All about chatbots: Here’s everything you need to know in 2022

Many of us, at some point in our life, have probably used a chatbot, and we may not have even realised it! Chatbots, or simply ‘chat robots,’ are a phenomenon right now. 

You name the website, and you will likely find one. Chatbots are seemingly cropping up all over the internet, in websites ranging from eCommerce platforms to customer care areas. 

A while back, Chatbots were used on crowd-sourced live help channels like Zendesk. The ubiquity of chatbots stems from the need for improving customer engagement and automating many such processes that would otherwise be costly. 

So what exactly is a chatbot? Have you ever wondered how it works? Let’s have a look!

What is a Chatbot?

Chatbots are computer programs that simulate text or voice conversations with a human for customer service or sales interactions. Put simply, chatbots utilise artificial intelligence capabilities to provide answers autonomously and without needing manual intervention. 

Once the customer requests are fed into the program, the chatbot will search for relevant answers in its database or learn from previous conversations and respond to the customer.

Currently, over 1.4B people use chatbots each day, reveals numerous reports. In 1960’s (1964 to 1966), Joseph Weizenbaum, a professor at MIT, developed the world’s first chatbot – Eliza. It was able to engage in simple conversation by asking questions and responding to cues from users.

Various industries like retail & e-commerce, media & entertainment, finance & legal, health, food, and travel are shifting their focus on resolving customer queries in the quickest time possible. 

With both traditional companies and startups giving more attention to amassing feedback from customers globally, evidence suggests that providing a quick response is as vital to achieving company goals as having a high-quality product or service.

How big is the Chatbot market?

Market and Market’s report reveals that the global chatbot market is forecast to reach around $10.5B in 2026 at a CAGR of 23.5 per cent. 

The report further adds that various factors, including the need for 24/7 customer support at a lower operational cost, an increase in focus on customer engagement through several channels, and many  more, add to the growth of the chatbot market. 

The chatbot market has been divided into five segments – APAC, Europe, MEA, North America, and Latin America. Among these regions, North America is set to hold the largest market size during the forecast period, says the report. 

The report also adds that APAC is expected to grow at the highest CAGR during the forecast period. 

“Factors such as flexible economic conditions, industrialisation- and globalisation-motivated policies of governments, and digitalization are expected to support the growth of the chatbot market in APAC,” says the report. 

How do Chatbots work?

Typically, a chatbot comes with its responses through a combination of machine learning and pre-defined scripts. 

When a query is requested, the chatbot will respond based on what it knows at that time. If not, the chatbot will transfer the conversation to a human operator.  

Chatbots are designed to learn from people’s conversations, resulting in them getting progressively better in response. The complexity of the chatbot depends on the dataset it is trained on and the algorithms its learning system employs to make sense of that data.

Type of Chatbots

At its core, Chatbots are divided into two types:

  • Rule-based Chatbots
  • AI-based Chatbots

Rule-based Chatbots

Rule-Based Chatbots are pre-determined to provide answers to a specific set of questions. It uses situational knowledge or a series of IF/THEN statements, which makes them understand users’ queries and provide corresponding answers to them.

Rule-Based chatbots might only reply in binary, like “Yes” or “No”, to questions about whether a product is in stock, for example, whereas complex versions can understand human language, learn over time and respond with relevant answers and context to all kinds of questions. 

Further, this chatbot lacks analytical capabilities and adaptability to understand a persons questions and intentions. 

AI-based Chatbots

AI Chatbots are much more endowed than their counterparts. Not only do they have Natural Language Processing (NLP) capabilities but they are also equipped with Artificial Intelligence (AI), which further allows them to make independent decisions using Machine Learning (ML) as well as in keeping track of customer preferences. 

The system uses patterns and context to help form an intelligent response that can understand the user and provide correspondingly relevant answers. 

Additionally, the AI bot can learn from past conversations and remember what it had discussed before or what the user liked. Thus, AI Chatbots are smarter and continue to grow smarter with experience.

Some of the perfectly-known examples of AI chatbots are Apple’s Siri, Google Assistant, and Amazon’s Alexa. 

What are the benefits of Chatbot?

According to Business Insider, around 40 per cent of internet users globally prefer interacting with chatbots over humans in customer service. Several major companies, including LinkedIn, Starbucks, eBay, and British Airways, announced their support for chatbots within their own business, adds the report. 

Implementing a chatbot into the business has several benefits. They are:

Customer Satisfaction: A chatbot is the most crucial aid towards maintaining a seamless relationship with your customers. As a result, customers don’t have to wait or waste time in getting their queries resolved

Available 24/7: Chatbots don’t sleep and aren’t restricted by business hours when it comes to answering consumer queries. Some consumers are sensitive when trying to communicate online and may require help from your business as soon as possible, and this is where Chatbots come in.

Help businesses grow:  Knowing and providing the right details at the correct time is crucial when it comes to closing a sale. And who is better than a chatbot? Chatbots are becoming a critical tool to handle almost any customer service-related task, answer common questions and provide mentoring and guidance. From marketing to sales to customer services, chatbots can help businesses grow, improve and expand in every aspect. 

Wide range of applications: Chatbot offers a wide range of applications such as Customer Services, Marketing, Sales, IT Service Helpdesk, HR, and more. 

Saves money: Last but not the least, chatbots help businesses save a huge chunk of money. The main reason behind introducing chatbots is to replace traditional methods of customer support with more automated solutions. 

Why is that? Well, it will help businesses save costs in hiring support agents by reducing human labour costs as well as the cost of acquiring and maintaining hardware and software specifically to support customers better than humans possibly can themselves.

According to a report, chatbots help reduce customer service costs by 30 per cent by implementing conversational solutions like chatbots or virtual agents, which can be very beneficial for businesses who want to cut down on overhead expenses.

Artificial intelligence is an incredibly useful tool in our modern high-tech world. It is empowering programmers to create personalised chatbots that can better understand customers’ queries. 

This is changing the way consumers expect brands to engage with them in the future, opening up and improving direct dialogue with customers as they were once used to, and thus making the whole experience that much more refreshing.

What are the limitations of Chatbots?

Chatbot technology has come a long way and will continue to forge ahead. Despite phenomenal advances in the last few years, chatbots haven’t quite replaced human beings as the pinnacle of versatility and capability. A chatbot regardless of its technology still needs a precise clear purpose for its utilisation. If the goals aren’t clearly defined or too open-ended, a chatbot may fail miserably. Other limitations of chatbots include a lack of human context and empathy, repetitiveness, and poor conversational understanding.

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