The study presents a comprehensive framework for optimizing customer retention budget by integrating clustering, classification, and mathematical optimization techniques. The study begins with the IBM Telco dataset, which is prepared through data cleansing, encoding, and scaling.  In the preliminary phase, customer segmentation is performed using K-Means clustering, with k = 3 and k = 4 identified as optimal based on the elbow method and Silhouette score. The configurations produced three (Premium, Standard, Low) and four (Premium, Standard Plus, Standard, Low) customer segments based on purchase preferences, which served as input features for churn prediction. In the second phase, the dataset was divided into training and test sets in an 80:20 ratio, followed by data balancing using the Synthetic Minority Over-sampling Technique (SMOTE) and Edited Nearest Neighbors (ENN). Multiple classification algorithms were evaluated, including Naive Bayes (NB), Random Forest (RF), Categorical Boosting (CatBoost), Light Gradient Boosting Machine (LightGBM), Extreme Gradient Boosting (XGBoost), Gradient Boosting (GB), Support Vector Machine (SVM), Logistic Regression (LR), K-Nearest Neighbors (KNN), and Multi-Layer Perceptron (MLP) using F1-score as the performance metric. CatBoost and LightGBM, with k values of 3 and 4, respectively, were the highest-performing classification models, with only minimal differences in performance.    Ultimately, customer segmentation established customer prioritization, whereas churn prediction assessed customer churn likelihood. Four distinct configurations were assessed utilizing mixed-integer linear programming (MILP) to optimise retention budget allocation within uniform budget constraints, discount amounts, and churn thresholds. In both the k=3 and k=4 scenarios, CatBoost surpassed LightGBM, with CatBoost at K=3 effectively discounting 66% of at-risk consumers across all three segments, hence improving the intervention's efficacy and budget allocation, making it the ideal choice for maximizing customer retention. The results demonstrate the importance of segmentation in enhancing retention budgeting and budget optimization, particularly concerning parameter sensitivity.

This study presents RetenNet, a comprehensive framework for managing customer churn in telecommunications, integrating predictive modelling, prescriptive optimization, and explainable artificial intelligence (XAI) incorporated with Large Language Models (LLMs). The process commences with the IBM Telco dataset, divided in an 80:20 ratio into training and testing sets. Categorical variables are converted by one-hot and label encoding, whilst class imbalance is mitigated using SMOTEENN. Min-max scaling and mutual information-based feature selection guarantee data appropriateness for machine learning models. Five classification algorithms, i.e., Random Forest (RF), Support Vector Machine (SVM), Extreme Gradient Boosting (XGB), Logistic Regression (LR), and Multi-Layer Perceptron (MLP) are assessed. The SVM model utilizing an RBF kernel exhibits optimal performance. In conjunction with nested cross-validation, Bayesian optimization guarantees excellent hyperparameter optimization and generalization. Performance is evaluated using the F1-score to highlight the implications of false negatives and false positives in churn situations. The methodology additionally incorporates fuzzy rule-based clustering, facilitating flexibility in customer segment identification for intervention priority. Prescriptive optimization uses linear integer programming to distribute retention budget according to model results and business constraints. SHAP waterfall plot employed to guarantee transparency and facilitate actionable insights. Furthermore, Gemini 1.5 Flash, a multimodal LLM, generates analysis and produces contextual recommendations derived from the SHAP waterfall plot. RetenNet offers a comprehensive and interpretable approach to the churn management pipeline, including classical machine learning, prescriptive optimization, and LLM-driven explainable artificial intelligence to enhance decision-making in customer retention efforts.