Chatbot 101: Understanding The What, How & Why

Jessica Peckett
Head of Demand Generation
Live Chat
Read Time: 7 minutes
March 28, 2022

Live chat has become vital for enhancing the online customer experience and collecting valuable information. With instant support, personalised interactions, and seamless engagement, chat has become an indispensable tool for businesses and individuals alike. And within the realm of live chat, comes the use of chatbots. These can improve efficiency, reduce costs, and drive measurable results, making them crucial in the fast-paced digital landscape.

Here's an all-inclusive overview of chatbots, diving into their definition, capabilities, and the benefits they bring across various industries. This valuable resource is your go-to guide for understanding how chatbots are propelling business growth.

Let’s dive in.

What are Chatbots?

Imagine you're talking to a computer program that can understand what you're saying, can have a conversation with you and help you out just like talking to a person. That computer or ai program is called a chatbot. 

It uses special technology such as natural language processing (NLP) to understand the words typed or said. Then it gives you answers or helps you with things based on what it understands. 

There are generally three main types of chatbots:

1. Rule-Based Chatbots: Also known as scripted or decision-tree chatbots, these follow predefined rules and work using a set of predetermined responses to specific user inputs. 

Rule-based chatbots are best suited for simple and straightforward inquiries. They are limited to predefined rules and struggle with complex or unexpected queries.

2. AI-Powered Chatbots: These chatbots use artificial intelligence and machine learning algorithms to understand and respond to user inputs. They use natural language processing (NLP) to interpret intent and context in order to provide more intelligent and interactive conversations. 

These can learn and improve over time based on user interactions.

3. Hybrid Chatbots: Hybrid chatbots combine rule-based and AI-powered approaches, using predefined rules for common queries and AI algorithms for more complex or ambiguous inquiries. 

Hybrid chatbots strike a balance between flexibility and control, offering a robust conversational experience while ensuring accurate responses for common scenarios.

It's worth noting that the capabilities and functionalities of chatbots can vary depending on their development and implementation. Some chatbots may specialise in specific industries or domains, such as customer service, e-commerce, or healthcare, while others may have broader applications.

The Benefits of Chatbots - The Why

The use of chatbots may not be right for every business, but for those that it is, there are a number of benefits to be gained.

  1. Customer service and support
  2. 24/7 availability and instant responses
  3. Time and cost savings
  4. High volume of inquiry handling

We explore the benefits of chatbots here.

For certain businesses, opting for a chat system managed by human agents might align better with their specific objectives in deploying chat. Read more about this here.

How Chatbots Work?

Chatbots operate on a backend architecture that includes a messaging platform or website interface for user interactions, a server or cloud infrastructure to handle the processing and response generation, and a database to store and retrieve relevant information.

Natural Language Processing (NLP) plays a crucial role in enabling chatbots to understand and interpret user input. Machine Learning (ML) algorithms are often used to train chatbots on large datasets, allowing them to improve their language understanding and response generation over time.

There are several development tools and platforms available for building and deploying chatbots. These tools often provide user-friendly interfaces, pre-built templates, and drag-and-drop features to simplify the chatbot development process. They may also include features for training chatbots using machine learning techniques, managing conversation flows, and integrating with external systems.

By leveraging backend architecture, NLP and ML algorithms, integration with messaging platforms and websites, and utilizing chatbot development tools and platforms, businesses can create powerful and intelligent chatbots that can understand user queries, provide relevant information, and interact with users in a conversational manner.

Best Practices for Chatbot Deployment

With the decision made to incorporate a chatbot in your customers' journey, there are a few items to consider. These include:

1. Set the objective of the chatbot: Like all business decisions, launching a chatbot should have a clear objective and KPIs in order to measure success. There are a few questions to ask yourself.

  • Is this for prospective buyers or existing customers?
  • What information will it need to provide?
  • What tone of voice will the target user expect?
  • What hours does it need to be active for?
  • What is the goal of launching the chatbot?

2. Understand your target audience: You should have a good understanding of who will be using the chatbot, what questions they will ask and what information should be provided. This will also impact the tone of voice and language used. 

3. Craft conversational dialogues and chat flows: Based on the objective of the chatbot as well as a good understanding of your target audience, conversational dialogues and chat flows should be built.

4. Set testing and optimisation processes: Regular testing and optimisation of chatbots ensure a good customer experience. This process needs to become part of someone's role and KPIs. 

5. Integration with existing systems: As chat will become a core contact point for prospects or customers, this should be recorded alongside other key customer touchpoints, and therefore should be integrated with existing CRM tools.

6. Privacy, data protection and security: It is crucial to ensure that chatbots and their associated processes comply with the privacy and data protection requirements of your business.

Chatbot Challenges and Limitations

Whilst there are benefits to employing a chatbot, there are also a number of challenges and limitations that need to be considered. These include:

  1. Handling complex queries and unique customer scenarios
  2. Understanding language nuances
  3. Chatbot errors and fallback options
  4. Balancing automation with human intervention

It is important to consider these options when deciding whether a chatbot is the right way to deploy live chat. For some businesses, human-led chat might be a better option than a chatbot, and this brings the option of whether to outsource this to a third party to manage.

Future Trends in Chatbot Technology

With continual advancements in technology, the future use and development of chatbots seem unlimited. There are three core areas of special interest. 

  1. Advancements in AI and machine learning
  2. Voice-based chatbots and virtual assistants
  3. Integration with emerging technologies (e.g., AR/VR, IoT)

If you're intrigued by the potential benefits of our Live Chat technology for your business, we invite you to Book A Demo with us today. 

Over the years, chat-based communication has gained tremendous popularity as customers veer away from traditional modes of interacting with brands. By employing chatbots to address straightforward customer queries, companies can assign their human agents to handle more intricate issues, resulting in enhanced customer experiences and higher conversion rates. There are both benefits and limitations to using a chatbot, and all need to be considered in order to determine