What is a chatbot?
Overview, Benefits, Examples, Features, Generative AI

Chatbots, also known as conversational agents, are automated communication tools designed to simulate conversations with users during written or spoken interactions. In business settings, chatbots play a crucial role with two important areas of functionality:

• Enhance the customer experience by handling core tasks like answering customer inquiries, offering product recommendations, and providing post-purchase support, and then providing reporting capabilities to continually optimize these processes. 
• Streamline repetitive tasks to drive business growth by improving efficiency, personalization, and the scalability of customer-facing operations.

Conversational commerce has emerged as a powerful tool that caters to consumer habits and preferences.

Many companies looking to use an AI chatbot for business have turned to conversational chatbots, which can comprehend more than just keywords, grasping context and having a nuanced understanding of language-based interactions. 

These bots also have reporting suites, meaning they can perform data collection and analysis to constantly adapt and improve. Overall, they offer 24/7 responsiveness and help deliver a seamless online shopping experience.

Conversational bots rely on advanced features to process and respond to a variety of requests.

Artificial intelligence is the main technology powering the capabilities and features of conversational chatbots, and is behind their ability to handle complex questions, learn from interactions, and offer personalized responses.

Natural language processing (NLP) enables bots to interpret and respond to inputs, whether the response involves a text-based answer or an action (like redirecting to a human customer service agent).

NLP can be further subdivided into the following types:

• Natural language understanding (NLU), capable of detecting intent and meaning by drawing on contextual cues.
• Natural language generation (NLG), which mainly supports the chatbot’s response abilities, transforming data into natural-sounding and contextually appropriate text.

AI tech is also used in business settings through software applications based on Generative Adversarial Networks (GANs), and can be deployed with sentiment analysis or image recognition features.

Thanks to the technologies mentioned above, generative AI chatbots have emerged as the latest generation of conversational technology. They allow brands to have rich customer interactions across the entire customer journey at each step, from handling initial inquiries to providing personalized product recommendations, upselling, cross-selling, and delivering targeted promotions.

Bot types include scripted or rule-based bots that work off predefined input and AI-powered bots of a task-oriented nature, including social messaging and transactional chatbots.

This type of conversational chatbot can dynamically create new content in different formats instead of being limited to text. Examples include the latest versions of openAI's ChatGPT, Microsoft Copilot, or Google Bard. These AI bots stand out in applications like high-volume customer service interactions, and can potentially result in more conversions at no extra cost.

Generative AI bots also support human agents, creating summaries of customer history interactions, drafting and rephrasing agent responses with a focus on quality, and performing accurate product information searches in real time. In some cases, the implementation of these bots leads to customer satisfaction rates of 94%, much higher than the industry average.

Hybrid chatbots rely on rule-based, AI-powered technology, and are therefore capable of handling everything from simple to complex interactions. 

In e-commerce, this software can assist customers with standardized order placing, tracking, and modifying, as well as guide them through sales funnels with the aid of rule-based logic, or escalate customer service inquiries to a human agent.

Through each chatbot example below, we’ll look at three ways in which bots and their features can be leveraged by an e-commerce business.

European furniture brand, Momax, deployed a chatbot capable of answering all of their FAQs and questions about their entire product catalog. The conversion rate climbed to 13% after implementing this self-training solution.

Eyewear retailer, Payne Glasses, partnered with iAdvize to implement an AI chatbot that could cope with a high volume of customer inquiries. This move resulted in conversion rates 10 times higher than through traditional channels, and cut the workload of their customer service agents in half.

AI chatbots have strong product discovery applications in e-commerce. These solutions can fully personalize the shopping journey, since conversational bots can interact with shoppers to find out their preferences, and deliver tailored product suggestions that save time and reduce abandoned cart rates.

The data speaks for itself: nearly 75% of US shoppers actually want this technology to help them make product discovery more accurate and seamless.

An AI chatbot can be implemented across different channels, from website to social media platforms to mobile apps, with a range of features that streamline repetitive inquiries and ultimately support growth.

According to some surveys, conversion rates from bot-led interactions can increase by 23%. Similarly, bringing them into the decision-making stage of the marketing funnel can result in a 67% sales boost.

AI bots offer instant 24/7 responses and can lead to a 77% decline in inquiry handling time. This can help ensure that browsers become buyers, maximizing the positive impact to your bottom line.

The round-the-clock availability of chatbots can result in reduced payroll and operational expenses starting at 30%. In the e-commerce sector, these solutions have been shown to deliver revenue increases of more than 60%.

The automation of many routine customer service tasks means that agents can focus on interactions where quality human input is needed. Since bots reduce the workload, they can also contribute to fewer errors and less pressure on customer service personnel.

Customer satisfaction rates can increase after the launch of a chatbot on an e-commerce website. Satisfaction and engagement rates are particularly high among Gen Z consumers.

To create an effective chatbot with features tailored to your needs, it’s necessary to follow the strategic steps below.

Look for a company with a proven track record in building chatbot solutions and with extensive documentation for developers. Ideally, they should be offering new-era generative AI bots, and should be specialized in your industry sector.

The personal and payment data handled by chatbots must be kept secure through measures like user authentication and end-to-end encrypted visitor data. You should be able to find details on which data is collected, where it's stored, for how long, and their policies for anonymized data.

In addition, the provider should abide by ethical practices and be compliant with legislation and security standards like the GDPR, CCPA, ISO 27001, and any others that may apply in your region.

Chatbots don’t replace humans, but rather augment their abilities. To ensure these solutions offer optimal benefits in your business, consider their ease of integration with existing human-led customer service teams. Below are some aspects to look at when comparing bot options.

• How fast can they be set up? Timelines above 2 weeks could be disruptive to your operations.
• Is it user friendly?
• How easy is it to feed different types of company data to the bot?
• Are self-training bots available?
• How extensive are the user-defined policy controls?

Multi-channel chatbot implementation can help ensure a consistent automated experience, making its benefits accessible across the web. Here are some channel-specific bots that can improve your standard of communication and service with customers.

Many B2B companies use artificial intelligence-powered chat solutions on their websites, with features ranging from answering specific product questions to offering personalized recommendations or guiding customers to ensure they finalize the purchase process smoothly.

Many leading retailers have implemented this self-serve experience to facilitate in-app purchases, book a taxi to the physical store, provide tutorials, as virtual stylists, or to help with product care instructions, and more.

With more than 2.7 billion users worldwide, WhatsApp can be leveraged as a truly global e-commerce communication solution, using bots for tasks like lead qualification, automated order confirmation, FAQ support, and personalized notifications about upcoming promotions.

RCS and SMS chatbots are useful for concise communications like on-demand order updates, but can also handle more complex issues like assistance with technical problems.

Thanks to the wide-ranging capabilities of AI chatbots and advancements in AI chatbot technology, these intelligent virtual assistants can be effectively used for every industry, especially e-commerce.

Integrating chatbots into business communications and customer service can offer a richer experience that leads to increased sales and a stronger reputation. Of course, the key is choosing the right chatbot solution taking into account current and future needs to ensure this technology matches their brand values, customer service standards, and growth plans.