What is a chatbot and how can it improve customer service?

The question is no longer “Should we use chatbots?” so much as “Where and how should we use chatbots?” to better serve our customers.

By Hannah Wren, Content Marketing Associate

Published June 24, 2020
Last updated July 14, 2020

Chatbots are no longer a new technology in customer service. Customers are using them to get support across a variety of industries, whether they need help changing a hotel reservation, paying a bill, or finding the perfect lipstick color. Business use of chatbots and conversational AI is only going in one direction. Gartner predicts that 70 percent of customer interactions will involve emerging technologies such as machine learning, chatbots, and mobile messaging by 2022—a 15 percent increase from 2018.

Creating a better customer experience with a chatbot shouldn’t be daunting, and with the right tools a business can get started quickly. But it first requires an organization to develop a basic understanding of what a chatbot is, how it works, and how it can benefit its customers.

What is a chatbot?

A chatbot is a scripted or self-learning AI tool programmed to converse with customers through an app, messaging platform, social network, or chat solution in a way that mimics a human conversation.

How does a chatbot work?

A chatbot, also known as a virtual assistant, uses predefined rules, natural language processing, machine learning, and/or deep learning to interpret a variety of customer (or employee) requests and provide responses.

A user—you, Samantha from HR, a customer—asks a chatbot a question, and it will retrieve the appropriate answer, depending on how the chatbot platform is programmed. If your new running shoes are too big, you might ask the business’s chatbot, “How do I get a refund?” or tell it, “My shoes don’t fit.” The chatbot can recognize that both phrases refer to the same question, and might recommend articles from the help center on how to start a return.

Chatbots can process requests through text or voice across a variety of languages and channels, such as mobile apps, website pages, email, social media, or messaging platforms. If Samantha from HR is struggling to connect to the company VPN, she could ask her company’s chatbot for help over Slack.

According to Gartner, chatbots are always narrow in scope. That means they must solve a specific problem that humans choose for it, and operate within the predetermined goals that humans set, at least for now.

Chatbots work best when dealing with structured data—they’re great for simple, repetitive interactions where customer needs are specific and clear. Humans still have chatbots beat when it comes to more ambiguous tasks that require creativity and emotional thinking, which can be more complicated to automate.

“Rather than try to boil the ocean, companies are picking specific functions that it makes sense for a chatbot to solve—and they’re becoming increasingly useful doing it,” explains a report on chatbot penetration by CB Insights. The key is to use chatbots in conjunction with human intelligence and think about how to foster human-machine partnerships that work better together.

How can chatbots help businesses improve customer service?

On the business side, CB Insights found that chatbots are “saving hundreds of thousands of hours and associated costs” by automating costly and time-consuming workflows. But chatbots have meaningful benefits for customers, too. Here’s how chatbots enable a business to better support its customers, internal or external.

  1. Answer customer requests faster

    Customers want fast replies to their questions. So much so that over half of customers surveyed in Zendesk’s 2020 Customer Experience Trends Report said that a long wait time is the top indicator of a bad customer experience. In automating responses to low-touch conversations, chatbots provide fast, efficient resolutions to customer issues. This reduces first response time and increases customer satisfaction.

  2. Provide always-on, 24/7 support

    Zendesk findings also revealed that over 40 percent of customers consider 24/7 support, in real-time a top component of a good customer experience. Customers expect help when they need it, even if your agents are off the clock. Since chatbots don’t need sleep or meal breaks, they can handle customer requests when agents are busy being humans.

  3. Improve the agent experience

    Research shows that when your agents are motivated, they’re more empowered to create stronger relationships with your customers. But answering the same mundane questions repeatedly can be a lackluster. Chatbots take these types of frequently asked questions off an agent’s plate. This allows a support team to prioritize complex tasks that require a human touch, increasing efficiency and creating an overall better agent experience.

  4. Proactively meet customers’ needs—and boost conversions

    Proactive support means actively anticipating customer issues before they escalate. Dollar Shave Club’s bot welcomes website visitors with help center articles to answer common questions the business can anticipate—before a customer abandons their cart due to lingering concerns. With 55 percent of online shoppers abandoning a purchase because they can’t find an answer to a question quickly, a chatbot can be an easy opportunity to proactively increase conversions.

  5. Scale smarter and do more with less

    One area where AI becomes paramount is enabling a business to scale. 42 percent of customer service leaders expect customer requests to grow, yet only 36 percent can expand headcount. This gap represents a sweet spot where a chatbot can help.

    As a small team, Spartan Race’s bot helps its agents tackle spikes in customer requests during races—races are harder to staff for because they usually occur on weekends. Since launching Zendesk’s Answer Bot, Spartan Race has seen a 9.5 percent decrease in chat volume and was able to extend its support team’s live chat availability by 3 hours every day from time savings.

  6. Empower customers to self-serve, in context

    Customer feedback reveals that customers have preferred to solve their problems on their own for a while. A chatbot can enable customers to self-serve outside of a help center, from where they already are.

    With a chatbot, an HR team can direct employees to help center articles inside Slack or an e-commerce company can use knowledge base content to answer customer questions on its checkout page. This allows an organization to deliver knowledge that is tailored to each user and their context, directing customers to help center articles based on their specific requests.

  7. Still be able to provide a human touch

    AI is most successful when businesses combine it with human intervention. Humans are better for certain requests, like high-stakes issues that involve empathy. When a chatbot integrates with a support team’s customer service software, it can seamlessly hand conversations off to human agents in sensitive situations.

Getting started with an AI-powered bot for customer service

Businesses see the most success with AI when they start small, and then accelerate. Out-of-the-box solutions, like Zendesk’s Answer Bot, can provide support teams that fast time to value. This type of AI-powered bot works alongside a knowledge base to deflect customer queries across a variety of channels.

Some businesses are looking for a highly customized AI chatbot. An airline company might want a Twitter chatbot that allows users to choose their flight seat, a hotel brand might prefer a Facebook Messenger chatbot that enables users to book reservations, or a financial service might need its own chatbot that helps users pay bills—inside the thread. This requires developers and a powerful solution to provide the infrastructure.

No matter what the goal for your chatbot is, the key is to keep the customer at the center. Here are some questions a business should consider when getting started with a chatbot for customer service:

  • What are the most frequent requests your support team receives?
  • Companies spend a lot of money answering the same questions over and over again. This is low-hanging fruit that can be handed to a chatbot. Look for common one-touch requests—the ones resolved with a simple response. These are the known knowns that a business can anticipate and likely already have been written internally by its product or documentation team.

  • Who are your core customer-audience segments?
  • Businesses get the most value from a chatbot when they tailor it to the needs of their customer-audience. If you see a lot of high-level questions from prospective customers, your chatbot should be able to answer those. If you have a complex product where experienced customers need help troubleshooting, your chatbot should be able to direct them to relevant resources. And if your customers are global, you’ll need a multilingual chatbot.

  • Where do your customers interact with your business the most?
  • A business should optimize its chatbot for how it will be consumed. Think about the channels your customers engage with the most. If you’re looking for an internal chatbot for your employees and they primarily use Slack, you’ll want a bot that works well on that channel. If you’re an e-commerce company that gets a lot of live chat requests during the checkout process, a web widget on your checkout page is a good option.

  • How will you measure success?
  • Getting the most benefits from a chatbot requires you to determine the right metrics for your business goals. Ticket deflection, CSAT, and time saved are common success measures.

    Rephrase the conversation

    Artificial intelligence is now table stakes for businesses. As a result, the question is no longer “Should we use chatbots?” so much as “Where and how should we use chatbots?” to better serve our customers. When a business tailors a chatbot to its customer needs and balances the power of AI with the power of its human agents, it can create the kind of AI experience that drives loyalty.