Chatbots in Customer Service: An Introduction

What are chatbots? Learn everything you need to know about the digitised customer service tool.

We’ll show you how chatbots optimise the customer service experience by creating efficiency and ease for both companies and customers. Discover how chatbots originated, the technologies used behind them, and how chatbots assist companies today.

The origin of chatbots

The world’s first chatbot was the virtual psychotherapist ELIZA, which was programmed from 1964 to 1966. It was a relatively simple scripted program that asked its users to keep talking or asked questions about the topics addressed using a thesaurus. Many people considered it to be a legitimate dialogue partner, at least for a short time. Upon taking a closer look, the system’s weaknesses became apparent. Nevertheless, ELIZA could not formally pass the Turing test, the measure of whether AI is equal to humans in its functionality. In the Turing test, the test person chats with a machine and a human at the same time. If, after intensive questioning, they are unable to determine which chat partner was the human and which one was the machine, the Turing test is considered passed.

To date, no AI has been able to pass the Turing test. However, for chatbots in particular, it’s no longer necessary to pass such a test. Today, society is increasingly accepting of using chatbots. In a 2019 survey, 86% of those questioned stated that they would rather communicate with a chatbot on a company website than fill out a static contact form. Many customers are now well aware of the advantages of this technology and use chatbots even when it is clear that they are not talking to a person, but AI. At the same time, positive experiences with virtual assistants are increasing the demand for permanently available support. As of 2020, 41% of consumers believe that chatbots can provide better and more efficient customer service. This can be seen in the growing number of accessible chatbots.

How chatbots support companies

Chatbots provide fast and reliable communication between the consumer and business. By offering customers a competent contact person around the clock, questions and urgent inquiries do not just end up unanswered in an empty void, but instead, customers receive feedback immediately.

The customer then feels valued and appreciated, which strengthens their trust and relationship with the company. As customer retention is cheaper than customer acquisition, it’s essential in maintaining a loyal partnership with customers. 

Thus, customer requests that are recurring can be completely automated with chatbots. Conversational AI can immediately process the request in full. This not only increases customer satisfaction but also relieves support teams that are sparsely staffed. On the one hand, companies can save costs, and on the other hand, customer service employees have more time to deal with individual and more complex inquiries to offer better care for customers. Ultimately, the quality of customer service is improved by the use of chatbots.

In addition to service and support services, chatbots are also increasingly being used for lead generation. Many processes run in similar ways and can therefore be automated with predefined processes. When acquiring new customers, chatbots are a logical digital tool that automate potential clients, while addressing customers on a personal level. Chatbots can cover first approaches to customers in lead generation, and the sales team can intervene as soon as the customer shows interest.

Chatbots can not only be used for communication between companies and private or business customers; they are also well suited for internal communications. For example, there are chatbots that are used solely as a service help desk for internal employees. The communication tasks involved here are comparatively simple, and the bots used can guide employees through predefined workflows. As people’s preferred way of communication has changed in the digital age, chats and messenger services have become the preferred communication medium today, replacing calls and emails in private communications. The popularity of chatbots is also on the rise among customers in corporate communication, and they achieve better results than circular emails.

The technology behind chatbots – how intelligent are they really?

Modern chatbots currently work in two different ways: either scripts based on rules or based on artificial intelligence in which the chatbot learns something new with each customer interaction. The basis for this is always the largest possible database of knowledge, also called a knowledge base. This helps the bot to recognise patterns and to find the right answer to them. The larger the amount of data stored, the better the chatbot will react to the many text entries or requests.

The chatbots based on rules can only answer question-answer sets that have previously been added to the knowledge base. Thus, they are not considered intelligent, because they cannot learn something new on their own, nor can they recognise unknown patterns.

Other chatbot models are based on artificial intelligence and use machine learning and, in part, natural language processing (NLP) to process the requests. This means that not only are text entries processed by several rules, but the AI chatbots can access the knowledge base and give the impression that the dialogue partner is human. These models usually require large amounts of data training.

These AI-supported chatbot models are considered intelligent because the program learns something new over time and can thus recognise previously unknown patterns and respond accordingly. Over time, these AI chatbots can also learn to refine existing patterns and, for example, recognise different adjectives in relation to nouns. These AI chatbots offer an increasing rate of automation to companies and a continuous flow of conversation to customers.

However, since handling a conversation is a very demanding task and the technology of chatbots cannot yet automate 100% of requests, there are hybrid chatbot models as well. The aim is to combine the advantages of AI-supported chatbots, such as an increasing automation rate, shorter response times and a contact channel around the clock, with the capabilities of a human agent. This allows the chatbot to act independently and only activate the agent if the bot does not understand the question. This leads to a constantly growing knowledge base and automation.

What are chatbots capable of doing today?

The easiest way of recognising the complexity of a chatbot these days is to ask a question that does not fall within the functional scope of the bot and does not appear in the knowledge database. Chatbot programs usually specialise in certain areas.

For instance, a bookseller’s chatbot that helps you with ordering or can give book recommendations has no idea of current share prices, while the chatbot of a bank can immediately call up the relevant information requested. If you use company chatbots to request information for which they were programmed, you can only partially determine the difference.

Nonetheless, chatbots are able to proficiently work in any sector, including but not limited to: financial services, human resources, insurance and telecommunications.

The future of intelligent chatbots

Chatbots are already taking on a variety of functions and will continue to expand in the near future. Speech and pattern recognition will also improve further, increasing the apparent understanding of programs. While chatbots are currently mainly used in messengers and on homepages, they will also dominate other media forms in the future. At the same time, chatbot dialogues are becoming more and more natural, and users are beginning to develop personal relationships with them. 

Additionally, the cost savings for companies is undeniable: within the retail, banking and healthcare sectors, chatbots are expected to deliver an annual cost savings of $11 billion by 2023. Today, companies must adapt to such tools, especially as customer expectations are changing. The expansion of specialised chatbots for streamlined communication has already begun.

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