Overview

The following is an analysis of a telecom customer dataset found on Kaggle.com.

The data contains 5986 individual customer records with 19 substantial features. The response variable is Churn, whether or not a customer has terminated their service with the telecom company.

Of the predictor variables, three are numeric: tenure, MonthlyCharges, and TotalCharges. These variables are all related to the length of time and price of the service. The remaining 16 predictors are indicator variables covering customer demographics and the level of service provided by the company. A detailed description of the each feature can be found in the Feature table at the end of this document. A feature containing customer ID was removed as it was not relevant to this analysis.

Qualitative Analysis

Before attempting to predict customer churn we will examine the data with the intent to gain further insight into the following questions:

  1. How is the company’s pricing structure and customer tenure related to customer churn?
  2. What is the relationship between customer demographic information and churn?
  3. How are the characteristics of the contract, billing, and service type related to customer churn?

Price and Tenure

First let us look at the total amount of retained customers and churned customers:

Out of the 5986 observations, 4399 customers remained with the company while 1587 were churned. Overall, slightly over one-in-four, 26.5 percent, of customers terminated service at the end of the billing period.

Next we want to know the difference in monthly payments between the two groups:

Monthly Charges Summary Statistics in Dollars:
Churn Mean FirstQuartile Median ThirdQuartile StdDev
No 61.42 25.12 64.75 88.7 31.09
Yes 74.16 55.67 79.50 94.4 24.97

Customers who churn are paying on average $13 more dollars per month than those who do not. Seventy-five percent of customers who terminated service paid between $55.67 and $94.40. Further analysis is needed to see why this is the case.

Total Charges Summary Statistics in Dollars:
Churn Mean FirstQuartile Median ThirdQuartile StdDev
No 2568.29 579.00 1689.45 4287.20 2335.46
Yes 1550.70 131.93 706.60 2366.78 1905.71

Looking at total charges we can see that customers who churn seem to be paying higher monthly fees, but have a smaller amount of total charges before they churn. Tenure explains this by showing that the majority of churned customers are cancelling service within the first month before they accumlate large amounts of total fees.

Tenure Summary Statistics in Months
Churn Mean FirstQuartile Median ThirdQuartile StdDev
No 37.60 15 37 61 24.07
Yes 18.25 2 10 30 19.67

Since the data is skewed, the median is a better measure of central tendency than the mean. Half of the customers who churned have been with the company for 10 months or less, while the median retained customer has been with the company for 37 months.

Key Takeaways

  • Churned customers are, on average, newer and paying higher monthly fees than non-churned customres.
  • Approximately 1-in-4 customers are churning

Demographic Information

A selection of demographic subgroups is listed below. The variable gender was omitted as it didn’t have a large effect on the the churn rate or average total charge.

Demographic Group Churn Rate Number of Customers Average Total Charges
Overall 0.265 5986 $2298.06
All Non Senior citizens 0.236 5020 $2205.04
All Senior citizens 0.416 966 $2780.5
Senior citizens without Partners 0.486 481 $2038.3
Non Senior citizens with Partners 0.169 2419 $2962.68
Non Senior citizens with Dependents 0.153 1718 $2471.46
Non Senior citizens with Partners and Dependents 0.14 1419 $2695.63
Non Senior citizens without Partners and Dependents 0.31 2302 $1514.56

As shown in the table above, retirees had the highet churn rate. Almost 1 in 2 retirees without a partner churned; however the senior citizens had a higher than average total charges. Non-seniors with families spent more money on average and had lower churn rates. Non-seniors without families spent less money and had a 31% churn rate.

From this information, we can infer that those who have families are less likely to churn. While those who live alone are more likely to churn and will spend less money on average.

Key Takeaways

  • Senior citizens churn higher than average, families churn less than average
  • Families spend more and are less likely to switch service
  • Singles are more likely to churn and have a lower lifetime value

Contract Information

The features relating to contract infromation can be subdivided into these additional categories:

Type of Service

The type of service can be broken down into: Phone only, Internet Only, and Phone and Internet. The internet categories can be further divided into DSL and Fiber Optic. Fiber is generally more expensive than DSL.

Type of Service Count Churn Rate Average Monthly Charge($) Average Tenure
Phone Only 1291 0.077 21.09 30.43
Internet Only DSL 590 0.253 41.94 31.7
Internet Only Fiber No Customers 0 0 0
Phone & Internet DSL 1478 0.168 64.56 33.21
Phone & Internet Fiber 2627 0.415 91.55 33.23

The data shows that 41.5% of customers with Phone and Fiber Optic internet churned. This is most likely related to the average price of the fiber optic service at $91/month.

In the above graph the top line represents the lifetime of an average Fiber Optic internet customer, while the bottom line represents the lifetime of an average phone-only customer. Clearly customers using fiber optic for a short time or customers who pay more than the average fiber optic price are those who most frequently churn.

Key Takeaways

  • Customers who are using fiber optic internet for a short period of time are most likely to churn

Extra Service Features

To analyze the number of extra service features I created a new variable numExtra that collates the number of extra service features per each account. This variable decreases the amount of information so it will not be included a predictive model.

The highest churn rate is found among those with 0 to 2 extra features, while adding more than two features is associated with a decrease in the churn rate.

The churn rate breakdown for each feature is as follows:

Service Number of Customers Churn Rate
Multiple Lines 2548 0.28
Online Security 1713 0.14
Online Backup 2090 0.22
Device Protection 2055 0.27
Tech Support 1735 0.16
Streaming TV 2306 0.4
Streaming Movies 2339 0.41

Key Takeaways

  • Most customers have at least one extra service feature
  • Customers with 1-3 extra features are most likely to churn
  • Streaming Movies and TV are the most churned service features.

Contract Characteristics

Contract Type

Contract Type Number of Customers Churn Rate
Month-to-month 3269 0.43
One year 1276 0.12
Two year 1441 0.03

The data shows that most customers are on month-to-month contracts, and unsurprisingly customers who are on month-to-month contracts are more likely to churn.

Payment Method

Payment Method Number of Customers Churn Rate
Bank transfer (automatic) 1308 0.17
Credit card (automatic) 1303 0.15
Electronic check 2006 0.45
Mailed check 1369 0.19

A plurality of customers using electronic check as the payment method. This group is also the most likely to churn.

Paperless Billing

Paperless Billing Count Churn Rate
No 2458 0.17
Yes 3528 0.33

Key Takeaways

  • The majority of customers are on month-to-month contracts and this group is most likely to churn
  • Electronic check customers are more likely to churn
  • Most customers use paperless billing. 1 in 3 customers who use paperless billing churn compared to 1 in 6 paper billing customers.

Feature

Predictor Type Description
Gender Categorical The gender of the customer (Male/Female)
SeniorCitizen Categorical The retirement status of the customer (Yes/No)
Partner Categorical Whether the customer is married(Yes/No)
Dependents Categorical Whether or not the customer lives with dependents(Yes/No)
Tenure Discrete The number of months a customer has been with the company
PhoneService Categorical Connection status of telephone service (Yes/No)
MultipleLines Categorical Status of clients multiple lines (Yes/No/No Telephone)
InternetService Categorical Type of internet service (DSL/FiberOptic/None)
OnlineSercuity Categorical Status of Online Security service (Yes/No/No Internet)
OnlineBackup Categorical Status of Online Backup service (Yes/No/No Internet)
DeviceProtection Categorical Status of device insurance service (Yes/No/No Internet)
TechSupport Categorical Status of technical support service (Yes/No/No Internet)
StreamingTV Categorical Status of streaming TV service (Yes/No/No Internet)
StreamingMovies Categorical Status of movie streaming service (Yes/No/No Internet)
Contract Type Categorical Type of contract (Month-to-month/One-Year/Two-Year)
PaperlessBilling Categorical Paperless billing service (Yes/No)
PayymentMethod Categorical Method of Payment (Bank Transfer(auto)/ Credit Card(auto)/Electronic Check/Mailed Check)
MonthlyCharges Continuous The monthly payment made by the customer
TotalCharges Continuous The total amount of money paid by the customer