Chatbot Illustration

Chatbots > Chatbot

Chatbot

The Ultimate Guide to Chatbots: How they work, what are their benefits, and everything your business needs to start leveraging them.

Summary:

How do chatbots work Illustration

How does a chatbot work? 

What is a chatbot? A chatbot is an artificial intelligence system that uses an evolving set of prewritten answers to respond to a real person’s language cues. More and more businesses are beginning to use chatbots instead of human agents to answer simple questions, book appointments, and provide general information.

How do chatbots work? Chatbots identify keywords and use them to select from their database of prewritten answers, which allows them to mimic normal human conversation. Some more complicated chatbots also exist, which respond intelligently to human cues, but these chatbots are primitive and often highly problematic. As of now, the most popular chatbots in the industry are written entirely by real people to mimic human language and respond to specific language cues.

To define chatbots: a well-designed and built chatbot will be good at using existing conversation data to understand what the person is asking. It will also analyze effective conversations versus less effective conversations and use machine learning to optimize its capabilities. Finally, a well-designed chatbot will use its machine learning capabilities to learn contextual cues – that is, cues that may not contain defined keywords but which delineate pre-programmed questions based on previous conversation data.

Three types of chatbots Illustration

Three main types of chatbots 

Rule-based chatbots

Rule-based chatbots are the oldest iteration of the chatbot technology. They pick up patterns and keywords in human speech and respond with a prewritten phrase that most closely matches their cues. Have you ever read a Choose Your Own Adventure Book? Depending on your decisions, the book instructs you to turn to various pages either in front or behind where you currently are in the book. You continue to progress by making simple decisions until you reach one of the book’s multiple endings.

In a way, rule-based chatbots operate the same way as these books. You make simple decisions, causing the chatbot meaning to diverge onto one or another conversation ‘path’ based on your language cues. 

Multitudes of businesses are using rule-based chatbot platforms for marketing and support services. These bots can reach out to potential leads who are browsing the company’s website and engage them in a conversation that will lead to them purchasing the product. For example, suppose a person has been browsing around a site for a while without adding anything to their cart. In that case, customer service chatbots can step in, ask a few simple questions, and show them specific products that might interest them. Conversation bots can also highlight promotions and answer common questions about the product. People are more likely to purchase a product if they are involved in a conversation about the product, even if they have a conversation with a bot. Using strategies such as this, companies can increase revenue by qualifying leads and attracting more customers.

Companies can also use rule-based chatbot services to provide simple technical support for their products. Many troubleshooting issues are different iterations of the same few bugs. Rule-based eCommerce chatbots can identify keywords in customer problems and either respond with basic answers or link them to support documents that match their issue. This usage of chatbots will decrease the number of agents responding to simple problems, allowing them to work on the more pressing technical issues. It will also reduce wait times and consequently increase customer satisfaction. Ultimately, the company will see an increase in revenue as well.

Live Chat

Live chat combines chatbot software with a live agent interface. Customers will likely prefer speaking to live agents because they can produce more empathetic and intelligent responses. However, live agents are not always available, and extended response wait times are a massive cause of lost leads. With live chat, bots begin the conversation, collect data, and answer all the simple questions that they can. Then, they can use their data to automatically direct the conversation into the inbox of the person most equipped to solve the problem when they are available to solve it.

The best chatbots can improve marketing and support outcomes by responding to simple questions and collecting customer data. Live chat capabilities take these functions one step further by employing real people where the chatbots fall short.

Let us go back to our previous scenario, wherein a chatbot automatically engages a customer who has been browsing without adding anything to their cart. If the chatbot is unable to close the sale, they can connect a live sales agent. The sales agent can add an empathetic voice and social pressure to convince the customer to buy the product.

In the other scenario, we saw a rule-based chatbot responding to simple troubleshooting problems either through pre-programmed written responses or through links to support documents. Live chat can link customers with more complex issues to live support agents when the questions are too complicated for the chatbot. The software can use keywords to connect the customer directly to the person most equipped to solve their problem when that person becomes available.

Live chat software combines the time- and money-saving aspects of chatbots with the nuanced and empathetic support of live agents. It creates a complex and responsive marketing and support network.        

AI-Powered Chatbot 

Conversational AI chatbots use Natural Language Processing (NLP) and logical reasoning to respond intelligently to inquiries. Whereas rule-based chatbots picked up on cues and patterns which match a stagnate database of responses, chatbot AI can create and learn new responses in real-time. While NLP chatbots can be an incredible time and money saver for your company, they are still not as capable as humans at responding logically and staying on track. Specific interactions can cause them to ‘learn’ language and responses that may not align with your company’s values. These systems will likely become much more refined in their ability to mimic live agents in the coming years.

AI chat finds itself somewhere in the middle of rule-based chatbot and live chat in terms of functional capabilities. For example, the best AI chatbot online could intervene in the live agent’s place to prompt our wandering customer back to a cart of items they left after their last visit. Machine learning chatbots can also intelligently respond to support inquiries by engaging in a conversation with the customer instead of simply linking them to a support document. This simple conversational addition will improve customer satisfaction with their support experience.

Build vs. Buy: Calculate the TCO

Use our Total Cost of Ownership (TCO) tool to compare the expenses of building or buying an ACX solution.

Calculate Your TCO
Analytics growth

Chatbot benefits Illustration

What are the benefits of Chatbots? 

Benefits for marketing 

Chatbot technology can help your company’s marketing strategy by engaging customers in conversations about promotions, new products, and other attractive store features. Chatbot marketing software can also learn about individual customer preferences and highlight specific products that they may be interested in but might not have noticed otherwise. All these features work to increase website conversion – more visitors to a site will buy your product when chatbots are working on marketing those products.

Chatbots generate more qualified leads by asking simple questions and highlighting products and promotions early. People with a general interest in a product can quickly convert into leads when chatbots initiate a conversation about products.

Chatbot tools also make it easier for your marketing team to identify and target these leads. The act of initiating conversation with a chatbot and asking questions about specific products allows for more effective marketing of those products, even if the potential customer does not initially add the products to their cart. Without chatbots, marketing teams would have no way to quantify people’s interests unless they actively add products to their cart. Now, these teams can qualify leads and target marketing strategies earlier with chatbots.

Companies that use chatbots for marketing can also reduce their customer churn. When customers can have personalized conversations with chatbots that have saved their conversation preferences and values, and when they receive around-the-clock service without long wait times, they will want to continue using your products. Chatbots also provide an excellent opportunity to market additional products to customers whenever they visit your website. When customers recognize your quality service, they will only want more of it.

Ditch One Size Fits All Marketing

Level-up your brand interactions with smart two-way engagement that drives revenue, boosts conversion, and creates happy customers for life.

Learn More
Handoff

Benefits for support 

Conversational chatbots are a boon to a company’s marketing strategy, but they are equally beneficial to people who have already purchased its products. Since customer support chatbots are fully automated, they can work around the clock at scale. Never again will customers have to wait in long queues to receive support. They can troubleshoot all common problems with chatbot support software that has saved their account and previous conversation data. Then, the software can seamlessly transition them to a live agent when one becomes available. The software can also save the customer’s contact preference and have a live agent contact the customer directly if no agents are available.

We have all experienced the frustration of waiting on hold, only to be transferred from department to department and explaining our problem from the beginning every time. Now with chatbots, all your data is saved so that agents will have to ask fewer questions. The best chatbots for websites can also use the information you provide to transfer you directly to the department most equipped to answer your questions. Fewer agent transfers, less time on hold, and a system that stores your information rather than expecting you to re-explain will increase your satisfaction with the company and its products.

The combined results of immediate service and fewer agent transfers equate to quicker issue resolution. When bots take over the simple questions and negate the need for agents to listen to problems only to transfer the problem to another department, agents are free to solve the highest-profile issues quickly and efficiently. Now, customers can expect a pleasant interaction with a bot, followed by an immediate connection to a service agent who can solve their problem in minutes. This scenario seems too good to be true, but it is possible with chatbots.

Chatbots also work to improve customer self-service. Frequently, issues are small enough for customers to resolve themselves if they are empowered to do so. The best customer service chatbots can listen to a customer issue and respond with the applicable self-service document. In this way, customers can learn more about their products and troubleshoot issues independently. Customer satisfaction will increase when they need to visit your service desk less regularly because they can fix problems themselves or with a chatbot.

Using chatbot best practices as your first line of service will allow your company to optimize service costs. Now, instead of paying an army of service agents to answer simple, repetitive questions, you can hire a small group of highly-trained staff to respond to the most pressing issues without needing to worry about increasing wait times or decreasing service quality. Indirectly, chatbots for service can only be a benefit to your company’s sales. Satisfied customers will purchase more products, renew previous subscriptions, write positive reviews, and tell their friends.

Personalized Customer Service Chatbot

Ada makes it easy for your support team to solve 80%+ of customer inquiries instantly, with an AI-powered chatbot.

Learn More

How to build a chatbot Illustration

How to build a chatbot with Ada

Build 

Learn how to make a chatbot with Ada. Begin with a basic understanding of your customers and the questions they generally ask. Then, build a chatbot template of answers to their most frequently asked questions using Ada chatbot builder. An excellent place to start might be your FAQ. Turn those answers into short, conversational insights that might arise naturally in a customer support interaction. Ada University’s course will equip you with the background necessary to identify critical questions and write thorough responses.

Next, identify the paths that will lead customers to the answers you have written. Isolate keywords from different contexts and ensure your bot has enough contextual knowledge to differentiate between specific questions with similar keywords. This step is where the task of designing your chatbot begins to seem daunting, but do not fear. The course will teach you how to create a chatbot that responds intelligently so that your well-written answers do not go to waste!

Although we would love the world to break down into simple question and answer interactions, customers are rarely satisfied after a single response. Generally, they have multiple questions, or your answer prompts further questions. Therefore, you must build logical answer flows based on anticipated lines of questioning. Customers will appreciate it when the bot anticipates their next question and follows up with further information.

A lot of the data that will drive answer flows comes from you and your customer service agents; no one understands the general flow of service conversations better than those who have them every day. With a comprehensive technical background in chatbot development from Ada University and an understanding of conversation flow within your company, you will be able to ‘design’ efficient and effective chatbot conversations from scratch.

Personalize 

Chatbots are an excellent tool to add to your customer service package, but humans generally do not like to feel like they are speaking to a robot. Some people prefer a more professional interaction, while others respond best to a conversation that includes emoticons, gifs, or videos. How, then, could you possibly maintain a high level of customer satisfaction with a bot that can only pick up on keywords with a limited list of standard responses?

Luckily, there are ways to personalize your chatbot to each customer, just as service agents can adapt to different personalities. Ada uses a tool called ‘variables’ which collect data on customer interactions, personalize the interaction to optimize customer satisfaction, and save these variables for the following exchange. Learn how to use the ‘List Option’ Block and the ‘Set Variable’ Block to tweak responses based on real-time customer feedback. With these tools, you can create multiple response types and tailor their usage to each one of your customers, creating a truly personalized experience.

Not only can you personalize your response tone, but you can also personalize answer flows and conversation prompts based on the type of customer. The Conditional Block in the Ada interface allows you to segment customers based on conversational data and send different messages to each group. For example, you can use Ada to identify groups of customers looking for support for products they already purchased versus groups of potential leads. Each group needs a different type of interaction to be segmented and lead into different answer flows right from the beginning.

Finally, personalize conversations by easily connecting customers to a service agent when necessary. Take Ada’s course to learn more about how the bot’s Request Block can authenticate and connect people directly to the person who can best answer their question. This extra level is perfect when customers need an account, order status, or purchase history information. It also is excellent for when questions are too complex for the chatbot to answer.

Launch 

Writing comprehensive answer flows is only part of the process. If you want your bot to enhance user experience, you need to integrate it into your communication network properly. To create an effective bot roll-out, you must design a user-friendly interface and streamline connections between the bot and your company’s internal communications. This way, both the initial conversation and internal transfers are as intuitive as possible.

Once you have programmed the bot and integrated it into your other communication channels, it will be essential to run a focus group (or several) before you go live. Ask real customers if your bot’s tone seems right, if it can help with their most pressing problems, and multitudes of other questions. Ada’s course will teach you how to design, recruit, and conduct appropriate focus groups for your company.

Once focus groups have deemed you ready to launch, it is time to enter the chatbot e-Commerce world! However, it is essential to remember that customer values and satisfaction metrics can change over time. As society and your company change, your chatbot should change with them. Always continue to evaluate customer satisfaction through three primary metrics: analytics, conversations, and questions. The Ada course will delve into the definitions, measurement methods, and research outcomes of these three metrics.

Integrate

Switching between platforms can quickly become annoying and confusing. In the worst cases, it can lead to lost conversation data, dropped leads, longer wait times, and unsatisfied customers. Now, instead of an additional platform for agents to track, Ada chatbots come equipped with the ability to integrate within a multitude of different platforms that your company may already be using. This integrational capability allows you to store all your customer data in one place and access it from whichever medium is most convenient. It also means that agents communicating through the bot can handle problems that arise faster because they can access all the necessary resources right through Ada’s interface.

Platform

Capabilities

Salesforce

Ada Glass for Salesforce begins conversations via bot and then seamlessly transitions them to a Salesforce live agent when necessary. All conversations occur using the same interface, and the software stores all conversation data in readily accessible locations.

Zendesk

Similar to Salesforce, Ada Glass for Zendesk integrates seamlessly into your Zendesk interface. The software transitions conversations with the Ada bot directly to the Zendesk live agents, right when they are available to help.

Oracle

Integrate Ada into your company’s Oracle infrastructure. Now, the bot can solve up to 80% of inquiries, meaning that Oracle agents are free to answer the most challenging and important questions, all within one comprehensive interface.

Intercom

Integrate Ada into your Intercom messaging system to solve 80% of inquiries without live agents. When live agents are available to solve the highest-profile problems with shorter wait times, you optimize your CSAT and increase sales. Furthermore, by automating the mundane tasks and giving agents the freedom to work on the most intellectually stimulating problems, you also improve work satisfaction and agent happiness.

Integrations Made Easy

Find out how you can integrate Ada with the tools you already use, or discover new ways to step things up.

Learn More
Integration

Chatbot use cases Illustration

Chatbot Use Cases 

Chatbots in Insurance 

What are chatbots used for? What are the benefits of chatbots? Let us look at some chatbot examples. Chatbots in insurance can provide round-the-clock service, estimate quotes, and collect primary data, all without a live agent’s help. Then, the live agent can step in equipped with all the necessary information to close the deal. Companies can integrate the chatbot into their internal communications systems to create claim tickets and advance claims in a faster and more streamlined process than a lot of existing software can provide. These services save the company money while collecting data in more efficient ways than ever before.

Chatbots in Retail/eComm

E-commerce and retail sites can use chatbots in many of the ways previously discussed. Chatbots can market new products, drive sales, and provide simple technical support, all without a significant financial investment. They are an excellent first line of contact on E-commerce websites so that customers can feel an empathetic connection immediately upon entering the store.

Chatbots in FinTech 

Using chatbots, customers can check their account balances, amount of money transferred, and recent transactions through their favourite messaging platform. They can also connect a PayPal account to their chatbot for even more convenient transactions. Chatbots can process payments, create invoices, offer investment opportunities, and create and manage customer portfolios – all without the help of a live agent.

Chatbot automation is faster than human employees at answering questions and finding banking information so that customers can expect a quick and painless experience. They are also able to qualify new leads for banking and investment solutions. With chatbots, customer satisfaction will increase, and qualified leads will increase too. 

Chatbots in SaaS

Consumers expect Software as a Service (SaaS) companies to provide faster, more innovative engagement by the very nature of the services they offer. Chatbots are the solution. They can provide the cutting-edge, 24/7 service that customers expect, giving your company that extra edge.

Software products are less intuitive than many other traditional items you might visit a website to buy, so people might be more likely to visit the site and not know where to go from there. They need a chatbot to greet them, define their preferences and explain everything they do not understand. Chatbots can lead customers through the shopping experience similar to a live sales agent, but with fewer costs and more availability.

In SaaS, it is also crucial to keep track of customer preferences and feedback even as your company scales. This task used to be difficult because live agents could not keep up with an ever-expanding company. Now, chatbot analytics makes it easy to track customer feedback and integrate it into your company’s business strategy in meaningful ways.

Chatbots in Banking 

Online banking services include multitudes of simple tasks that could easily be automated and streamlined for a cheaper and more comprehensive customer service experience. Chatbots can send notifications for banking or investment news and changes in credit score. These notifications can improve customers’ understanding of their bank and knowledge of new banking advancements, which will enhance their overall satisfaction with their bank.

Chatbots can also send reminders for bill payment or loan application deadlines. They can help customers throughout the entire application process for loans, credit cards, or reward programs. Chatbots can alert customers when these applications go live and distill complex application details. Now, customers know exactly what information they need to provide and when. They are also present to answer any questions that arise during the application process.

Some banking processes such as cancelling a credit card and transferring money can be straightforward yet urgently time-dependent. Chatbots are the ideal solution in these cases. They can solve many common time-sensitive banking issues in mere minutes. They can also detect fraudulent activity, notify customers of this activity via their preferred communication method, and lock their accounts automatically.

Chatbots can also act as a cheaper, continuously available financial advisor. They can provide weekly or monthly financial overviews to customers who would like automatic help managing their budget. They can provide insights such as spending patterns and locations and provide financial advice similar to a live financial agent. They can also send notifications to customers whenever changes such as deposits or refunds occur in their accounts.

All these features render chatbots the ideal addition to the banking model. When all these functions are automated, live agents can focus on the most pressing concerns. Simultaneously, customer satisfaction will increase due to shorter wait times, efficient help, and a more personalized banking experience.

Chatbots in Telecomm 

Telecom companies can use chatbots in a variety of ways we know and love. They can answer frequently asked questions, route customer inquiries to the correct department, and assist with simple issues such as password changes. They can also perform various specialized functions within the telecom industry that will boost sales and customer satisfaction.

Customers can use chatbots to manage their accounts, change their passwords, or check their phone plan status. If a customer prefers it, chatbots can send the customer direct notifications before their plan expires or when they have used most of their data for the month. Chatbots can also personalize your company’s services to each customer. For example, if a customer always runs out of data three weeks into the month, a chatbot can suggest and promote other plans with more monthly data. These bots can even upgrade phone plans automatically, all without a support agent.

Chatbots can also suggest promotions and communicate important news about the company to users who might find it relevant. For example, in the case of a service outage, chatbots can proactively update customers on the outage status. Now, instead of overwhelmed call centers and unsatisfied customers, you can keep everyone in the loop without employing any more service agents.

In telecom, customer feedback is everything. Companies need to know about signal issues, security breaches, and changing customer preferences as quickly as possible to improve their products in real-time. Chatbots are the solution to these speed and feedback dilemmas.

Chatbots in Travel 

Travel companies can use chatbots to boost customer satisfaction and promote products that will help them excel financially. Younger generations are less likely to plan their trips through a travel agency, but they still need advice, price comparisons, and alternate suggestions. Enter the chatbot; they can promote packages and deals so that both the traveler and the company benefit.

Customers can use chatbots to find the cheapest flights within a specific time frame, the closest hotels to a particular attraction, and the best restaurant recommendations in an area. The chatbot can also work within a defined budget to optimize traveler experience based on the amount of money they would like to spend. Chatbots can build entire itineraries and send them to everyone on the trip and integrate them into the group’s favourite messaging platform.

Chatbot for travel is the new frontier in personalized travel advice. The bots can be accessed anywhere, both before and during the trip, and they save the company money on live agents.

Chatbots in Higher Education

One of the most significant administrative barriers in higher education is the number of different departments, faculties, and offices and the lack of communication between these entities. Students may find it almost impossible to complete administrative tasks or ask questions because they do not know where to start. Chatbots can work to integrate all aspects of a higher education institution into one user-friendly interface.

With chatbots for higher education, students can ask questions and receive directions directly to the office they need. They can also connect with academic advisors and receive what-if reports based on changes to their major. Chatbots can even recommend courses based on the student’s academic history and goals.

Chatbots can also aid in the admissions process by answering frequently asked questions and by highlighting scholarships, extracurricular activities, facilities, or academics based on incoming student profiles. When faculty feel they are not answering the same simple questions on repeat, students are more satisfied with the administration, and incoming students are adequately informed about all the school’s assets, the school will improve in every capacity.

Chatbot software benefits all aspects of your company, including marketing, sales, and support. When your company can qualify more leads and keep customers satisfied years into their purchases, it will only be easier to grow.

See Ada in Action

Get a peek behind the curtain at our brand interaction platform and discover why industry leaders automate with Ada.

Request a Demo
Conversational AI