments you’re looking at.
    • Most influential attributes: The most important aspects to consider when making a prediction are the many elements that make up the whole picture. When creating aggregated predictions, a model takes into account all of the relevant factors and calculates their relative weights. You can use the results of your predictions to validate these factors by using them. This information can also be used to create segments that could help influence the churn risk for customers.
    • Record-level Explainability: The output entity includes a table that outlines the significant factors that influenced each retail churn score as part of its record-level explainability. You have the option of exporting these tables for a variety of uses.

Fix a Failed Prediction

If a prediction was incorrect, an error message will appear with an explanation of what went wrong. For instance, when the model was executed, it did not find any customers who were “churning,” and the model did not pass training. If this occurred, it is possible that the transaction thresholds were set too low.

To attempt to improve a prediction by going through previous error logs:

  • Step 1: Select the tab labeled “My predictions” after navigating to the Intelligence > Predictions menu option.
  • Step 2: Choose the prediction you would like to examine, and then select Logs.
  • Step 3: Examine every mistake. A description of the circumstances that led to each error can assist you in determining how to resolve the issue at hand. For instance, if you load more data, you can fix an error that says there is not enough information to make an accurate prediction of customer churn. Alternately, an error that indicates that your model is producing a prediction of zero customers leaving could mean that you need to revise your model preferences to include higher thresholds that indicate churn.

Delete a Prediction

  • Step 1: Select the tab labeled “My predictions” after navigating to the Intelligence > Predictions menu option.
  • Step 1: Choose the ellipsis in the vertical position next to the prediction you wish to remove from the list.
  • Step 1: Select Delete.

Conclusion

When you have finished preparing the Churn Prediction Model, the next step is to incorporate it into the day-to-day operations of the company. This requires constant monitoring, evaluation, and updating of the system (which may simply consist of re-training the system or may even involve the addition of new features).

As a consequence of this, you can begin to automatically recognize events that tend to increase the propensity to leave and that require a response as quickly as possible.

In this article, you learned how to build a churn prediction model for retail data and how to review the status and results along with how to delete and fix a failed prediction.

However, as a Developer, extracting complex data from a diverse set of data sources like Databases, CRMs, Project management Tools, Streaming Services, and Marketing Platforms to your Database can seem to be quite challenging. If you are from non-technical background or are new in the game of data warehouse and analytics, Hevo Data can help!

Visit our Website to Explore Hevo

Hevo Data will automate your data transfer process, hence allowing you to focus on other aspects of your business like Analytics, Customer Management, etc. This platform allows you to transfer data from 100+ data sources to Cloud-based Data Warehouses like Snowflake, Google BigQuery, Amazon Redshift, etc. It will provide you with a hassle-free experience and make your work life much easier.

Want to take Hevo for a spin? Sign Up for a 14-day free trial and experience the feature-rich Hevo suite first hand.

You can also have a look at our unbeatable pricing that will help you choose the right plan for your business needs!

Sharon Rithika
Content Writer, Hevo Data

Sharon is a data science enthusiast with a hands-on approach to data integration and infrastructure. She leverages her technical background in computer science and her experience as a Marketing Content Analyst at Hevo Data to create informative content that bridges the gap between technical concepts and practical applications. Sharon's passion lies in using data to solve real-world problems and empower others with data literacy.

No-Code Data Pipeline for Your Data Warehouse