Optimizing predictive precision in imbalanced datasets for actionable revenue change prediction

Pravar Dilip Mahajan, Abhinav Maurya, Aly Megahed, Alaa Elwany, Ray Strong and Jeanette Blomberg

European Journal of Operational Research, 2020, vol. 285, issue 3, 1095-1113

Abstract: In business environments where an organization offers contract-based periodic services to its clients, one crucial task is to predict changes in revenues generated through different clients or specific service offerings from one time epoch to another. This is commonly known as the revenue change prediction problem. In practical real-world environments, the importance of having adequate revenue change prediction capability primarily stems from scarcity of resources (in particular, sales team personnel or technical consultants) that are needed to respond to different revenue change scenarios including predicted revenue growth or shrinkage. It becomes important to make actionable decisions; that is, decisions related to prioritizing clients or service offerings to which these scarce resources are to be allocated. The contribution of the current work is twofold. First, we propose a framework for conducting revenue change prediction through casting it as a classification problem. Second, since datasets associated with revenue change prediction are typically imbalanced, we develop a new methodology for solving the classification problem such that we achieve maximum prediction precision while minimizing sacrifice in prediction accuracy. We validate our proposed framework through real-world datasets acquired from a major global provider of cloud computing services, and benchmark its performance against standard classifiers from previous works in the literature.

Keywords: (D) Analytics; Revenue change prediction; Classification; Machine learning; Bayesian optimization; Imbalanced datasets (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ejores:v:285:y:2020:i:3:p:1095-1113

DOI: 10.1016/j.ejor.2020.02.036

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