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What is Chatbot? A Definitive guide 

Kate Williams

Last Updated:  

20 February 2023

9 min read

Ema was thinking about investing in a survey tool for a long time. So, she visited a survey company’s pricing page to avail their services.

Even though the page included comparisons and pricing charts, Ema was confused. Why? Because of the wide range of options and features.

And, instead of buying the product, she decided not to go through with the purchase!  

What if an incident like this happens to one of your prospects? If customers get confused with your pricing plans or product features, they might not purchase from you. Also, if they’re having a hard time understanding the products and services, instead of contacting your customer service department, they might even start looking at other options out of frustration. You certainly don’t want this, do you?

That’s why chatbots are a miracle to businesses.

Why Need a Chatbot?

Chatbots can easily guide your customers in deciding which product they should purchase. Unlike a human customer service team, Chatbots don’t need lunch breaks or short vacations. They are available 24/7 to offer excellent customer service. As per the 2019’s Salesforce survey, 77% of customers agreed that chatbots would transform their expectations of companies in the upcoming five years. We’re now in 2021, and chatbots are going stronger than ever. 

However, several brands are still confused about how chatbot is a strategic investment. We will decode that in this blog as we’ll talk about chatbot & conversational AI and how businesses can benefit from them going forward. And we promise that by the end of it, you’ll have the information you need to start using them the right way. So, let’s do this! 

What Is A Chatbot?

A chatbot is a program powered by AI (artificial intelligence) or rules that deliver a human-like chatting experience. No matter what type of chatbot you use (website bot or messenger bot), they all have one goal- take language input from humans, understand what they’re trying to say, and provide correct answers based on that. One of the best parts of using chatbots is that you don’t have to download them to use them. Unlike other applications, they won’t take up space on your phone’s memory. 

According to a recent study, the market size of chatbots will reach $1.3 billion by 2024. It will be a driving force behind all the business communication. Several startups and giant companies like Facebook, Skype, Telegram have adopted conversational bots for providing support to their customers. From this, we can pretty much assume that chatbots are expected to become more mainstream in the future. 

What Is A Conversational AI?

Conversation 1: 

Bot- Hello, how can I help you today?

Sara- how much balance do I have in my account?

Bot- You have $875.99 in your account.

Conversation 2:

Bot- Hey there Sara, how can I help you today?

Sara- How much balance do I have in my account? 

Bot- Wait a sec Sara… let me grab my calculator!

You have $875.99 in your account. 

Which conversation sounds more natural to you? The second one, right? Well, this is where conversational AI comes into the story. When we interact with a computer, we want it to communicate naturally. Conversational AI is a technology that makes chatbots answer a customer in a more human-like manner. It helps the bot understand human triggers and questions, the way a human will understand and give a response. Mostly, SaaS companies, B2B businesses use conversational chatbots to provide better customer service. 

Conversational AI Vs. Traditional Chatbots

Not all chatbots are similar. There’s a big difference between conversational AI and traditional rule-based chatbots. Rule-based chatbots use pre-defined rules during a conversation. It initially provides customers with a fixed set of question choices relevant to their problems or queries. After that, the chatbot will guide them by providing more options until their questions have been answered. Businesses such as banks, restaurants, online delivery services mostly use this type of chatbot. 

Conversational AI, on the other hand, uses machine learning and NLP to give a human touch to the chatbots. When you ask a query, a machine learning algorithm helps the chatbot monitor the past conversations it had with you and give relevant responses accordingly. While NLP or Natural Language Processing helps the bot transform the users’ speech or text inputs into structured data, it also trains the bot about the different ways a user may type during the conversation. Impressive, isn’t it?

A chatbot with AI can make your bot intelligent enough to answer all kinds of complex queries. And it keeps the conversation engaging, fun, and conversational. Chatbots can gather data quickly from past interactions with the users. Based on those interactions, it can improve the current conversation with them. Also, AI-powered chatbots save time by providing the right information quickly to the users. Because being quick in solving queries is important to keep satisfying customers. 

What Are Chatbots Used For?

We are living in the era of automation. From paying bills to ordering food, everything is done by automation. Chatbot technology is no exception. Implementing chatbots is basically a win-win for both customers and businesses. How? Well, customers can find quick solutions for their problems. And businesses can improve customer satisfaction big time with chatbots. Here are a few common examples where chatbots are making life a lot easier for people and organizations:

  • People are using chatbots for different banking operations- for paying bills, sending money, online transactions. 
  • If a customer wants any information about their account balance, last transaction, or any kind of banking activity- chatbots are a solution. 
  • If a customer wants to know about a product or service, they can visit a company’s website chatbot. They can ask the chatbot about the features, FAQs, or any other queries. 
  • For any kind of complex customer queries or live chat, solution chatbots can provide 24×7 customer service.

Why Are Chatbots Important?

More and more companies are using chatbots for websites, apps, messenger, social media to adopt a digitally advanced business strategy. By the end of 2023, organizations will save around 2.5 billion customer service hours by using chatbots. That’s a heck lot! The way chatbots are gaining immense popularity among businesses, we can say it offers some great advantages for them. And let’s explore these advantages to show you that chatbots can definitely lead the way for your business’s growth. 

Lead Generation Machine

Most of the businesses nowadays are omnichannel. They operate through websites and social media channels (Facebook, Twitter, Instagram). And AI chatbots allow businesses to communicate with their potential customers via these platforms. With chatbots, you can engage with your website visitors and guide them throughout their purchasing journey. This will help them to make a better purchasing decision quickly. 

For better lead qualification bots, ask relevant questions to your potential leads and direct them to your sales team for scheduling an appointment or immediate conversion. Also, chatbots can nurture your qualified leads by providing them combo offers, personalized recommendations, discounts, etc. 

For example, famous global clothing brandH&M is using chatbots to sell their products. The H&M bot guides its customers to the online store and navigates their search through outfit possibilities to meet their purchasing desire. The bot helps you pick outfits by suggesting their price and details. If you dislike the outfit suggestion, the chatbot will show you another option. If you like the second option given by the bot, it will give you more options like shop, save, share, or next outfit. Not just H&M, famous brands like eBay also use a chatbot to guide their customers through their purchasing journey. 

24×7 Customer Support

Every business should make sure they are not putting their customers on hold. Consider a scenario where your customer may need help from your customer support team in the middle of the night. And, you don’t have a 24×7 support team to answer your customers’ queries or resolve their issues. This would create a negative brand image. Not only that, you might lose your customers to competitors that are always available for them. 

Nobody likes to wait, not even your customers. As per Microsoft, 96% of Americans think customer service plays a crucial role in deciding whether or not to do business with a company. Having great customer service enables high customer engagement and reduces customer churn. Now, what can a chatbot do to provide excellent customer service?

  • Chatbots can provide answers that will quickly help the customers.
  • AI chatbots don’t need breaks or a salary raise. They are cost-effective and can provide customer support at any time of the day, week, or year. Businesses can save their customer service costs by 30% using conversational chatbots. 
  • You can use chatbots to add FAQs and answers. 

Chatbots lead to faster responses and customer support 24x7x365.

Autodesk, a famous computer-aided software corporation, uses a virtual customer service bot called AVA. It responds to customer queries any time of the day. Be it a customer’s request with a login issue, payment issue, or any other frequently asked questions; AVA is there to help and support them always. 

Increased Customer Engagement

Let’s imagine a scenario here. You contact a customer service representative regarding an issue with a software product. After getting connected with a representative, you share your query with them. The representative tells you to wait for some time or shares your query with a different customer support department. When you connect with a different department, you have to explain the problem all over again. 

This is an example of a negative customer experience, which eventually causes customer dissatisfaction. Hopefully, chatbots are taking customer engagement to a new level by redefining customer service. Using AI chatbots, you can provide useful, a free-flowing conversation that keeps your customers engaged. 

Here are some ways you can use chatbots to increase customer engagement:

  • You can personalize your website chatbots with a custom theme, a personalized avatar, ideal language, and tone. People also love using images, videos, emojis, GIFs. So, you can use these in the conversation to make it sound more natural and fun. 
  • Chatbots can respond in real-time. You can embed chatbots in all of the main brand communication channels; it gives your customers more opportunities to freely engage. 
  • AI chatbots provide solutions in real-time while keeping the conversation natural. Trust us; that’ll bring a smile to your customer’s face. And a happy customer is a satisfied customer! 

For example, Mya, the AI chatbot of L’Oréal Paris, engages with recruiting candidates via SMS, Skype, Facebook, and Emails. It provides tips, guidance and delivers alerts to the candidates. As a result, Mya engages with 92% of candidates and achieves nearly a 100% satisfaction rate. 

Chatbots Are Easily Scalable

Let’s say you run a food delivery business with 4-6 staff. When the customer demand rises, you and your team find it hard to handle all the orders. So, you decided to embed a chatbot for websites. Now chatbots can engage with all your customers and handle their orders efficiently. After implementing chatbots, your team never missed an order. And bonus? Your customers are always happy. 

This proves how chatbots can be a scalable solution for businesses. Sometimes, you can’t offer support to a large audience due to small staff, training, or lack of infrastructure. In a situation like this, chatbots can help you big time. Chatbots can handle thousands of customers at the same time. No matter what or when your customers’ problems will be resolved immediately. Famous brands like Dominos and Taco Bell use chatbots to manage delivery orders from their customers, and what a marvellous job they do! 

Free From Human Errors

You can’t deny the fact that humans make mistakes. They can make mistakes while answering a customer’s question, while gathering customer data, or resolving an issue. In short, you can’t avoid errors when working manually. But, with chatbots, you can have an error-free experience. Chatbots are designed with advanced technologies, like AI, and all the required information. And because of that, they are highly accurate and error-free in terms of collecting, storing, and passing information. 

Because of these significant advantages of bots, recently, Alexa has become a chatbot. Amazon introduced a new feature on ios that will allow you to talk to Alexa by typing. Needless to say, chatbots are going to become more prevalent in the upcoming years and beyond.  

What Makes The Best AI Chatbot? Must-Have Key Features 

You may think it’s obvious, but there’s a difference between a chatbot answering customer queries and a chatbot having an engaging, intelligent conversation. A truly engaging conversational chatbot will give you a better customer experience than a rule-based one. But, how do you know what makes the best AI chatbot? Well, here are some features that would help you determine that.  

  • A superb AI chatbot needs zero to no technical knowledge to embed it on your website. For example, SurveySparrow’s Feedbot is a no-code website chatbot builder. With Feedbot, all you have to do is simply copy-paste the auto-generated embed code. 
  • 80% of customers are more likely to purchase from a brand that provides a personalized experience. Most chatbots let you personalize the bot with customized themes and CSS. If a chatbot can use a customer’s name while conversing with them, it will give them a better-personalized experience.  
  • An efficient chatbot will help you get responses in real-time. It will allow you to filter responses, study the data, and cross-tabulate responses. 
  • Data security is another crucial must-have feature for any good AI chatbot. That’s why it’s important to use a bot that provides data security. According to a 2019 report, an average of 4,800 websites is hit by form-jacking attacks per month. So chatbots should have the features of password protection and end-to-end encryption to prevent such data breaches. 

Wrapping up…

Based on the success of chatbots like Alexa, Google, Mya, AVA, and many others, we can safely say the growing trend of chatbots is here to stay for a long time. Customers now want an amazing customer experience to go along with amazing products & services.

That’s why it’s essential to use AI bots to match their expectations. And as chatbots have more conversations with customers, they’ll gather data and learn from them. They will act as a catalyst to improve organizational growth when implemented across different business industries. Ain’t that fantastic? If you’re saying a yes, it means you’re all set to use chatbots to take your customer experience and satisfaction to the next level. So, waiting to read your comment and looking forward to knowing your interest in SurveySparrow’s Feedbot.  


Kate Williams

Product Marketing Manager at SurveySparrow

Excels in empowering visionary companies through storytelling and strategic go-to-market planning. With extensive experience in product marketing and customer experience management, she is an accomplished author, podcast host, and mentor, sharing her expertise across diverse platforms and audiences.

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