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What Is a Chatbot, and What Is It Used For?

Angela Stringfellow

Last updated on

All businesses have a customer-facing aspect of their operations where they have to interact with their consumers. It’s not a significant problem for B2B businesses, as they have a small number of customers with large ticket sizes, and these companies will hire dedicated relationship managers for their clients.

Businesses that serve directly to end consumers have millions of customers, and hiring employees to handle the problems of each customer becomes challenging and costly. While most businesses leverage call centers, controlling costs is a key concern, as well as ensuring that customers get prompt support when they need it. A scalable solution that any business, with any number of customers, can deploy is a chatbot.

What are Chatbots?

Chatbots are customer service software applications that can engage users in a conversation using text or speech. Chatbots are designed to mimic the conversational patterns of a human, with the aim of giving customers a more personalized experience but without the costs associated with using human representatives to address all queries. Ideally, customers shouldn’t be able to identify if they are having a conversation with a chatbot, but believe instead that they are talking to another human. Unfortunately, this is not the case for many of the chatbots used in commercial applications.

That said, the general purpose of chatbots is not to fool the customer into thinking they’re talking to a real person, but rather to deal with large numbers of customers simultaneously in a cost effective manner. Most chatbots are algorithmically designed to provide pre-determined answers to their users, and most systems are just smart enough to understand users’ queries and point them in the right direction.  

Many different variations of chatbots are used for commercial purposes. Some of the types of bots are:

  • Option-based Chatbots: One of the most basic forms of bot, it can only display multiple options to the user. Based on the option selected by the user, the next set of options is displayed or the user is redirected to a relevant webpage.
  • Scripted Bots: These chatbots have a pre-determined script for conversations, and the bot simply chooses a response from a set according to the user input. These bots work with generic text that is scripted and saved for later access.
  • Knowledge Base Bots: These bots are capable of identifying context from the user’s query or input. The bot is linked with a knowledge base and finds the relevant answer before using it to respond to the user.
  • Text Only Chatbots: These older bots can only work with text based information, as opposed to more modern chatbots that can interpret a user’s voice.
  • Contextual Chatbots: These bots have the ability to recognize key pieces of information in the user’s query. The response from the bot will then use data from the query to provide more context to the response.
  • AI Chatbots: Using AI technologies like Natural Language Processing (NLP), these bots have modern AI algorithms that work to better understand the user’s query. These chatbots have the ability to create responses that are not scripted or pre-determined, and are much smarter than most chatbots.
  • Voice Chatbots: These bots can understand users’ speech. The user speaks naturally, and the chatbot interprets what is said and then generates a response accordingly. The response from such bots can be in text or in voice format.

Applications for Chatbots

There is a wide range of applications for chatbots across different industries. Three major applications are mentioned in the following sections.

Customer Support

The most prevalent use of chatbots is in customer support. Creating a call center that can cater to millions of customers is cost-prohibitive, whereas chatbots are cheaper and offer a more scalable solution. Most of the queries will be addressed by the chatbot, but if the user requires assistance from a human operator, the chatbot can forward them to a customer service representative.

Sales Assistance

With a very small percentage of leads converting into sales, having your sales team chase every lead may not be a prudent allocation of time and human resources. Chatbots can therefore be used to qualify leads, allowing sales teams to dedicate more of their time engaging with the most qualified leads identified by the chatbot. This offers much needed flexibility for the sales team, while also helping to keep the number of required sales team members to a minimum.

Digital Assistants

Digital assistants are increasingly being used by consumers in their everyday lives, with the most popular digital assistants being Google Assistant, Amazon Alexa, Siri, and Cortana. These assistants can capture the speech of users and understand it. Based on what the user requested, they can then create a response. Advanced AI systems are used as the backbone for most modern digital assistants, allowing the bot to interpret and respond to almost any query. Unlike most other types of chatbots, the digital assistant is able to deliver its response to the user vocally, too.

Chatbots started off as a simple tool to carry out simple conversations, with their application becoming a simple and cheap solution for providing customer support for millions of  customers. The use of artificial intelligence is making chatbots smarter and giving them a wider range of abilities, resulting in more and more applications for chatbots developed each day.