AI chatbots have been gaining a lot of popularity thanks to the promising future applications that they have demonstrated. Though what are chatbots exactly? Are chatbots simple repositories of data or are they complex thinking machines that can learn and adapt to their environment?
Given the history of chatbots, it is hard to comprehend how far they have come from their initial stages. With such rapidly evolving technologies at hand, it is crucial to understand their inner workings and look out for ways to integrate them into real-world applications.
Having in-depth information about the subject can help you use AI chatbots to significantly reduce business costs or even help you get ahead in your career. This is why in this blog we will look at what is a chatbot and the ways in which it can be used for the betterment of everyday life.
What are Chatbots?
As the name suggests, chatbots are basically automated bits of software or computer program that simulates human conversation to chat or resolve their queries. These chatbots differ greatly in their scope and abilities when holding up conversations with humans.
Chatbot technology has progressed beyond simple decision tree-style conversations and can now understand and respond coherently regardless of the type of prompt. This is all thanks to the natural language processing abilities that are loaded in newer chatbots.
Artificial intelligence-powered chatbots are capable of resolving the most complex queries within seconds as they can decipher human language effortlessly with powerful language models. Such abilities make the utility of model chatbots basically limitless. Apart from this, there are many other advantages and disadvantages of using chatbots for your business.
A chatbot is often described as one of the most advanced and promising expressions of interaction between humans and machines. These digital assistants streamline interactions between people and services, enhancing customer experience. At the same time, they offer companies new opportunities to streamline the customer’s engagement process for efficiency that can reduce traditional support costs.
A chatbot can enhance and engage customer interactions with less human intervention. It removes the barriers to customer support that can occur when demand outpaces resources. Instead of waiting on hold, customers can get answers to their questions in real time. Less service friction can improve the brand experience for customers.
For companies looking to improve their customer experiences, the addition of chatbots to answer simple questions can improve satisfaction, streamline the customer journey, and provide customer-centric support.
Of the expected benefits of these digital service tools:
- 68% of customers cite 24-hour support
- 64% cite quick answers to simple questions
- 51% cite instant responses
Our digital world is constantly evolving, you need only look back on the last few years to be able to witness how new technologies have been adopted into businesses and our daily lives. And, one of these marketing trends and technologies which is relevant to all of us, is the rise of chatbots. Button-based, rules-based, AI-powered, voice and generative chatbots, each more advanced than the last, are all used throughout today’s digital landscape, designed to enhance one of the most influential factors in our existence, customer satisfaction.
The idea of providing effective customer service that doesn’t involve physical human resources is alluring, which is precisely why the integration of AI and chatbots into many businesses has become a game changer over recent years. These technologies are reshaping marketing tactics, helping businesses to streamline processes and manage customer interactions. However, although we know that chatbots provide access to 24-hour support and help organisations to save costs, where does this leave us when it comes to sought-after, authentic, human connection? Are chatbots ever likely to be in a position to compare?
We know that in general, interaction levels with chatbots is high, with 80% of users surveyed by Userlike confirming they had interacted with a chatbot at some point, and another 5.5% being unsure. This could encompass a number of interactions, whether that’s choosing to ‘chat to an adviser’ through a messenger service on a website, or conversing with Siri.
However, chatbots’ integration into customer service roles fell short of their original expectations. In 2016, there was a great deal of hype around chatbots, and the prediction was that they would become commonplace in our everyday lives. So much so, that Gartner predicted that by 2020, the average person will have more conversations with bots (and not know it) than with their spouse. Of course, we now know that this hasn’t happened (yet), and the fall in chatbots at this time can be attributed to a selection of factors. The key ones being that consumers found interaction time-consuming and complex, and chatbots needed more guidance from humans than was expected. Due to the complex nature of language, the data process power was simply not there yet.
Fast forward a few more years and AI is smarter than ever. Programmes such as ChatGPT, Bard and AlphaCode (among a plethora of others) assist businesses in a whole host of content production, so it is no surprise that this has also translated to chatbots. Additional technological advancements such as Natural Language Processing (NLP) has birthed a generation of ‘smart’ chatbots, that are designed to simulate human interactions with customers. Although this breed of chatbot still requires a great deal of programming to be successful, they seem to have found their niche within greater customer service strategies and operations.
A Brief History
Although the term ‘chatbot’ is nothing new and has in fact been around since the mid 1960s, the premise for AI conversation was actually first discussed by Alan Turing more than a decade earlier. His original ‘imitation game’ predicted that by the year 2000, computers’ imitation of speech would be intelligent enough that it would be able to fool a human interrogator, 70% of the time. Although this prediction didn’t come to fruition, the development of chatbots and their integration in digital functions through to today is impressive.
1966 – the first rule-based ‘chatterbot’, ELIZA, was developed.
1972 – Parry, a natural language programme was the first to pass the Turing Test.
1983 – A new chatterbot, Racter, was developed and a book written by the bot was published: “The Policeman’s Beard is Half Constructed.”
1995 – A.L.I.C.E (Artificial Linguistic Internet Computer Entity) won the Loebner prize three times for being the most human-like chatbot of its time.
1997 – the Jabberwacky chatbot was launched on the internet (would eventually become Cleverbot in 2008).
By the early 2000s, instant messengers were beginning to adopt the chatbot SmarterChild, and there were more means for customers to communicate with businesses. More emotionally intelligent chatbots hit the market during this time also, whereby they were able to converse with users in a more empathetic or humorous way.
Siri and other virtual assistants became available in the 2010s, along with integration into social media, boosting usage exponentially across the globe. By the end of this decade, we reached a position whereby chatbots were integrated into our daily lives, providing fast and easy access for consumers to get in touch with businesses and other applications.
business strategies
Imagine a scenario where a customer seeks information about a product or service.The chatbot, equipped with a wealth of knowledge, swiftly provides detailed specifications, and pricing details, and even recommends related items based on the customer’s preferences. This not only streamlines the information-seeking process but also enhances the overall customer experience.
The chatbot sector is experiencing remarkable financial growth, with estimated revenues reaching approximately $137.6 million in 2023. Projections indicate a substantial increase, foreseeing a surge to $454.8 million by 2027. In 2018, the market’s revenue was a modest $40.9 million.
Integrating customer service chatbots into business strategies marks a significant turning point. It is comparable to hiring a skilled multitasker capable of handling various tasks simultaneously.These chatbots are not just about handling customer inquiries; they go a step further.
They’re capable of capturing and analyzing valuable data from each interaction, turning every conversation into an opportunity for deeper insight.
This data-driven approach equips companies with the intelligence needed to tailor products, services, and marketing strategies to meet the evolving needs of their audience.
As companies adapt to new challenges, these digital assistants are not just helpful tools—they’re transforming how businesses succeed in customer satisfaction and engagement, driving them to new heights in a constantly evolving market.
How do Chatbots Work?
The conversational capabilities are what decide the complexity of the chatbot. This is why the workings of chatbots can basically be divided into three different types. Live agent chatbots, rule-based chatbots, and AI-powered chatbots. Let us start by looking at the simplest chatbot form.
1. Rule-based chatbots
Rule-based chatbots are arguably the simplest chatbot types as they can only process queries that are of a binary nature (yes/no) or queries that are written in a manner that matches the data that it operates on. Such chatbots do not require human intervention as their responses are pre-programmed and simple.
Though this is also a great limiter regarding functionality and flexibility when dealing with more complicated service requests. This is why it is not very often utilized by companies that demand more cohesive customer engagement.
2. Hybrid chatbots
Hybrid chatbots do resolve most of the issues faced by rule-based chatbots, however, they do not contribute much toward cost savings. A hybrid chatbot basically receives queries and forwards them to the most suitable human operator.
While this method of redirecting customer queries to a human operator does resolve the issue of handling complicated requests as humans can attend to them. But this type of chatbot still requires the company to hire human operators to handle customer queries which can be quite expensive.
3. AI-powered chatbots
AI chatbots are chatbots that integrate multiple AI technologies, from machine learning that optimize responses over time to natural language processing (NLP) and natural language understanding (NLU). These technologies helps AI-powered chatbots to accurately interpret user questions and matches them to specific intents.
A chatbot using artificial intelligence is neither limited when handling customer interactions nor requires massive funds for human conversation. It combines the best of both worlds by bringing the autonomous nature of rule-based bots and the effective skills of a live agent to the table.
How do Businesses Use Chatbots?
Given the high potential offered by AI-powered chatbots, it is important to look at all of the possible ways to integrate them into business operations. By using chatbots, your company can get benefited in several ways. For instance, saving money spent on resources or helping you get more leads, etc.
Here are ways in which businesses can use chatbots and integrate efficiency into their current practices:
1. Customer Service
Perhaps the most obvious use for an AI-powered chatbot is using it to attend to customer service requirements without hiring an entire team of service executives. Because the AI-powered chatbot simulates human conversation, there are absolutely zero issues encountered when it comes to communication.
Many banks, insurers, media companies, e-commerce companies, airlines, hotel chains, retailers, health care providers, government entities and restaurant chains have started integrating chatbots to their websites. This can help answer customer’s simple questions or queries as well as guide them to proper pages or links which they need to use, in orde to use your site properly.
With a GPT-enabled customer service chatbot in your arsenal, you can guarantee that you have satisfied customers every time they visit your website in search of support. All of this while simultaneously reducing the tremendous cost spent on customer service executives.
2. Internal resources
The process of onboarding and training can be one that is time-consuming and cumbersome for many companies. This is why integrating a chatbot that has all of the internal company information regarding standardized procedures and guidelines can be so helpful.
New or existing employees can simply converse with the chatbot to gain information regarding any subject that they may find confusing. Not just this, other complex issues such as outage alerts, knowledge management, system status update, password updates, etc. can be efficiently handled by chatbots. Chatbots encourage employees towards self service and automate processes to save time and mental efforts.
3. Surveys
Since an AI chatbot comes with machine learning abilities it can compile and classify data on its own from customers if required. This automated way of collecting data from customers using a chatbot can prove to be quite an improvement when conducting surveys.
You can also rest assured regarding the accuracy of the chatbot’s given survey data as it can figure out the customer’s intent easily with its natural language understanding abilities. With the intent figured out it can classify the responses in the way that you want them to.
4. Targeted marketing
Because customers can easily interact with chatbots at any given moment, you can use the GPT-enabled chatbot for marketing purposes and provide personalized suggestions to your customers. These suggestions can be of anything from content to additional products.
Conversely, you could also have customers ask the chatbot for recommendations for new products or services that they can use from your business. Such interactions can greatly improve customer engagement and loyalty for any business.
5. 24×7 support
Though a chatbot is a computer program that simulates human like interaction, it requires no additional time for breaks or sleep, unlike human service executives. With a chatbot, you can cater to the needs of your customers instantly without any backlog or downtimes whatsoever.
While chatbots have become fixtures in the online retail space to streamline customer support, they have also been widely adopted in industries such as finance, healthcare, and insurance. Beyond customer support, you see sales teams use chatbots to steer customers through the sales funnel and marketing teams to generate qualified leads.
Chatbots are a type of digital assistant designed to improve business efficiency by automating routine support tasks. They can save businesses as much as 30% on their customer support costs. They can also generate revenue by converting abandoned cart transactions into sales. They streamline customer support through automation and, according to Juniper Networks, can save consumers and businesses over 2.5 billion customer service hours by 2023.
it’s clear to witness the rise in interest in chatbots over recent years. Looking at Google Trends data, we can see a surge in the search term from late 2022, which also coincides with the launch of generative AI chatbot, ChatGPT. Considering the media noise around ChatGPT and its rapid adoption by businesses and individuals alike, this may have been the catalyst to launch an increase in worldwide search for chatbots and their capabilities.
When we dive deeper into some of the reasons why chatbots may have become so popular over recent years, there is a lot to be said for their benefits and capabilities. More recent advancements in technology are allowing businesses to save costs, and customers to get faster access to support.