Chatbot - The Ultimate Overview. Technology explained with real examples

In this chatbot overview, we’ll take a look at

What is a chatbot
How do chatbots work
Types of chatbots
Benefits of chatbots
How to make a chatbot
Corporate chatbot use cases

Whether it’s on a website homepage, your favorite messaging app, or helping you book a plane ticket, chatbots are suddenly all over the place. One of the reasons for this is that people love to text, with messaging apps now delivering billions of messages per day. At the same time, consumers are realizing that the convenience with which they communicate with friends and find instant answers to their questions on Google can also be provided by the companies they do business with.

Companies appreciate chatbots’ ability to reduce costs: according to recent research, chatbots will save retailers $439 million a year by 2023. What’s more, chatbots are taking the weight off the shoulders of customer service teams by handling day-to-day queries and carrying out simple tasks, such as reservations and appointments, allowing customer service agents to concentrate on important things that require human attention. For example, AI chatbot Annika automates 60% of the inbound contacts for one of the biggest Telcos in Nordics Elisa.

What is a chatbot and when do you need one?

Put simply, chatbots are AI programs that can simulate human conversation or chat through messaging interfaces. These interfaces include websites, mobile applications, and messaging platforms such as Facebook Messenger, WhatsApp, WeChat, and Viber.

As mentioned above, people enjoy the convenience of being able to contact companies swiftly and easily and obtain quick, relevant answers to their questions. That’s, even more, the case for younger consumers, who give a lot of importance to speedy, efficient customer service.

But chatbots aren’t just applicable to customer service and support. They can also help streamline operations for IT, HR, and marketing teams across a wide variety of industries. For example, a chatbot can process an HR request to provide access to a building to the new employee.

Over the years, chatbots have advanced to the point where they’re now able to comprehend complex queries, assess user intent, provide relevant answers and refine their abilities as they go on. They can help companies save time by decreasing the average handling time, optimize costs by automating a big portion of repetitive questions, process sales and help qualify leads by capturing information. However, it’s important to be aware that sophisticated AI chatbots require more investment than more basic versions that simply follow a flow of commands.

There are several steps to take to ensure that a chatbot is right for your company:

Define the key areas where a chatbot can make a difference. In which areas of business do you have a high volume of customer contacts?
Besides just volumes, it is important to understand how repetitive the questions and answers are in their nature. Do they really require human intelligence or can they be automated?
Does customer conversation require human assistance? Even if the contact cannot be fully automated, it is still worth of using chatbot for forwarding contacts to the right agent. For instance, the opportunity of selling a complex product might not be worth automating, but worth detecting as soon as possible.

Read our comprehensive article on what is a chatbot and when do you need it.

How do chatbots work?

What is the technology that makes chatbots such a valuable addition to the workplace? First of all, it’s important to be aware that not all chatbots are the same or offer the same benefits. More sophisticated AI chatbots are able to interpret and respond to human conversations using natural Language Processing (NLP), natural language understanding (NLU), and solution flow management.

Natural Language Processing is a subset of artificial intelligence and machine learning that explores the way machines interact with human language. Natural Language Understanding, a branch of NLP, enables machines to interpret the way us humans speak, even with colloquialisms, typos, and misspellings, without us having to type code into our devices.

Solution flow management is what enables the chatbot to manage a conversation and find relevant answers to questions.

In simple words, solutions flow is the knowledge base for solving customer contacts. It is very customizable and allows the chatbot to run a customer inquiry through the flow of additional steps and complex business logic, ask additional qualification questions, make API calls to backend systems for checking background information and actually solve the problem for the client, for instance activating roaming or blocking credit card. It is very important that every developed solution flow has its own owner responsible for providing the right information and ensuring that the information is up to date. Usually, that is a person who is an expert in the field or product owner. For instance, it might happen that a delivery policy is changed just overnight, and it is important that your customers get the right answers from the chatbot.

Read the full story of how do chatbots work

Types of chatbots

Chatbots are becoming increasingly mainstream, with hundreds of companies worldwide now offering chatbots for a range of purposes. However, it’s important to know that there are different types of chatbots available to serve different business needs. Let’s take a closer look:

In most cases, rule-based chatbots are based on pre-programmed answers that are guided by a decision tree or triggered by given keywords. They owe their popularity to the Facebook Messenger platform, which businesses can use to automate certain aspects of customer support. They’re often split into a sales track for capturing contact details, and a support track for providing answers to basic queries or links to further information. Most often, they are simply FAQs put inside a chatbot, which makes people lost and struggle to find a solution to their problem.

AI-based chatbots, on the other hand, use machine learning models to increase their functionality, gauge users’ intent, and in some cases solve customer issues without the input of human agents. API integration with backend systems can furthermore enable bots to actually perform tasks for customers, rather than provide them with self-service instructions. This makes them a valuable asset for larger companies in sectors such as telecommunications and banking, or the public sector.

Benefits of chatbots

As we’ve discussed above, chatbots come with a wealth of benefits. These will vary however from one industry or company to the next and according to the type of chatbot. However, their main advantages can be summed up as follows:

24/7 availability: chatbots need no sleep and do not get tired. They’re on call at any time at the day or night and available to answer questions from late-night browsers or just people in different time zones. What’s more, sophisticated AI chatbots can perform tasks for users with no human intervention, meaning you’re on hand for your customers when and where they need you.
Personalized customer experiences: chatbots can use customer data and background information to provide recommendations and suggestions that are tailored to their specific requirements.
Lead identification: AI-enhanced chatbots can detect sales opportunities and potential during a web session. If the chatbot is integrated with backend systems through an API it can process the sale or forward it to the appropriate human agent which depends on the business model and complexity of the product .
Cost savings: intelligent chatbots can automate around 80% of customer contacts and resolve around half of them, which implies significant savings compared to the cost of a fully-staffed support team.
Efficient staff onboarding: while sophisticated chatbots can automate up to 80% of inquiries, more complex cases still require a human touch. Chatbots can forward specific question clusters to specific staff members, improving both efficiency and responsiveness.
Scalability: chatbots enable faster scaling by allowing businesses to reinvest CapEx into OpEx. Rather than building, training, or restructuring contact centers, businesses can handle influxes in customer contacts more efficiently.
Standardizes solutions and knowledge: chatbots reduce the margin for human error by standardizing the knowledge base across the enterprise.
Chatbot gives customer service cases an owner who is responsible for results.

Check out the comprehensive review of the 8 most important benefits of chatbots

How to make a chatbot in 6 steps

Okay, now you have a good overview of a chatbot, how it works and what the benefits are, but what’s next? What are the logical steps to make a chatbot? What things do you have to consider in order to succeed with your project?

One of the most popular questions that is asked about chatbots is how long it will take to make a chatbot with these steps? Mostly, it depends on your team and objectives. Technically, it is possible to launch a chatbot in a couple of weeks. Business-wise, it might take longer to get aligned with your team. We have seen that even in large and complex organizations, it is possible to launch in a couple of months. Here are the six steps you need to consider for launching a chatbot.

In any case, we recommend finding a partner with experience and a high level of expertise in AI and business processes that could help and guide on the way of implementing a chatbot. We have seen cases where companies fail with AI and chatbots due to a wrong understanding of the process and considering it a regular IT project. It’s a common mistake among managers.

Read the full comprehensive guide on how to make a chatbot

Corporate chatbot use cases

The benefits mentioned above enable AI-enhanced chatbots to bring true value to a range of business applications across many different industries. Chatbots are able to not only help customers with queries but also process transactions and address more complex issues.

In the finance sector, chatbots’ ability to understand the intent and draw on customer information in the database makes them a valuable asset. Chatbots can perform operations such as blocking a customer’s card or suggesting relevant financial products based on their current plan and the state of their accounts. When it comes to retail, bots can integrate with recommendation engines to cross-sell and upsell products and provide shoppers with suggestions based on their current cart and personal preferences.

Chatbots can also help streamline day-to-day operations, boost productivity, and help staff work more efficiently. Rather than constantly having to refer to guidelines and manuals, employees can type in a query and receive an answer in a matter of seconds. Pharmacists can verify dosage recommendations, HR managers can check company policies regarding travel expenses and customer support agents can quickly pull up product information in a couple of clicks.

There are various other ways of using Titan chatbot software. In 2019, the Estonian telecom company Elisa implemented the conversational AI solution Annika that shares the same knowledge base with the chatbot. The call automation bot is used in Elisa’s call center which is possible because of an additional speech recognition model that transcribes the call in real-time. Over the following year, Annika answered around 300,000 calls, taking stock of customer issues and directing callers towards the most appropriate human agent. By cutting down calls by 30 seconds, Annika saved the company a total of 5000 working hours. In 2020, Annika took things a step further by flagging network faults and disorders to monitoring teams in real-time. By doing so, she enables support teams to identify the origin of network issues in less time for around 1000 customers. Want to know more about what Annika brings to Elisa?

The most efficient chatbots are integrated with a knowledge database or system that provides it with the answers it needs. In the past, customer support agents would be required to study these knowledge bases and refer back to them when updates were implemented. This is a slow, costly and inefficient process that is gradually being replaced by chatbots that draw on the knowledge base directly, in a process that can be referred to as product management 3.0.

Conclusion

In a nutshell, chatbots can help businesses automate key processes, improving efficiency and productivity while saving money across a wide range of industries. To find out if chatbots are right for your company, get in touch with our team.

Do you want to implement a chatbot?

Kristjan Jansons
Co-founder, CEO

Kristjan has helped various companies from Japan, Saudi Arabia, and Switzerland to implement the latest AI solutions. Having a strong technological background and understanding of the business processes helps him to detect specific business needs and offer necessary AI solutions for matching these goals.

Contact us