All You Need to Know About Chatbots & Why Businesses Should Adopt

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Introduction

Communication has always been the key to grow your business further. New enhancements in technology have opened the doors for unlimited experiments to make communication seamless and better than ever before.

However, businesses nowadays are also keen on resources spent. No wonder they want solutions that can help them achieve more in less time and resources. In such a scenario, it’s essential to cater to business needs and introduce a solution that can solve communication problems.

That’s where chatbot technology was introduced. Chatbots are computerized bots that communicate with customers using pre-recorded messages based on the customer's responses. They may or may not use human-driven intelligence.

Since its rise, chatbots have become popular among all business types. The State of Chatbot 2019 has come up with research that showcases the real situation of businesses while leveraging chatbots. Some highlights are:

80% of businesses are using chatbots in 2020.
90% of banks to leverage chatbot technology by 2022.
$4.5 billion to be invested in Chabot research by 2021, according to Opus Research.
While 58% of businesses who are using chatbots operate in B2B structure and 65.1% of them are engaged in web-based software.
27% of the adult population is ready to purchase goods through chatbots.

The figures comprehensively mentions the importance of using chatbot software. But what are chatbots? Let's discuss that in detail.

What is Chatbot

Chatbots, in general terms, are software-generated programs created to simulate human interactions for both text and voice conversations. Chatbots interpret communications from the user and answer based on the information it was provided by its developers. Some even learn conversation as they go. Whether you realize it or not, you have had full conversations with a chatbot while seeking customer service or sales support.

Chatbots are created to provide natural human conversation, which is why you may not be aware that you are conversing with a chatbot in certain situations, especially by text or chat messages. If you can’t tell, it’s doing its job correctly.

Two Main Chatbot Categories

Though there are several different types of chatbots, they can be categorized into two main types, including task-oriented bots and data-driven bots.

1. Task-oriented chatbots

These are best described as advanced frequently asked questions (FAQ) tools. They are pre-programmed with information to respond to users as they “hear” it. Programming uses conditional statements so it learns “if” and “then” conditions to communicate appropriately.

These bots have been around for quite some time. They are often easy to recognize as bots, such as purchasing movie tickets over the phone and the more recently created food delivery ordering. As complicated as they seem, these are the simpler bot of the two categories.

2. Data-driven chatbots

These bots use Artificial Intelligence (AI) to collect data, analyze it, and learn and evolve from it to provide complete and personalized conversations. The Amazon Alexa is a good example of a data-driven chatbot.

These are more complex bots with endless possibilities for the future because of their AI capabilities.

Evolution of Chatbot

Originally, chatbots were used to simulate humans in order for us to learn from them, in fields such as in psychiatry or to test their ability to intelligently think like humans. Some of the original technology from nearly 50 years ago was successful and is still in use today!

The use of chatbots evolved considerably with Apple’s Siri creation. Apple introduced the conversational AI assistant that spurred several others, like Google Assistant and Microsoft Cortana, making them more useful as a voice-commanded device that can answer questions, play music, set alarms, and so much more. This led to even more sophisticated smart speakers such as Amazon Alexa and Google Home.

Social media has also become a very popular use for chatbots. For instance, implementing a Facebook chatbot is an extremely effective way to interact with customers and prospects about your products and your brand.

The Role of Artificial Intelligence

AI was a game-changer for the development of chatbots giving them Machine Learning (ML) capabilities so they can actually learn from experience without the input of developers.

In terms of customer service, AI has brought chatbots from a glorified FAQ to a personable conversationalist capable of determining what type of help you need and the solution for it. In fact, AI has increased chatbot capabilities so much that they can actually provide therapy to support mental health!

Why Use Chatbots?

Chatbots are proving to be invaluable in the mobile age as organizations are expected to provide better and better customer service in order to compete with all the other organizations that are available to your prospects at the swipe of a phone screen. On top of that, consumers are finding online or automated customer service to be more convenient so they don’t have to wait on hold for the next available representative.

Types of Chatbot

Though chatbot types can be simplified into two basic categories (task-based and data-driven), these categories don’t explain all of the different types of chatbots that are out there. Though the terms for them may change, there are various types that can be recognized for their everyday value to users.

Here is a more detailed look at all of the various chatbots:

1. Simple Chatbots

Part of the task-based category, simple chatbots are just that...simple. They run based on scripts that consist of questions asked by the bot and answered by the user. It does not pull from previous experience or interactions. They are easier to build with flows that are logical and straightforward.

For the most part, simple chatbots are meant to have only one expertise from beginning to end, such as food ordering, product FAQ knowledge, company information, etc. Menu options and navigation tend to be very easy for simple chatbots. They can be created and implemented easily and, therefore, more widely.

Simple chatbots will give button options based on a pre-defined knowledge base. When the options you need are available, these are very effective bots. If your purpose for a chatbot isn’t as simple as a list of options to choose from, it may not be the right bot for you.

Example simple chatbot: A menu app with a chatbot that lists the options for you.

2. Action Chatbots

Another task-based chatbot that is a step-up in complexity from the simple bot is the action chatbot. These bots will be able to ask for more broad information than just a list of options by collecting relevant information from users and taking specific actions based on the information.

Action chatbots will respond based on the action or inaction of the user and be able to trigger different actions based on those choices. This is more effective than the simple chatbot but doesn’t require extra programming that goes with the more data-driven bots.

Example action chatbot: An FAQ chatbot for an organization that responds based on keywords with options to choose from.

3. Social Media Messaging Bots

These chatbots can be as simple or complex as an organization needs. Rapidly growing in popularity, social media messaging bots can be integrated with many different platforms so customers and prospects can get in touch with organizations right from social media. As you gain more followers and encourage these followers to reach out on your social media channels, the more advantageous a messaging bot can be. It will respond immediately and provide support or answers to the user on your behalf or send them to you, if necessary.

Your social media followers and others will be able to contact your business for customer service or sales needs any time of day from any timezone. Plus, in a world that is so much more used to getting instant results, a chatbot can respond immediately and appropriately so you don’t have to. This has a huge impact on increasing both conversions and customer satisfaction rates.

Example social media chatbot: A Facebook Messenger chatbot that can respond to users’ inquiries.

4. AI Chatbots

In the data-driven category, artificial intelligence (AI) chatbots are a whole new level of bot. These bots are considered skills chatbots because they can accomplish actions by voice commands such as turning on and off smart devices in homes. AI chatbots use natural language processing (NLP) to interpret commands and execute them.

Machine learning capabilities help AI chatbots understand human speech and can put it in a context that the user gives, whether they know it or not. Plus, as humans, we’ve gotten very good at adapting our language when necessary as well. When our chatbots don’t understand what device we meant it to turn on when we told it to, we will change our command to add which device. They don’t have to be all-knowing to be 100% effective.

Example AI Chatbot: Google assistant, Siri, and Microsoft Cortana.

5. Contextual Chatbots

The most advanced data-driven chatbots are even more contextual-based than the AI bots. These chatbots will not only use AI to converse naturally with users, but will also learn from interactions and past experiences. Contextual chatbots include our favorite virtual assistants such as Amazon Alexa.

Contextual chatbots can decipher what the user wants with more awareness of the context of the communications the users provide. These bots use AI, machine learning, and NLP to provide the most advanced experience for users. And the possibilities are endless with such smart and advanced chatbots.

Example contextual chatbot: Smart speakers such as Amazon Alexa and Google Home.

Not every occasion calls for a chatbot that can hold full conversations without missing a beat, like smart speakers. There are a variety of types of chatbots for this reason. Most fit neatly into the categories above, but some are combinations of different types. Think carefully before choosing which type is right for you. If you’re in the market for an automated solution that gives simple options for users to choose from, no need to include all of the bells and whistles you get with the more complex chatbots.

Designing the chatbot of your dreams also doesn’t have to be very complicated either. Using tools will do it for you...no expertise needed. First, you’ll just want to figure out what type of chatbot you really want. Part of determining the type that will work for you is to decide what you want it to do for you.

Read on to learn more about what chatbot software is and how chatbots work, which may help you with your decision for which type will work best for you and your organization.

How Are Chatbots Created?

Building a chatbot can be thought of as writing a story. In its simplest terms, here is how it’s done:

Determine what it is that you want your chatbot to do.
Determine what steps your bot will take to get there and what options may occur during the interaction.
Design the flow of your chatbot. Choosing from templates is a good way to start this process.
Determine which platforms you’ll want to integrate them with.
Integrate your chatbots.

Of course, there’s more to it than that and not everyone has experience with coding and development. Initiating the process with the software will make creating chat flows and integrating with platforms much easier. Plus, it provides reports to give you the data you need to optimize your bots.

Chatbots are basically time and money-saving assistants for your business that can help you with your customer service workload and convert your prospects faster. That’s a valuable addition to most organizations.

Benefits of Using Chatbots

From elevating your customer support strategy to improve your agents’ productivity, chatbots offer amazing benefits. More importantly, chatbots’ benefits aren’t limited only to the business. The full-fledged chatbots do offer some robust benefits to the end-users as well.

In this section, we’ll shed some light on the benefits to businesses and why they should consider deploying chatbots to complete various jobs.

Benefits of Chatbots for Businesses

1. Affordability

Let’s get it straight. Businesses want solutions that are cheaper and cost-effective. They also want these solutions to be lower on the maintenance cost. In a nutshell, businesses are always searching for something that can provide maximum benefits with less investment.

Chatbots perfectly fit this essential need. The development and deployment cost of one chatbot is much lower than developing a full-fledged application.

For example, technically and economically, it’s always easy to create a chatbot and deploy that into various mediums for your support necessities rather than buying a customer support software. On top of that, chatbots can handle themselves on their own and hardly need external help which makes them a better choice than Support solutions that need someone to run the show.

2. Rapid Development

Chatbots are small applications built to carry out certain operations. You just need to come up with a flow of how you want to drive your customers and then everything just becomes easy to develop. This does provide an edge over other solutions that take a large chunk of your time and still does not guarantee high-quality assistance that chatbots offer.

However, you need to keep in mind that building highly intelligent chatbots takes a long time. But this kind of development is really out-of-the-box and might not be needed for your business at the early stages of adoption.

3. Flexibility

When it comes to offering operational flexibility, there’s no better option than chatbots. Human agents might have many limitations such as handling a specific number of customers at the same time. However, chatbots are programmed agents that can perform tasks in large volumes. This is important to increase the entire operational capability.

Thus, chatbots not only reduce operational costs but also improve efficiency and productivity.

4. Multi-channel Engagement

Be it live chat, social media interactions, or email interactions, chatbots can be deployed into various channels. This makes chatbots a versatile medium to be deployed on multiple channels at the same time.

This improves your brand’s exposure and allows you to make meaningful connections and interactions with people across platforms.

5. Better Customer Experience

Chatbots help you provide quick information to your users’ queries. The most important thing customers want is a quick response to their questions and chatbots help you do that. Thus, it not only helps you provide a better customer experience but also increases customer satisfaction.

6. Provides Actionable Insights

Chatbot software comes with robust reporting capabilities. These insights help you make data-driven decisions and tighten screws wherever needed. Today, when there is utmost importance on data, having those helpful figures help you take your entire business forward.

Now, these are the benefits of chatbots that businesses get. However, chatbots also provide some amazing benefits to the end-user. We’ve listed down those benefits here for your information.

Benefits of Chatbots for End-Users

1. Instant resolution

Customers like getting an instant resolution to their queries and chatbots provide that. It’s not only time saving but improves the experience and trust.

2. Cost-effective

While most of the businesses do provide free customer service, customers still have to pay some external amounts like calling charges when it comes to using phone customer service.

Using chatbots reduces cost, not only for businesses but also for customers. They don’t have to spend those extra charges again.

3. Consistency & Accuracy

Consistency is the most essential part of any business. When it comes to Customer Support that becomes even more important. Chatbots are programmed to provide consistent customer service that customers prefer.

When it comes to accuracy, chatbots do exactly what are they programmed to do—providing personalized customer service. Customers just need to select options and they get to hear answers that they want to.

4. Overall Better Experience

In a nutshell, chatbots do provide amazing customer service that is needed to boost customer experience and increase customer retention. This is extremely important when it comes to increasing overall business growth.

Limitations & Areas of Concern

But like any other technology, chatbots, too, are evolving continuously. It’s still far from being perfect even in today’s digitized world. The communication with chatbots is till not humane and the customer knows when the communication is being developed with a chatbot.

RichRelevance says that AI-based chatbots still sends 40.7% of messages that look “creepy” than “cool” (27%). Moreover, 59% of users have mentioned that chatbots misunderstood their commands and 29% says that it functioned inaccurately.

It’s a challenge to make chatbots even powerful and seamless and for that to happen, it requires immense help—both on the economic and technical research front.

Chatbots are definitely a piece of future technology and it requires continuous development to open opportunities for brands to build better and closer relationships.

Prajakt Karanjkar