BADM Group B-9 Assignment 2
BADM Group B-9 Assignment 2
BADM Group B-9 Assignment 2
With a cut-off value of 0.5, 99.5% of the time when the customers did
not churn, our model predicted correctly and 3.6% of the time when
the customers churned our model predicted correctly. Overall
success rate is 93.3%.
(<0.5 = 0(not churned); >0.5=1(churned))
Odds Ratio
• P / 1- P is the odds ratio or the odds of success
• When the probability of success or P is ½ or 50-
50, odds for success equals .5/1-.5 = 1.0. This
means that success is equally as likely as failure
• Thus, predicted probability of .5 and an odds
ratio of 1.0 are our points of comparison when
making inferences
• Thus, the exponential beta value in the SPSS
output can be calculated into a percent by 100
(exp b –1) or the percentage change in odds for
each unit increase in the independent variable
Odds ratios in logistic regression
• Can be thought of as likelihood or odds
success based impact of predictors in model
• Interval : the odds of success for those who
are a unit apart in X, net of other predictors.
• Every unit increase in X has an exponential
effect on the odds of success so an odds ratio
can be >1
• P = e α + βX / 1 + e α + βX or odds / 1 + odds
Slope in logistic regression models (FYI)
• When β = 0, P does not change as X increases (X
has no bearing on probability or odds of success )
so the curve is flat, there is just a straight line
• For β > 0, P increases as X increases (probability of
success increases thus curve increases)
• For β < 0, P decreases as X increases (probability
of success decreases thus curve decreases)
Odds ratio and % change in odds by
Interest Paid
• = .00 ,Thus, log odds of churn of customer does not change with
change in interest paid
• Exp = 1.00, 𝑒 =
𝑂𝑑𝑑𝑠 𝑜𝑓 (𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑃𝑎𝑖𝑑+1)
𝑂𝑑𝑑𝑠 𝑜𝑓 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡 𝑃𝑎𝑖𝑑
KS max =46%
Significance of KS max
• The Kolmogorov-Smirnov test (KS-test) tries to
determine if two datasets differ significantly.
• KS max = 46%, implies if we target 36%(70000) of
the customer then we can predict the 81%(10000) of
the total churned customer.
• Hence, organization can reduce their cost drastically
by targeting only 36% of customer to get 81% of total
churned.
Decision Support System
Decision Support System
Constant -3.24338 -3.2434
LTV_good -1.00354 0 0.0000
LTV_vbad 0.06956 1 0.0696
Married_new 0.88731 0 0.0000
UnMarried_new 1.39683 1 1.3968
CT1 0.46708 1 0.4671
CT2 -0.39086 0 0.0000
CT3 -1.34888 0 0.0000
OCC1 0.40554 0 0.0000
OCC2 0.43241 1 0.4324
Interest_Paid 0.00006 1090 0.0654
Balance_Transferred 0.00003 4356 0.1168
Mean Values But one can Age_of_Account__Months -0.05116 63 -3.2232
take any value for Age_Group 0.03840 79 3.0332
Continuous variable Bill_Cycle 0.02048 17.14 0.3510
Customer_Value -0.00003 2700 -0.0699
Credit_Limit 0.00000 10764 0.0338
Sum -0.5704
Probability 0.3612
Result will not churn
We have created a decision support system in excel, where one can change the value
according to a particular customer to predict whether it will churn or not.
Reference attached excel file.
Decision Support System
Decision Support System
Constant -3.24338 -3.2434
LTV_good -1.00354 0 0.0000
LTV_vbad 0.06956 1 0.0696
Married_new 0.88731 0 0.0000
UnMarried_new 1.39683 1 1.3968
CT1 0.46708 1 0.4671
CT2 -0.39086 0 0.0000
CT3 -1.34888 0 0.0000
OCC1 0.40554 0 0.0000
OCC2 0.43241 1 0.4324
Interest_Paid 0.00006 1090 0.0654
Balance_Transferred 0.00003 4356 0.1168
Age_of_Account__Months -0.05116 63 -3.2232
one can take any value
Age_Group 0.03840 85 3.2636
for Continuous variable Bill_Cycle 0.02048 45 0.9215
Customer_Value -0.00003 2700 -0.0699
Credit_Limit 0.00000 10764 0.0338
Sum 0.2305
Probability 0.5574
Result will Churn
Thank You