When building custom machine learning (ML) models, the phrase “garbage in, garbage out” holds true. Even the most advanced algorithms will fall short if the data you feed them—your features—is not carefully crafted. Feature engineering is the process of shaping raw data into meaningful variables that help your model uncover patterns and deliver reliable results. Let us explore the best practices for feature engineering in 2025, with practical business cases to show how it works and why it matters. What Is Feature Engineering? Feature engineering involves selecting, transforming, and creating variables (features) from your raw data to make your ML model smarter. For example, instead of using a customer’s “date of birth,” you might create a feature like “age range” to better predict shopping habits or fraud risks. It is about turning raw numbers into insights your model can use effectively. Best Practices for Feature Engineering 1. Start with Your Business Goal Before touching the data, understand the problem you aim to solve. Your features should align with your business objectives. For instance, if you want to predict customer churn, focus on features like how often someone buys, their recent support interactions, or how long they have been a customer. Practical Business Case: A subscription-based streaming service engineered features like “average watch time per session” and “number of genres watched” to predict which users might cancel, improving retention by 10%. 2. Tap Into Expert Knowledge Collaborate with people who know your industry inside out. Their insights can guide you to the most relevant data points. In healthcare, for example, a doctor might suggest using “body mass index (BMI)” instead of separate “height” and “weight” measurements for better predictions. Practical Business Case: A hospital worked with clinicians to create a feature called “patient recovery score” based on vital signs and treatment history, which improved readmission predictions by 15%. 3. Deal with Missing Data Smartly Missing data can derail your model. Instead of tossing out incomplete records, try: Practical Business Case: A retailer used purchase history to estimate missing “customer location” data, enabling more accurate regional sales predictions. 4. Balance Feature Scales ML algorithms work best when features are on similar scales. Normalize or standardize variables so that something like “income” (in thousands) does not overpower “age” (in years). Practical Business Case: A bank scaled features like “account balance” and “transaction frequency” to ensure their fraud detection model treated both equally, catching 20% more suspicious activities. 5. Trim Excess Features Too many features can confuse your model and lead to overfitting. Use tools like Principal Component Analysis (PCA) or feature selection algorithms to keep only the most impactful ones. Practical Business Case: An e-commerce platform reduced 50 features to 10 key ones, like “time spent browsing” and “cart abandonment rate,” making their recommendation model faster and more accurate. 6. Combine Features for Deeper Insights Sometimes, two features together tell a stronger story than either alone. Combining variables can reveal patterns your model might miss otherwise. Practical Business Case: A clothing retailer combined “discount offered” and “holiday season” into a single feature, which helped predict sales spikes better than either variable alone. 7. Use Automation Carefully In 2025, tools like FeatureTools, H2O.ai, and AutoML pipelines can generate features automatically. However, always check that these features make sense for your specific business needs. Practical Business Case: A logistics company used an AutoML tool to create features but manually validated ones like “average delivery delay” to ensure they matched real-world conditions, improving route optimization by 12%. Why Feature Engineering Matters Feature engineering is not a one-and-done task—it is an ongoing process of testing and refining. By blending industry expertise, data science techniques, and modern tools, you can create features that unlock the true potential of your custom ML models. Think of features as the bridge between raw data and smart decisions—build them well, and your business will thrive.