Posted on 

May 30, 2022

What are chatbots, and how do they work?

Karl Tippins
Content writer

If you are a millennial or Gen Z-er, there is a high chance chatbots play a significant role in your life. Depending on how closely you actively engage with the tech you use, you might not be aware of just how much you are using chatbots every day.

What is a chatbot?

Have you ever used a search engine but used speech rather than text to look for something? How often do you find yourself on websites and notice a “live chat” window and automated helper pop up? How many times a day do you ask Siri, Alexa, or Google to help you discover something?

All these are examples of chatbots in action.

How do chatbots work?

Chatbots generally follow the below sequence:

  1. You provide an input by requesting something, like the weather forecast, the latest sports results, or anything else you want to know.
  2. The software using the chatbot analyses your request.
  3. The software identifies the intent of your request, and analyses the possible responses based on your input.
  4. The chatbot composes a reply, either speaking to you or writing the response that appears in the chat window.

How simple does this appear? The process is nothing more than an input and output feedback loop that we use every time we think!

However, underneath this, a chatbot is conducting millions of calculations in fractions of a second to generate an answer.

Chatbots rely on a range of technologies to provide contextual and relevant outputs, including:

  • Artificial Intelligence (AI)
  • Automated rules, such as “if this, then that” (IFTTT) instructions
  • Natural language processing (NLP)
  • Natural language understanding (NLU)
  • Machine learning (ML)

Furthermore, chatbots fall into one of two descriptions, which we explore below.

Task-orientated chatbots

Also known as declarative chatbots, these programs are single purpose and designed explicitly to carry out a sole function. Task-orientated chatbots can still give conversational responses, but only around specific queries or questions, such as:

  • What time is it?
  • What time is my business open?
  • What is the seventh planet from the sun?

Task-orientated chatbots are typically not set up for machine learning, so they will not remember previous queries for the purpose of providing a more contextual answer next time.

Data-driven and predictive chatbots

Also known as conversational chatbots, these types of chatbots are what you commonly find in a virtual assistant. Predictive chatbots are much more sophisticated and interactive, using NLU functions to understand context and emotion. They also rely heavily on ML functions to continually improve their outputs and personalise what they offer to meet your needs.

While a predictive chatbot learns from inputs and subsequent requests, you can also teach and tell your chatbot specific functions to carry out to help them learn quicker.

What value do chatbots provide?

If you use chatbots in your business, both you and your customers may stand to benefit.

Numerous studies have shown that using chatbots can have a dramatically positive impact on your conversion rates. If your target customers are millennials or Gen Z-ers, these are people who expect and are accustomed to quick responses. Not using chatbots to facilitate this could have an even more pronounced impact on your conversion rates.

Furthermore, a 2019 Adweek study found that 68% of consumers prefer communicating with businesses via messaging apps. Can your business afford to have a team of humans spending their day answering queries on Facebook Messenger or WhatsApp?!

For example, let us say you use chatbots in a customer-facing context.

You will:

  • Save money by automating a function rather than relying on human input
  • Ensure consistency in responses given to customers
  • Be able to address every customer query immediately rather than placing them in a queue
  • Dramatically reduce the volume of “real life” human interventions required in some of your business communication
  • Effectively have a customer service option available 24/7

You win, your customers win, you deliver excellent service levels, cut your costs, and grow your revenues.

The beauty of chatbots is that you can deploy them in a variety of ways to deliver a consistent customer experience. For example, if you use chatbots on the telephone, via live chat or messaging apps, and for helpdesk emails, customers can go through the same process, whichever channel they use to contact you. As chatbots are in place, the resource you will use is limited. Therefore, the customer has the power to choose whichever communication platform they prefer.

If your data starts to show that more customers prefer a particular method or specific platforms deliver better results than others, you can dive down into your performance and understand what you need to optimise.

Common uses of chatbots

Most people have probably experienced a chatbot via a live chat function on a website. However, their use in a business context is not limited solely to direct customer queries.

Other ways businesses can harness the use of chatbots include:

  • Within helpdesk software to act as a "self-service" solution for problems. You will often find this functionality used by internet service providers. If you are having trouble with your connection, a chatbot can take you through potential fixes.
  • As a primary means of gathering data from a customer before escalating to a human for resolution. For example, a chatbot can take care of everything from taking the customer's name, account number, password, and the reason they are getting in touch, minimising the human resource needed to deliver a resolution. Consumers increasingly do not mind such a process, either. People want automation where it is available!
  • To conduct a variety of real-world, everyday functions like booking tickets, remote flight check-ins, advance hotel check-ins, and comparing two or more potential products or services. When you are in a hotel, you might even use a chatbot to order room service!

Key takeaways

If you are not using chatbots in your business, you are missing a huge opportunity to both enhance the customer experience as well as your bottom line. Furthermore, studies demonstrate that customers expect and even want to deal with a chatbot rather than a person where possible!

Implementing chatbots in your business does not have to be complicated. While they may represent a short-term culture shock, in the long-term you, your teams, and your business overall will reap the rewards.

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