e-Profits: A Business-Aligned Evaluation Metric for Profit-Sensitive Customer Churn Prediction

TL;DR

e-Profits is a new evaluation metric for customer churn models that aligns with business goals by incorporating customer lifetime value, retention probability, and costs, providing more financially relevant model assessments.

Contribution

Introduces e-Profits, a novel, granular, customer-level profit metric based on survival analysis, improving upon traditional metrics for churn prediction evaluation.

Findings

e-Profits alters model rankings compared to AUC and F1-score.

The metric reveals financial benefits of models previously overlooked.

Supports segment-level analysis for ROI maximization.

Abstract

Retention campaigns in customer relationship management often rely on churn prediction models evaluated using traditional metrics such as AUC and F1-score. However, these metrics fail to reflect financial outcomes and may mislead strategic decisions. We introduce e-Profits, a novel business-aligned evaluation metric that quantifies model performance based on customer lifetime value, retention probability, and intervention costs. Unlike existing profit-based metrics such as Expected Maximum Profit, which assume fixed population-level parameters, e-Profits uses Kaplan-Meier survival analysis to estimate tenure-conditioned (customer-level) one-period retention probabilities and supports granular, per-customer profit evaluation. We benchmark six classifiers across two telecom datasets (IBM Telco and Maven Telecom) and demonstrate that e-Profits reshapes model rankings compared to traditional metrics, revealing financial advantages in models previously overlooked by AUC or F1-score. The metric also enables segment-level insight into which models maximise return on investment for high-value customers. e-Profits provides a transparent, customer-level evaluation framework that bridges predictive modelling and profit-driven decision-making in operational churn management. All source code is available at: https://github.com/Awaismanzoor/eprofits.