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What Are Chatbots? Everything Business Owners Should Know

Chatbots use AI to improve customer experience. Learn what a chatbot is and how you can use this tool to improve your customer service satisfaction.

Your customers are the lifeblood of your business; without them, you wouldn't be successful. Unfortunately, far too many businesses fail early on because they don't offer good customer service. While you might have great products or services, your customers want good service when they have questions and concerns.

Unfortunately, business owners are pressed for time, and startups might not have enough resources to hire more employees, especially when they've recently launched their business. Still, that doesn't mean customer service should ever sit on the back burner.

Whether your business has been operating for decades or you're just starting and want to improve your customer service, you might consider chatbots.

But what are chatbots, and how do they work? Chatbots are customer service tools that use artificial intelligence (AI) to help you support your customer service efforts with minimal staff.

What are chatbots?

Businesses use artificial intelligence (AI) every day, even if they don't know it. For example, you may already use AI for sales and marketing purposes or internally for process automation. Whatever the case, you can use AI to transform your customer experience strategy with chatbots.

Artificial intelligence (AI): When machines ingest and analyze large amounts of data and use that information to simulate human intelligence and responses.

A chatbot is a type of computer program or software that simulates human conversation with your customers. You can use chatbot technology to help customers find answers to common questions, answer inquiries, and even provide basic support to improve the customer experience.

There are two types of chatbots: declarative and conversational. Declarative chatbots are task-oriented and generate automated responses to common customer queries. Meanwhile, conversational chatbots are more complex and interactive, learning as they go to help provide personalized answers to customer questions.

Of course, to use this tool, you need a chatbot integration on your website, which means working with a service provider who can provide training on how to set up your bot to start using it to help customers on your website.

How chatbots work

As we've mentioned, there are two types of chatbots. However, their goals are the same—to enhance the customer experience by providing customers with answers to their questions and concerns. Chatbots use rules-based processes, machine learning, and natural language processing.

Essentially, the business creates rules for the bot to follow, with simple chatbots working like a flow chart in which the customer has options to choose from for questions they have. For example, when someone messages your chatbot, they might get a menu of options ranging from checking their order status to questions about products or services.

Artificial intelligence and natural language processing (NLP) are also used to understand and interpret human language to improve answers to questions instead of relying on programmed responses. These features make talking to chatbots seem more like customers are talking to a real person.

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Chatbot example

Most basic chatbots are rules-based. If you've ever used a chatbot, you might have gotten a response with a menu of options to choose from to work down a path to find your answer.

For example, let's say you have a question about your order status. You might use a company's chatbot to determine whether your order has been shipped or track it by using their chatbot widget and answering a series of questions until you get the tracking information for your order.

A query might be something like "Order status," to which the chatbot might respond with a list of options ranging from "Check your order," "Review your cart," or "Talk to a live agent." From there, the customer would likely select "Check your order" and receive information on shipping on the next page or a link to find more information.

Declarative vs. conversational

Now that you understand how chatbots work let's discuss the two different kinds more in-depth. Declarative chatbots are simple and use very little machine learning. Instead, they respond to inquiries with automated or canned responses set up by the business. These responses can be conversational, but they must be written that way. Declarative chatbots have structured responses and work like a flow chart, providing answers based on customers' questions or selections.

Meanwhile, conversational chatbots, also known as predictive chatbots, are more sophisticated or smart. Apple's Siri is an example of a conversational chatbot that learns the more you use it. Smart chatbots leverage more machine learning and NLP to understand the user asking the questions or provide contextual answers and responses. Conversational chatbots learn, allowing them to pick up on preferences and provide recommendations.

Declarative vs. conversational

How businesses can use chatbots

There are several ways your business can use chatbots, including the following:

Automate routine support tasks

Chatbots allow you to automate conversations with customers with little human intervention to free up time for customer service agents to focus on bigger problems. For example, if a customer has a question about their order status, they can have their questions answered by a chatbot instead of a human who may have to focus on other tasks.

Improve customer experience

Companies with limited staff will find it difficult to provide exceptional customer service that's necessary for the success of the business. However, with chatbots, all businesses can answer common customer questions easily with automated responses to improve customer service and respond to user queries promptly.

Enhance user experience

Chatbots aren't just about supporting your current customers; they can be used to help you turn website visitors into paying customers with conversational marketing. You can use chatbots to directly engage customers as they view your products and service pages to answer questions they might have before making a purchase.

Nurture leads

Chatbots can help nurture leads by giving personalized recommendations, suggesting the best deals, and offering discounts to help customers convert online.

For example, if someone has viewed the same product page on your website more than two or three times, your chatbot can initiate a conversation to give them a coupon code for the product to give them that final gentle push they need to make a purchase.

Types of chatbots

While there are two primary types of chatbots that describe how they work, there are actually many more types of chatbots that use the technologies we discussed earlier. These include:

5 types of chatbots: menu-based, keyword recognition, rule-based, machine learning/AI, and hybrid
  • Menu-based chatbots: Menu-based chatbots are basic chatbots that work using a decision tree or flowchart to help the user down a path to get their questions answered by selecting different buttons.
  • Keyword recognition chatbots: These chatbots are slightly more intelligent than menu-based chatbots because they have the ability to find relevant keywords in a query to provide answers.
  • Rule-based chatbots: Rule-based chatbots answer questions based on a set of rules defined by the business. These bots do not use machine learning and will only give answers to questions you've programmed them to.
  • Machine learning/AI chatbots: Machine learning chatbots are smarter and use machine learning and AI to enhance the customer experience with data.
  • Hybrid chatbots: Hybrid chatbots are a combination of rule-based and machine-learning chatbots, which can be beneficial for companies that don't have a lot of customer data to help their chatbot learn.

Benefits of chatbots

There are several benefits of chatbots for business, including the following:

  • Low cost: Chatbots may be more cost-effective than hiring a full-time customer service staff. However, you should always have a human available to answer customer questions when a chatbot cannot. Once your chatbot has been implemented, you can measure its effectiveness to determine whether or not you need to hire more customer service reps.
  • 24/7 customer service: Chatbots allow for 24/7 customer service. Since customers shop at any time throughout the day, they'll have access to help whenever they need it to keep them on your website and help them convert into paying customers no matter what time of day it is.
  • Engagement tool: Chatbots are a customer engagement tool that can help customers throughout the entire customer journey by providing them with the information they need to make informed decisions.

Disadvantages of chatbots

Unfortunately, no customer service software is without its drawbacks. Disadvantages of chatbots include:

  • Nuances in human language: The natural flow of human conversation can be difficult for simple chatbots to understand. Unfortunately, most chatbots cannot adapt their language to understand slang, misspellings, or even changes in tone like sarcasm.
  • Non-emotive: Chatbots don't have emotional intelligence. While they use NLP to appear more human, most people can tell when they're talking to a bot because they're less emotive and personalized than talking to a human. Customers want empathy when they have concerns, so if the conversation isn't empathetic, it can have a negative impact on the business.
  • Customer frustration: Customers can easily get frustrated talking to chatbots, which is why many prefer to talk to a human when they have problems. Chatbots are still a relatively new technology, and many people have experienced issues with them that make them avoid chatting with them again. Therefore, if your customers don't have access to a customer service representative, it can easily cause frustration and a poor experience.

Improve your customers' experience

Currently, chatbots should not replace your entire customer service team. However, they can help automate simple tasks and improve customer service and overall customer experience. When businesses take the time to program their chatbots to handle various tasks, customer service representatives can focus on more pressing customer concerns, reducing the time it takes to resolve issues.

Of course, to use a chatbot, you need an effective website. Mailchimp's website builder makes it easy to design your business website and add chatbot integrations to enhance customer service. With a chatbot integration, you can pass information from the bot to Mailchimp to learn more about your customers and create more effective personalized marketing campaigns.

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