Survival Analysis of Customer Lifetime and Churn Prediction in the Telecom Industry
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Abstract: Customer churn poses a significant concern for the telecom industry, as it directly affects both revenue generation and the efficiency of operations. To better understand and address this issue, the present analysis applies survival analysis methods to study customer tenure and the likelihood of churn. Specifically, the Kaplan-Meier estimator is utilized to estimate the survival function of telecom customers over time, while the Cox Proportional Hazards model is used to assess the influence of various customer attributes on the risk of churn. The study highlights that several customer-related factors play a crucial role in determining the probability of churn. Among these, the type of contract (e.g., month-to-month vs. long-term), mode of payment (e.g., electronic check, credit card), and access to additional services (like internet or tech support) emerged as statistically significant determinants. For instance, customers on short-term contracts or using certain payment methods exhibited higher churn probabilities compared to those with long-term commitments or bundled services.
The findings emphasize the importance for telecom companies to tailor their retention strategies by focusing on at-risk customer segments. By understanding the survival patterns and the variables most strongly associated with early churn, service providers can design targeted interventions—such as loyalty programs, contract incentives, or personalized communication—to extend customer relationships and improve overall Customer Lifetime Value (CLV). Ultimately, this evidence-based approach can support telecom firms in minimizing customer loss and maintaining long-term profitability.
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