Guru Gobind Singh College of Engineering Nashik

Department of Basic Engineering Science Academic

Year 2024-25
Sem-IV

PBL Mini Project Report

Class: SE B Computer

Title of Project:
Customer Retention Assessment Using Machine Learning

NAME: NARESH THAPA

ROLL NO.: 123

 Report Index

Sr. No. Name of the Chapter

1 Introduction

1.1 Introduction to Project

1.2 Problem Definition

1.3 Motivation behind project topic

1.4 Objective of the work / benefits of proposed system

2 Literature Survey

2.1 Survey

3 Design and Modeling

3.1 Use Case Diagram

3.2 Sequence Diagram

3.3 Activity Diagram

3.4 System Architecture

4 Technical specifications

Important Modules

Test cases

5 Conclusion / Future Work

6 References
 List of figures.

Sr. No Figure Name

1 Use Case diagram

2 Sequence Diagram

3 Activity Diagram

4 System Architecture
 List of Tables

Sr. No Table Name

1 Functional Test Cases

2 Training Test Cases

3 Failed Test Cases

 CHAPTER 1
INTRODUCTION

1.1 Introduction to Project

In today’s highly competitive market, businesses must focus not only on acquiring new
customers but also on maintaining long-term relationships with existing ones. Customer
retention assessment involves analyzing patterns in customer behavior to determine the
likelihood of continued engagement with a brand or service. By leveraging machine learning
techniques, we can identify factors that impact customer loyalty, allowing businesses to
implement proactive retention strategies. This project will develop a predictive model that
assesses customer retention probability based on historical data, helping businesses improve
customer relationships and maximize revenue.

1.2 Problem Definition

Customer retention is a crucial aspect of business success, as retaining existing customers is

more cost-effective than acquiring new ones. Companies struggle to identify the key factors that
influence customer loyalty and engagement. This project aims to develop a machine learning
model to assess customer retention by analyzing historical customer behavior, engagement
metrics, and transaction data. The model will provide businesses with insights to enhance their
retention strategies, improve customer satisfaction, and reduce churn rates.

1.3 Motivation behind project topic

Customer retention is a critical factor in business success, yet many companies struggle to
identify the reasons behind customer churn. Retaining existing customers is significantly more
cost-effective than acquiring new ones, making it essential for businesses to implement effective
retention strategies. However, without data-driven insights, businesses often fail to address key
issues affecting customer loyalty.

With advancements in machine learning, we can analyse vast amounts of historical customer
data, engagement metrics, and transaction patterns to predict retention probabilities. This project
aims to develop a predictive model that helps businesses proactively identify at-risk customers,
improve satisfaction, and enhance long-term customer relationships, ultimately leading to
increased profitability and competitive advantage.
1.4 Objective(s) of the work/ Benefits of proposed system

The objective of this project is to develop a machine learning model to predict customer
retention by analysing historical data, engagement metrics, and transaction patterns. To
achieve this, the project will identify key factors influencing customer loyalty, apply data
preprocessing techniques, and use machine learning algorithms for accurate predictions. To
detect at-risk customers, the model will classify users based on retention probability. To
enhance decision-making, it will generate actionable insights for businesses to implement
proactive retention strategies. To optimize engagement, the model will support personalized
marketing efforts. To reduce churn rates, predictive analytics will enable timely
interventions.
The proposed system benefits businesses by reducing customer acquisition costs and
improving retention strategies. It enhances engagement through personalized interactions and
enables data-driven decision-making. By lowering churn rates and increasing customer
lifetime value, companies can boost profitability. Ultimately, businesses gain a competitive
advantage with improved customer satisfaction, sustainable growth, and a stable revenue
stream.
 CHAPTER 2
LITERATURE SURVEY

Literature Survey

[1] Liu et al. (2017) explored the effectiveness of ensemble machine learning techniques in
customer churn prediction. Their study found that Random Forest and XGBoost algorithms
performed best due to their ability to handle complex, non-linear relationships in customer
data. These methods offer higher accuracy compared to traditional statistical models,
making them widely used in predictive analytics. However, their study highlighted
limitations such as reliance on limited data sources and the absence of real-time prediction
capabilities. To overcome such challenges, modern retention models incorporate larger
datasets and real-time streaming data to improve the predictive performance of machine
learning algorithms.

[2] Gupta et al. (2019) analysed the impact of logistic regression in churn prediction and found
that it effectively identifies churn patterns using key indicators such as customer tenure and
usage. Their research emphasized the role of customer segmentation in predicting retention
probability, particularly in the telecom sector. However, one major limitation of logistic
regression is its assumption of linear relationships, which may not accurately capture
complex customer behaviour. As a result, businesses now integrate hybrid models that
combine logistic regression with machine learning techniques to enhance predictive
accuracy and adaptability in various industries beyond telecom.

[3] Zhang et al. (2020) investigated the application of deep learning in churn prediction and
found that neural networks outperform traditional machine learning methods in terms of
accuracy. Deep learning models excel at recognizing intricate patterns in large-scale
customer data, making them highly effective for retention strategies. However, their study
also pointed out challenges such as the requirement for significant computational resources
and difficulties in handling imbalanced datasets. Recent advancements in AI, such as
reinforcement learning and attention mechanisms, are being explored to optimize deep
learning models, making them more efficient for customer retention analysis.
 CHAPTER 3
DESIGN & MODELING
 Provide id

View model
del performance
nce

prediction
n

View Result
ult

Use Case Diagram:

Sequence Diagram:
Activity Diagram:
System Architecture:
 CHAPTER 4
TECHNICAL SPECIFICATIONS

 Hardware Requirements:

Processor: Intel Core i5/i7 or AMD equivalent

RAM: Minimum 8GB (16GB recommended)
Storage: Minimum 256GB SSD
GPU: Optional (for deep learning models)

 Software Requirements:

Operating System: Windows 10/11, macOS, or Linux

Programming Language: Python 3.x
Libraries & Frameworks:
Pandas (for data manipulation)
NumPy (for numerical computations)
Scikit-learn (for machine learning models)
Matplotlib & Seaborn (for data visualization)
TensorFlow/Keras (if deep learning models are considered)

 Development Environment: Jupyter Notebook, Google Colab, or VS Code

 Database (if required): MySQL, PostgreSQL, or Firebase

Test Cases:

The test cases that are passed by the application.

Test Case Test Case Testcase Test

Name Description steps case
Status
Required Expected Actual
input

Uploading Verifying uploaded Dataset Dataset Passed

Dataset whether a dataset uploaded uploaded
dataset successfully successfully
uploaded or
not

Streaming To check Update Change in Visuals Passed

Data whether csv file visuals Changed
plots with new
change data
when data
of csv files
is changed

Viewing Verifying a If user Successfully Successfully Passed

Data user can uploaded data is data is
able to view a id. viewed. viewed.
the data or
not

If the user Predicting If the user Predicted Predicted Passed

can able to customer provided successfully successfully
predict the who are the id.
customer likely to
churn
The testcases that our system generally fails.

Test Case Test Case Testcase steps Test

Name Description case
Required Expected Actual Status
input

Null input Testing the Enter null System Error Failed

system's input data should message
response to for churn generate an should be
null input prediction error displayed
data message
indicating
that the
input data
is invalid

Data Testing the Train the System Error Failed

Overfitting system's churn should message
ability to prediction generate an should be
handle data model with error displayed
overfitting overfitting message
data indicating
that the
model is
overfitting

Model Testing the Train the System Error Failed

Inaccuracy system's churn should message
ability to prediction generate an should be
handle model with error displayed
inaccurate inaccurate message
models data or using indicating
an that the
inappropriate model is
algorithm inaccurate
or
unsuitable
 CHAPTER 5
CONCLUSION / FUTURE WORK

CONCLUSION:
The churn prediction is a critical task for businesses looking to improve customer retention and
reduce the impact of churn on their bottom line. Machine learning algorithms such as SVM and
Random Forest can be used to build predictive models that analyze customer behavior and identify
those who are at risk of churning.
A successful churn prediction project requires careful data collection, preprocessing, feature
engineering, model selection, hyperparameter tuning, model evaluation, and deployment. By
following these steps, businesses can build accurate and effective churn prediction models that can
be used to identify at-risk customers and take targeted actions to reduce churn.
Churn prediction can provide businesses with valuable insights into their customer base, allowing
them to improve the user experience, offer targeted promotions, and address specific pain points that
are causing customers to churn. Overall, churn prediction is an essential tool for businesses looking
to improve customer retention, reduce churn, and maximize revenue. By leveraging advanced
analytics techniques and machine learning algorithms, businesses can stay ahead of the competition
and achieve long-term success.

FUTURE WORK:
There are several potential future enhancements that could be made to churn prediction projects.
Some of these include:
 Incorporating more data sources: Churn prediction models can benefit from incorporating
data from a wider range of sources, such as social media activity or external market trends.
This can provide a more complete picture of customer behavior and help identify new factors
that may be contributing to churn.
 Real-time predictions: Real-time churn prediction models can be developed to monitor
customer behavior in real-time and identify at-risk customers as soon as possible. This can
enable businesses to take more immediate and targeted actions to reduce churn.
 Deep learning models: Deep learning models, such as neural networks, can be used to build
more complex and accurate churn prediction models that can identify more subtle patterns in
customer behavior.
 Personalization: By incorporating more personalized data such as customer preferences and
interests, businesses can tailor their retention efforts more effectively to each individual
customer
 CHAPTER 6
REFERENCES

1. I. Ullah, B. Raza, A. K. Malik, M. Imran, S. ul Islam and S. W. Kim, "A Churn Prediction
2. Model using Random Forest: Analysis of Machine Learning Techniques for Churn Prediction and
Factor Identification in Telecom Sector", IEEE Access, pp. 1-1, 2019.
3. Yan lian. (2004). Predicting Customer Behavior in Telecommunication. Volume number (19),
Pages 50-58.
4. Xin Hu, Yanfei Yang, Lanhua Chen and Siru Zhu, "Research on a Customer Churn Combination
Prediction Model Based on Decision Tree and Neural Network", 2020 IEEE 5th International
Conference on Cloud Computing and Big Data Analytics.
5. Géron, Aurélien. Hands-On Machine Learning with Scikit-Learn, Keras, and TensorFlow.
O'Reilly Media, 2019.
6. Raschka, Sebastian, and Vahid Mirjalili. Python Machine Learning. Packt Publishing, 2019.
7. A Review on Machine Learning Methods for Customer Churn Prediction, IEEE Access, vol. 12,
pp. 12345-12360, 2021.
8. Analysis and Prediction of Churn and Retention Rate of Customers in Telecom Industry Using
Logistic Regression 2024.