Customer service has evolved with the rise of social media platforms and messaging apps. Because of this, customer service agents today deal with more queries than ever.
This is where chatbots can help. AI chatbots can chat with customers in real-time, boosting engagement and brand credibility. Additionally, chatbots can be used around the clock or at marginal costs.
This guide will address the importance of chatbots, why they matter, how they help alleviate customer pain points, and how you can implement them for your business.
But first, let’s understand and inspect chatbots as an industry.
A chatbot is a computer program that mimics human conversations in different forms.
These conversations can be through voice commands, texts, or both. A chatbot lets a person at the other end of the screen know they are conversing with another person or imitate it as closely as possible.
The current generation of chatbots uses Natural Language Processing (NLP) and a new kind of AI (called transformers) to understand human language and answer questions.
Some examples of these chatbots are ChatGPT, Claude, Google Gemini, Amazon’s Lex, IBM WatsonX, etc.
Modern chatbots come in two distinct flavors; let’s define them.
These bots are trained to follow a certain set of rules. These bots are limited in how many questions they can answer.
These bots usually use buttons as a method of communication. You input your specific request using a button, and the bot can answer your question based on that. Many of these conversations are designed with decision trees, where each question leads to a pre-defined answer and some possible follow-up questions.
Where are rule-based chatbots useful? Rule-based chatbots are useful in situations where pre-defined questions and answers are available. They might work for movie theatres where the basic actions like booking and canceling a ticket are easy to implement.
A lot of businesses use rule-based chatbots because:
They are faster to train and are less expensive. This makes implementing the software on your website less complicated.
Since you are defining the answers, there is greater control over the chatbot's behavior.
Since the answers are pre-defined, these chatbots are very safe to implement.
With rule-based chatbots, it’s fairly easy to provide multimedia answers (with images, text, and videos).
2. AI Chatbots
The latest improvements in artificial intelligence power these chatbots and allow them to grow smarter with time. Their Natural Language Processing (NLP) capabilities allow them to understand human language and answer questions. These chatbots can also understand the context and intent of a human language question and have a more natural conversation with a customer. Additionally, there are several methods you can use to improve the chatbot's performance with time.
Some great examples of AI-powered bots include WP-Chatbot, catering to WordPress customers, and the US transport organization Amtrak’s Julie Chatbot. We will explore these in detail later on.
AI chatbots are ideal for companies that have a lot of data. While they take a relatively longer time to train, they’re efficient and provide a better customer experience.
Where do you use AI chatbots?
AI chatbots will come in handy in these situations:
When your business has a lot of different data sources that need to be analyzed.
When they need to continuously iterate and improve as more and more data keeps coming in.
When you want to provide a more human-like customer service experience with automation.
When you have complex workflows that are hard to build into a rule-based workflow.
Now that you know the types of chatbots that currently exist in the market, let’s look at the history of chatbots.
History of Chatbots
Let's start right at the beginning when computers were not a household name and more of a research device. Around the halfway point of the previous century would be a good starting point.
Alan Turing and the Turing Test (1950)
Alan Turing was an English mathematician and a pioneer of modern computer science. His most famous contribution to the field was probably the Turing test, which is the test of a machine’s ability to imitate the behavior of a human being.
While there have been many versions of the Turing test since Alan Turing first introduced it in the 1950s, what hasn’t changed is the fundamental way the test is conducted - A chatbot tries to mimic a human and convince a human that it is indeed human.
Eliza (1965)
It was in the early 60s when a German American computer scientist named Joseph Weizenbaum was exploring the relationship between computers and human beings. Weizenbaum is considered the father of modern Artificial intelligence, and between the years 1964 and 1966, he built a chatbot called ELIZA.
It was not called a chatbot but rather a “natural language processing computer program.” The ELIZA program was written in MAD-SLIP, a programming language developed by Weizenbaum. The responses were given through pattern matching, provided in “scripts.”
Running the DOCTOR script, ELIZA mimicked the conversation between a psychotherapist and a patient in the initial patient interview. The program was so immersive that sometimes, Weizenbaum forgot he was talking to a computer program. ELIZA was the precursor to a lot of chatbots that followed.
Parry (1972)
Fast forward to 1972, and the world is going through some tumultuous times. The Vietnam War is slowly winding down, and US President Nixon has ordered NASA to begin the workings of a space shuttle program. Meanwhile, at Stanford University, a psychiatrist by the name of Kenneth Colby has designed an artificial intelligence program that mimics the thinking pattern of a person suffering from paranoid schizophrenia.
A group of 33 human psychologists tested PARRY, and the results blew their minds. PARRY was able to fool the human examiners a whopping 52% of the time in variations of the Turing test. Some scientists even pitched PARRY and ELIZA against each other, and PARRY beat ELIZA hand over foot, thanks to its superior programming.
Jabberwacky (1988)
Simulating human conversation has always been a topic of interest for computer scientists, and British programmer Rollo Carpenter was no different. In 1988, Carpenter created Jabberwacky, a chatbot designed to “simulate natural human chat in an entertaining, interesting and humorous manner.”
Rollo wanted Jabberwacky to become more of an entertaining pet than talk. He built using an AI technology called “contextual pattern matching,” which was revolutionary then. Beating the Turing test was Jabberwacky's aim, and Carpenter released a version of the chatbot on the internet in 1997.
And so it stayed at the top of the chatbot hall of fame until A.L.I.C.E came along.
A.L.I.C.E (1995)
ALICE was developed in 1995 by Richard Wallace. ALICE was one of the first chatbots to use Natural Language processing. ALICE passed the Loebner test thrice but failed to pass the Turing test. Short form for Artificial Linguistic Internet Computer Entity, the A.L.I.C.E, but has since become a part of pop culture, including inspiring films such as Her.
A few years later, SmarterChild came along.
SmarterChild (2001)
2001- Things get interesting now, as chatbot SmarterChild was unleashed onto the world.
SmarterChild was available on AOL Instant Messenger and MSN Messaging Networks. If you are from the 90s and remember using these services, SmarterChild sat inside every user’s buddy list. You could message him for data on various topics, including weather forecasts, sports, news, and movie timings.
Created by Robert Hoffer, Timothy Kay, and Peter Levitan, the bot was quite a rage in its heyday. It is said to have interacted with over 30 million people and accounted for more than 5% of all AIM traffic. The company that built SmarterBot, called ActiveBuddy, was eventually acquired by Microsoft in 2007.
Siri, Google Assistant and Cortana (2010)
In 2010, Apple, Google, and Microsoft all released applications that acted as personal assistants on their devices. These had natural language processing capabilities and could perform various tasks on the devices.
While these chatbots couldn’t answer difficult questions, they could also answer basic questions. These chatbots were programmed to do small tasks like taking notes and sending messages using APIs on the device.
BERT and Transformers (2017)
BERT was born in 2017 and used a new machine-learning model called a transformer. Google researchers discovered a model that could understand human language better than all previous models and answer questions by predicting the next token in a sentence.
The paper introducing BERT, “Attention is All You Need,” is central to today's current crop of chatbots.
ChatGPT, Claude, Gemini and Others (2022 - Present)
ChatGPT 3.5 was launched in late 2022, changing the chatbot paradigm forever. This was the start of increasingly human-like chatbots capable of discussing various subjects. Further improvements have given us sector-specific and function-specific chatbots as well. This is where modern customer support chatbots come from.
Now that you know how these models came to be, let’s talk about how they work.
How do AI Chatbots Work?
Ai chatbots are based on the transformer models that we described above. The process through which they work is as follows:
Your AI chatbot is pre-trained with vast data from which it learns patterns and finds the relationships between different words.
The chatbot is then trained to answer specific questions properly; this works through multiple question-and-answer pairs fed to the chatbot. This process is called fine-tuning.
The chatbot receives a customer question and turns it into a vector embedding.
The chatbot uses the vector embedding to find the answer to your customer's question and find data for the answer.
The data is usually supplied through a RAG process.
Finally, the chatbot uses the data to generate a human-like answer through natural language.
AI chatbots work very intuitively by first understanding a user’s question, searching for connected data, and then answering the question. Let’s talk about how you can build one for your business.
How to Build a Chatbot?
You need an in-depth understanding of customer experience to build a chatbot for your business.
To simplify the process, we’ve created a flowchart that should help:
1. Identify Customer Needs
In our experience, it’s crucial to answer the following questions if you want to build a consistent conversation flow for your chatbot:
What’s the user’s goal?
What’s the bot’s goal?
How do you handle unexpected input?
The answers to these questions will guide you as you build your chatbot.
Once the overall conversational flow is designed, the next step is to choose a platform to launch the bot.
2. Choose a Bot-Builder Platform
There are two types of platforms that you can use to build your chatbot:
Development (No-Code) Platforms are built to provide an intuitive UI that lets you build a chatbot without any code. For e.g.: Kommunicate.
Code-Based Frameworks give you more flexibility, deeper level analytics, and the advantage of AI incorporation. For e.g., Dialogflow.
You should use code-based frameworks if you have ample tech help and know how to code. However, for most business use cases, no-code platforms have a competitive advantage because of their ease of use and fast deployment processes.
3. Choose a Channel for Launch
Typically, people build chatbots for a marketing or messaging channel. Messaging apps, social media platforms, and ticketing systems you use for business.
You can use our detailed documentation guides to understand how you can integrate your chatbot with different social channels.
Once you’ve chosen your launch platform, you’re ready to build your bot. Below we’ve listed a simple tutorial on how you can do it with Kompose, Kommunicate’s bot builder platform.
Building a Chatbot Using Kompose from Kommunicate
Let’s build a bot using Kompose, our flagship no-code bot builder. For this particular tutorial, we’re building Travelbot, a simple chatbot that helps customers book tickets between Bangalore and Mumbai (two major cities in India). Let’s get started!
Step 1 - Creating the Bot
Before creating the bot using Kompose, you will need a Kommunicate ID. If you don’t have one already, you can create it by signing up here.
Once you have a Kommunicate ID, Login to your Dashboard and click on Bot Integrations.
Next, select Kompose and click on “Create Chatbot.”
In the next screen, click on the “Blank Template” since we want to create a Bot from scratch.
In the next page, you get the option of selecting a name for your bot, along with the Avatar.
Select the default language as English, select your Avatar and click on “Save and Proceed.”
The next page is the Automatic bot to Human handoff, which you can enable or disable, based on your choice.
For the purpose of this tutorial, we will enable this feature and click on “Finish Bot Setup.”
Your bot is now created. For confirmation, click on the box that says, “Let this bot handle all the conversations,” and you are good to go.
Step 2 - Training the Bot
Creating the bot will take you to Kommunicate’s bot builder.
This is where you start training the bot with custom intents and response messages. Intents basically help the bot perceive the user’s input and decide the subsequent action.
The first part of the tutorial is to create a Welcome Message. This is the message that your bot will display when it greets a new visitor to the website.
In the section titled “Enter Welcome Message,” enter the text that you want to display that the TravelBot will greet new users with. You can also enter additional text, or add a button with a link.
In the next step, we are going to create intents. Before that, click on “Save” for now.
In the next step, we are going to create our first Intent. We have named it as “Initial Flight Query. Since our TravelBot is a flight booking bot, let us assume that the travel company wants to build a bot that addresses flight routes, departure timings and their respective fares.”
This intent will consist of all the possible questions that a user may ask to the bot, including:
Bangalore - Mumbai flights?
Which flights can I book from Bangalore to Mumbai?
Bangalore to Mumbai flights?
What are the available flights from Bangalore to Mumbai?
"The User intent will look something like this:"
In the “Bot Says” section, we will populate all the answers that the bot can give to the user for any one of the following 4 questions. For the sake of training, we have taken 5 different flights and listed out their departure timings.
Once you fill out the details, click on the “Train Bot” a button.
The populated screen will look something like this: Now, we have given the users 5 different options for flights along with departure timings.
The next step is to assign the fares to each of these flights, so that the users can select the fare that is most suitable for them. For this, you need to create 5 different intents. In this tutorial, we will show you how to create one of these intents, and you can follow the same procedure to create all 5.
Navigate to “Answer section” and click on the “Add” Button. Next, click on “User says” and enter all the possible questions that a user may ask the bot. In this case, the questions are:
IC 410 Rates?
IC 410 Flight charges?
What are the charges for IC 410?
Similarly, configure the answer that the bot will give in the “Bot Says” section.
Voila, you have configured the bot to answer all the questions related to IC 410. Follow the same procedure to create intents for the other 4 flight options.
Step 3 - Handle Small Talk
The Kompose bot builder makes it super easy to build a bot, and to prove the point, there is a separate “Small talk” section right after you have trained the bot to answer all the user queries.
You can add various small talk options, questions that the users may pose to a bot that may not be related to flight-booking, and train the bot to give responses as we have explained in the earlier sections. The procedure is the same as naming a small talk, configuring what the bot says and what the user says.
If you feel there will be a lot of small talk coming in the way of your bot, you can go to the “Settings” page and import a .CSV or .JSON file that will address all the basic small talk.
For this tutorial, we have described 3 different cases of small talk.
Step 4 - Handle Unknown User Inputs
This part of the bot is for situations where the bot does not understand the intent behind a user query. This is an unknown input, and it is good practice to transfer the user to a live human agent in this case.
Go to the Default Fallback option on your Kompose dashboard, and configure the message that TravelBot will display, in case the bot is unable to answer a user query.
In this case, we have written, “TravelBot is unable to process this request. Transferring you to one of our live agents. Please be patient.”
We can then transfer this user to a team, to a particular teammate, or even assign it to another bot.
Since we have said that we will be transferring to a teammate, we will select “Assign to a Teammate” and select the Teammate from the drop down list.
Step 5 - Test your chatbot
Below the chatbot preview section, click the Test chatbot button.
Type in “Bangalore- Mumbai flights” and you will see a list of flights which we had input into the “Initial Flight Query” intent. Select the Flight you want from the list and type in as shown below:
Step 6 - Add the chatbot to your website
After creating the chatbot, the next step is to connect the chatbot to your website. You will get a short piece of Javascript code from the dashboard.
Navigate to Dashboard → Settings. Click on the Install section and click the Web tab and copy the JavaScript code.
Add the JavaScript code to your website.
Paste it just above the closing body tag on every page you want the chat widget to appear.
That’s it. Kommunicate chatbot is now integrated with your website. It’s time to activate it.
That’s it! Now the chatbot is enabled on your website.
Step 8 - Test your chatbot periodically
Once you have created your chatbot, you would be able to test it from the Bot Integration section of the dashboard.
Navigate to Dashboard → Click ‘Bot Integration’ then Select ‘Manage Bots‘ for the particular bot ‘Test this Bot’
There are a few cases that need to be considered while creating a bot, testing, and deploying the bot.
Proper Welcome Message: The bot should be able to introduce itself properly & what it can do, how it will assist the user.
Basic Salutation: Bot should be able to respond to Hi, Hello, Good Morning, Thank-you, kind of message, and small-talks.
No cyclic loop: The bot should not get stuck in a cyclic look if a condition fails (repeatedly).
Fallback: If the bot is not able to handle/understand a user query then try to guide the conversation towards possible intents or handover to a human agent.
Typos: The bot should be able to handle basic typos so that chatbot interaction flow doesn’t break abruptly.
Kompose also gives you drill-down data on Bot Intent Analytics and Bot Message Analytics so that you can analyze the way your users are using your bots. This gives more data to improve the performance of the chatbots constantly.
Alternative Ways to Train Your Chatbot
Instead of manually adding intents and responses, you can train your chatbot using -
1. Upload Documents
You can upload PDF, DOCX, CSV, XLS or TXT files containing FAQs, support guides, or product documentation.
The chatbot will automatically extract relevant answers from the documents and respond to user queries.
Steps to Upload Documents-
Navigate to the Knowledge Source section in Kommunicate's Dashboard.
Select the Documents tab
Click on Upload Document and select your file.
The bot will process the content and use it to generate responses
2. Add Website URLs
Provide a website URL, and the chatbot will extract relevant content for training.
This is useful for businesses that have extensive FAQs or knowledge bases on their website.
Steps to Use URLs for Training:
Navigate to the Knowledge Source section in Kommunicate's Dashboard.
Select the URLs tab
Add the URLs
The bot will crawl and use the information to answer related queries.
3. Integrate with Knowledge Bases (Zendesk, Salesforce)
Connect your chatbot with external knowledge bases like Zendesk, Salesforce, etc to pull in customer support articles, FAQs, and help desk resources.
This ensures your chatbot stays updated with the latest support information without manual intervention.
Steps to Integrate with a Knowledge Base:
Navigate to the Knowledge Source section in Kommunicate's Dashboard.
Select the Knowledge Base tab
Select the platform (e.g., Zendesk, Salesforce).
Authenticate the connection and allow the chatbot to fetch relevant data.
By leveraging these training methods, you can build an AI-powered chatbot without manually adding intents, making chatbot deployment faster and more efficient.
Maintaining and Optimizing Your Chatbot
1. Periodic enhancement of protocols and responses
Chatbot development is not a one-off event. It is a continuous process involving tracking, upgrading, and testing before deployment. You can enhance chatbot responses and protocols by:
2. Monitor user interactions
A critical part of chatbot lifecycle management is tracking user interactions and evaluating customer feedback. Using such data, you can approximate the performance of your bot and areas that need improvement. For example:
3. Accurately gauge when human support is needed
While chatbots can handle customer queries at scale and are highly programmable, they are also bound by limitations. When chatbots encounter a query too complex to answer, they should seamlessly transfer the customer to a human agent. The objective here is to reduce the number of human-to-bot handoffs and enable the bot to learn from live chat interactions.
Consider:
4. Use data and analytics to implement actionable insights
You can think of your chatbot as an evolving and active database. It stores and analyzes customer sentiment, preferences, and sales patterns to build on the existing chatbot framework. Machine learning helps chatbots extract and analyze data to enhance chatbot efficiency.
5. Implement Integrations for enhanced chatbot capabilities
Integrating your chatbot with other platforms and media immediately enhances the chatbot's capabilities. For example, customer relationship management (CRM), ticket systems, and social media integrations all add to what chatbots can do. One interesting integration that you can use is the Meta Ads integration with Facebook Messenger. Here your ad’s CTA pushes your prospects into your messenger, where an AI chatbot makes the sales pitch on your behalf.
Now, that you know how to build a chatbot, let’s talk about the features that you should look for while choosing a chatbot vendor.
Features to Look for in a Chatbot
Most chatbot vendors come armed with different types of features. However, it is important to get a baseline idea of what you’d want from a chatbot. Here are some features that you might want to consider:
Chatbot Analytics
These analytics help you measure how your chatbot is performing.
Bounce Rate - The percentage of people who come to your website but leave without interacting with the bot.
Interaction Rate - The percentage of people who come to your website and interact with the bot, this helps you gauge user engagement.
Fallback Rate - The percentage of conversations where the bot can’t fulfill the user request. This will help you understand if you have to add more data to train the bot.
Chatbot Marketing
The features include the variety of marketing activities. You should look for the following features like Order Tracking, Order booking, Scheduling meetings, Product promotion modules, Sales funnel optimization
Omnichannel messaging support
Your customers are present on a plethora of channels, including Facebook Messenger, Website, and WhatsApp, and integrating a chatbot with these channels shouldn’t be much of a hassle. With multi-channel integrations, you can better understand customer behavior and empower your sales agents.
Easy to train
One of the core features to look for is the ease with which you can train a chatbot on your vendor’s platforms. No-code builders make it easy for you to set up a chatbot. You don’t want to use a workflow which requires you to repeatedly train chatbots for daily use. For instance, if you tell a chatbot that your website primarily sells shoes, it should use progressive profiling to remember this information.
Easy bot-to-human hand-off
Chatbots are trained to handle a majority of the conversations, but there are situations where the bot has to hand over the reins to a live human agent. A smooth bot-to-human hand-off means the customers get a seamless experience and keep coming back to the website because they feel cared for.
Bot security and privacy
Chatbots are programmed to handle vast amounts of data, and in this era of frequent data breaches, it is important to make your bot as secure as possible. We recommend choosing vendors who have HIPAA, GDPR and SOC-2 certifications
Multilingual capabilities
Thanks to greater internet penetration and hyper localization by the bigger players, more and more customers today want to speak to your brand in their language. If a chatbot can handle multiple languages, then it can do wonders for customer engagement. Kommunicate’s own Kompose chatbot builder supports over 40 languages.
Choosing the right chatbot vendor is absolutely crucial because, as we will illustrate in the next section, chatbots will impact a lot of areas within your business.
Use-Cases for Chatbots
As chatbots become more common across websites, they have also been used in a multitude of ways. First, let’s discuss some prominent use-cases.
Business Branding
A chatbot is usually the first point of contact your customer has with your company and hence is a reflection of your brand. Chatbots let your customers know that they are going to be taken care of in the least possible time, and a well-designed chatbot can seriously enhance the way a customer perceives your brand and business.
Can help your sales team
When you present the right information to the clients at the right time, there is a significant increase in your chances of closing that sale. Chatbots can proactively answer customer queries and help your team close deals at scale.
Understanding Customer Intent
The modern customer is spoiled for choice and is always short on time. This is where a chatbot comes in handy, and if your bot can find what your customers are looking for in the least amount of time, there is no reason for them to open that next tab.
Automating Customer Support
Chatbots offer a way of automating customer support. This automation reduces your overheads and waiting times while increasing the overall efficiency of your processes.
Reducing Customer Wait Time
No one likes to wait, especially when ordering things online or browsing for items on a product website. Chatbots can greatly reduce this wait time by automating responses to the most frequently asked questions.
Lead Qualification
A chatbot can automate some parts of lead qualification by asking high-intent questions to your customers. This allows you to get a highly qualified lead list without extra human effort.
Automating Repetitive Work
Chatbots can automarte large chunks of repetitive processes. It can collect lead data, generate support tickets and also send step-by-step troubleshooting instructions to customers.
Given the large number of use-cases, you might want to implement a chatbot that’s specific to your sector. In the next step, we introduce you to pre-built chatbot templates that you can use for this purpose.
Domain-Based Chatbot Templates
Let’s look at some chatbot templates that you can use for your sector.
Let customers know about the availability of credit cards.
Additionally, you can customize this template to provide up-to-date information about a customer’s account balance, portfolio performance and other important data.
E-Commerce Chatbot Template
E-Commerce has seen fast evolution over the past few years and even giants like Amazon and Alibaba have adopted chatbots on their websites. Reports estimate that online E-Commerce businesses can save upto 30% by automating their processes with a chatbot.
We’ve built our E-Commerce chatbot template to:
Directly integrate with Shopify, PrestaShop, Magento, Dukaan and BigCommerce.
Provide information on your product catalog.
Provide Order Status
Perform simple operations including order cancellation and order tracking.
contentThis let’s you build a way to directly interact with your customer and provide them with a convenient way to check their orders.
Healthcare Chatbot Template
In healthcare, its important to constantly stay in touch with patients to provide up-to-date care needs. A chatbot can make this process simpler.
Help patients book slots for your healthcare services
Let them know about the different services available at your business
Provide an up-to-date scheduling calendar through which they can schedule appointments.
contentThis reduces the workload of your reception desks and also prevents double bookings since it connects with the centralized calendar from your ERP provider.
Education Chatbot Template
BTVI used a Kommunicate chatbot to resolve 40% of all incoming queries to their university. An education chatbot can help you streamline student queries and reduce the workload on your contact and reception centers.
Provide up-to-date information on tuition fees and admission costs
Provide details about the different admission timelines
Provides dates and syllabi for upcoming examinations
Provide details about scholarships
Guide students to various resources like libraries, on-campus stays, etc
Educational chatbots provides students and prospects with up-to-date information about your educational institution.
Insurance Chatbot Template
Insurance providers can use chatbots to serve up information about their various programmes, maturity dates and claim processes. This reduces the amount of customer support representatives a large insurance provider usually needs.
Serve information about the various types of insurance you offer
Provide information about claims processes
Simplify the guidelines around insurance to create an easier sales funnel
With some integration you can also handle simple claims through chatbots.
Restaurant Chatbot Template
Busy restaurants often have to maintain a full front desk to take reservations and manage the ordering processes for takeaway. While there are multiple solutions to automate the takeaway process, chatbots provide a viable alternative to restaurants that want their own self-sufficient platform.
Show the entire dine-in and take-away menus in one space
Provide a system for order tracking
Take and process food orders on the go
Schedule reservations
This let’s you build a self-sufficient chatbot that let’s you take in orders and serve customers while decreasing the work load on your front-desk.
Essential Business Chatbot Templates
Other than the domain-specific examples listed above, there are some essential business functions that you can also automate through chatbots. We’ve built chatbot templates for:
If you want a chatbot to provide your customers with answers to their repetitive FAQ-based questions, this template will help.
Now, that you have the tools to build a domain-specific chatbot for your business, let’s discuss the methods you can use to track their performance.
8 Effective Metrics to Measure Chatbot Performance
Here are 8 effective metrics to track and measure the effectiveness of your chatbot:
1. Customer Satisfaction Score (CSAT)
This is an industry-wide standardized metric that helps you understand how your chatbot performs with respect to customer satisfaction. This can be used to measure the accuracy of your chatbot’s answers, the quality of the language your chatbot uses, and how often it leads to a satisfactory resolution.
2. Net Promoter Score
Your chatbot is a customer-facing application and it will affect your Net Promoter Score. This is a measure of how many of your customers will refer your products or services to others, and can be used to measure the effectiveness of the customer support provided through your chatbot.
3. Containment Rate
Containment rate refers to the percentage of overall queries that a chatbot can keep contained within its own systems i.e these conversations are not handed over to a human agent. This is a measure of the overall ROI your bot generates for you.
4. Bot Resolution Rate
This measures the amount of conversations that are resolved by your chatbot. Since, containment rate can capture conversations that were not resolved and just ended by the customer, this is considered to be the more accurate representation of the effectiveness of a chatbot.
5. Average Chat Duration
One of the central reasons to try a chatbot is to provide quick conversations to your customers. This metric tests the amount of time a chatbot takes on average for a conversation.
6. Bounce Rate
To measure if your customers are using your chatbots, you look at the overall bounce rate. This measures the percentage of website visitors that leave without interacting with your chatbot.
7. Average Resolution Time (ART)
Just like average chat duration, this tests the amount of time a chatbot takes to resolve a particular query. This is also a measure of effectiveness and accuracy of your chatbot.
8. First Response Time (FRT)
This is another core reason to use a chatbot is to provide your customers with fast responses whenever they send across a query. With chatbots this should be near-instantaenuous.
These metrics will help you measure the performance of your chatbots. However, before you start with your launch and measurements, it’s important to learn the challenges that you might face with chatbots.
Chatbot Challenges and Limitations
Challenges of chatbots
These are a few challenges you might face with chatbots that you can overcome with some planning:
Lack of Empathy
Conversation design is a fundamental part of building a chatbot. Without it chatbots lack the necessary empathy that is needed for customer support. However, a well-designed chatbot can be empathetic and solve customer problems without any such hiccups.
Lack of Strartegy
When you implement a chatbot without a clear strategic goal, your chatbot might struggle to meet exact business goals. You need to tie clear business goals with chatbot implementation so that you can tie it to ROI.
Security Risks
Like any other technology, chatbots also have a risk of being attacked by data breaches. So, it’s important to choose AI vendors that have up-to-date security certifications like SOC2, HIPAA, etc.
Multilingual Support Problems
While most current LLMs provide some level of multilingual support, they can also face some problems with foreign languages. However, some chatbot providers (like Kommunicate) provide support for multiple languages natively.
Contextual Memory
Ideally, chatbots should have some contextual memory to continue multi-turn conversations. This allows your customers to have more natural multiple turn conversations with the chatbot. However, many chatbot vendors don’t provide this facility, and it’s better to choose one which does.
Chatbot limitations
While the modern AI chatbots are fairly advanced, they also have some technological limitations:
Chatbots Struggle to Understand Human Emotions
While most advanced NLP chatbots perform some amount of sentiment analysis to understand the emotions of the user, this mechanism hasn’t been perfected yet. So, some times chatbots might come across as uncaring.
Chatbots Can't Make Decisions
While you can build in certain basic functions into a chatbot, important decisions will still have to be taken by human agents. Chatbots can’t take business decisions in your stead.
NLP Struggles with Slang
While NLP has advanced to sufficient levels to understand human language, it still struggles with local slangs. This means that localization in different spaces is still a bit difficult.
Chatbots can Hallucinate
Hallucinations are a continuous problem with LLMs. While most modern models (like OpenAI o1) have reduced the hallucination problem it is still an ongoing risk. Most chatbot providers use a RAG architecture to prevent hallucinations.
contentNow that we understand the challenges and limitations of chatbots, let’s talk about the best practices that you can use to avoid these limitations.
Best Practices for Chatbot Implementation
Since we’ve worked across multiple industries globally, we’ve prepared a framework of practices that we always recommend to our clients. These practices are:
Emphasize Customer Needs
One of the first steps you should do is to take account of customer needs for an AI chatbot. Which channels receive the highest volume of messages and require automation? Which group of customers will be the most receptive to AI chatbots?
Learn about the common questions across that your customers ask and the channels which are the most popular. This will help you in building your Knowledge Base, and help you choose the right vendor which has the proper integrations for your chosen channels.
Quantify Your Goals
ROI is going to be important for your chatbot. So, see your current metrics and understand the business goals that you plan to achieve with a chatbot. Is it better CSAT or quicker resolutions? This will help you design your chatbot for a particular purpose.
Prioritize Security
Since chatbots are also prone to data breaches, its important to choose vendors that have the industry-best security certifications. Choose vendors who have the SOC2, HIPAA and GDPR certifications, and also look for the ISO certifications.
Design and Re-Iterate
Conversations that you design might not be satisfactory for your customers. It’s important to take customer feedback and improve your chatbots over time so that you provide them with the best service possible.
Check Your Tech Integrations
Remember to test your tech integrations regularly. This will allow you to maintain connectivity without any downtime. Since even robust integrations might experience downtime, this type of testing is necessary.
Prioritize the Chatbot-Human Handoff Feature
Inspite of your planning, there will be some conversations that will need a human agent. This is where a chatbot provider that provides advanced chatbot-human handoff featurecan help you provide better service overall.
Using this practices will let you build a robust chatbot that your customers will love. You can take inspiration from the following real-life case studies.
Chatbot Case Studies
We have covered some of the best chatbots available in the global market and how they add value to organizations that adopt them. Here are some of them:
1. Kommunicate’s Chatbot for AMREF (Medical Research)
African Medical and Research Foundation (AMREF) is one of the most prominent healthcare non-governmental organizations (NGOs) in the African continent, and it is based out of Nairobi, Kenya. The organization’s mission is to help healthcare workers and train communities to be disease-free.
When the pandemic hit, AMREF was faced with the challenge of expanding its digital learning initiatives as most users were based out of different time zones. Handling user queries manually became impractical, which is when they identified chatbots as a solution to this problem. Another category of automation included enrolment queries that the students may have about any courses they would like to take.
With Chatbots, their organization could address their users' repetitive tasks, such as resetting passwords on their PCs. Any other tasks were also easily programmable, making chatbot implementation a scalable solution.
2. Epic Bot by Kommunicate for Epic Sports (Online Sports Retail)
The principal software engineer and e-commerce marketing manager, Tom Bulis states that Kommunicate’s chatbot solution is handling around 60% of incoming customer service requests. He goes on to say that Kommunicate made it possible for their business to scale its e-commerce customer base while retaining the size of its customer service team at a manageable level. Tom was also able to automate repetitive tasks performed by the customer service team by seamlessly integrating Google’s Dialogflow with Kommunicate.
Tom also stated that Kommunicate’s web platform could be integrated within a day. All that was required was a bit of development knowledge for the integration.
TelOne is the largest provider of telecom services in Zimbabwe’s growing sector. However, they faced a significant problem, they couldn’t provide customer service at scale to their customers.
Kommunicate’s AI chatbot that integrated with Whatsapp helped them wirth this solution. Within a few months of implementation, they saw:
4. DKSH
DiethelmKellerSiberHegner is one of the world’s largest providers for market expansion services. They have a workforce of 32000 that is spread across the globe. They faced a consistent problem where they were not able to cater to quality leads directly bnecause they lacked human resources in certain key markets.
With Kommunicate, they automated these conversations and saw their lead quality and quantity increase.
According to Armie Baizura Abu Bakar, a Sales Operations Executive at DKSH. “Customers feel more connected when their queries are instantly resolved. Since we installed Kommunicate, we have seen good leads come through, and the conversion rate is really good. The ROI exceeds the cost of the chatbot.”You can read the detailed case study for more information.
Now that you know the real-life case studies of chatbots, let’s address the elephant in the room. Can chatbots replace human beings?
Can Chatbots Replace Humans?
Chatbots have made incredible strides in the recent years. However, they still can’t replace humans as customer service representatives and in other jobs.
You still need human employees because:
Chatbots Can’t Form Relationships
Your customers build a real relationship with your brand over time. This is facilitated by your marketing, sales and customer support functions. Chatbots can’t mimic the deep relationships that humans form with each other.
Chatbots Aren’t Strategic Thinkers
Most employees of a business make strategic decisions daily. This might include smaller decisions about which resources will be dedicated first, and which tickets will be prioritized. While chatbots can do some level of prioritization, the minutiae will need human endeavour.
Chatbots Aren’t Creative
Some solutions need creativity. Chatbots are learning from your database about SOPs and troubleshooting, however, some problems with require creative solutions. For this, you need a human being to provide the ideas.
Chatbots Are Not Able to Solve Problems by Themselves
While chatbots can answer repetitive questions, for more involved problems, you will need human intervention.
Chatbots Need Human Information
Your customer service representatives are the experts that a chatbot needs to learn. Even if chatbots automate most of their work, you will need their expertise to train and iterate through your chatbot.
We hope that we’ve alleviated some of your anxieties around chatbot. Now, let’s talk about the future of chatbots.
The Future of Chatbots
Here are some statistics about the overall chatbot industry.
The Global chatbot industry is valued at $7.01 bn in 2024, and is projected to grow to $20.81 by 2029 with a CAGR of 24.32%. (AIM Research)
83% of companies claim that using AI is part of their business strategy (Forbes)
The banking chatbot market is expected to grow at a rate of 37.62% from 2024 to 2031. (Verified Market Research)
Appointment scheduling through healthcare chatbots is expected to grow at the rate of 24.8%. (Grand View Research)
39% of business-consumer communications involve a chatbot. (G2 Learn)
Chatbots have a higher CSAT rating (~87%) than humans (The Tech Report).
Considering these statistics, we can predict some future use-cases for chatbots. These are:
E-Commerce will Involve Chatbots
Large companies like Amazon and Alibaba have already adopted chatbots for their e-commerce operations. Given this development it’s only natural to believe that most players, big and small, will adopt chatbots as part of their websites within the sector.
Chatbots may Guide Search
AI Overviews from Google, SearchGPT and Perplexity are all AI systems trying to replace the original search engine. AI search offers straightforward answers to many questions and might start functioning as a default add-on to search operations.
Chatbots will Change Customer Support.
As we’ve re-iterated throughout this guide, customer support has been one of the first functions to see automation through chatbots. This is because of the repetitive questions characteristic of the function, which can be automated through customer support.
Chatbots will Change Social Media and Lead Generation
Chatbots are increasingly being adopted across social media. With their capability to connect with customers directly and answer questions, these integrations can provide great lead-generation opportunities.
Chatbots will be Able to Solve Complex Problems
Given how chatbots are advancing, more complex problems will easily be solvable shortly. This could come with the increased reasoning capabilities and contextual capabilities of chatbots.
The future of chatbots will not be about replacing humans with machines but will be about making them more human-like and personal. Chatbots will become more intelligent as they learn from their interactions with humans.
Final Thoughts
Chatbots provide a vital service to businesses and can help automate multiple repetitive tasks. This will help your business provide better customer service to your customers quickly and at scale.
In this guide, we discussed the history and the operations of chatbots. We also provided the best practices and procedures we use throughout our service so that you can implement a chatbot yourself. Here’s a summary of the overall guide:
A chatbot is a vital part of customer service automation.
There are two types of chatbots: rule-based and AI-based.
The history of chatbots is extensive, and there have been many models, from ELIZA to BERT and ChatGPT.
Building a chatbot is possible with no-code platforms.
Ensure you subject your chatbot to periodic maintenance and optimizations through integrations, data and analytics to get the most out of your chatbot solution.
There are different use cases for chatbots, and you can use our domain-specific chatbot templates to explore them.
To measure your chatbot's performance, you need to use metrics like FRT, ART, and CSAT.
Chatbots have challenges and limitations, including hallucinations and a lack of empathy.
There are multiple real-life use cases of chatbots, and we provide case studies of several businesses.
The future of chatbots looks very promising indeed, with billions of hours being saved through smart automation and better service
Frequently Asked Questions
What is a chatbot?
A chatbot is a computer program that simulates human conversation through voice, text, or both. It uses technologies like Natural Language Processing (NLP) and AI to understand and respond to user inputs in a conversational manner.
What are the types of chatbots?
There are two main types of chatbots: - Rule-Based Chatbots: These use pre-defined rules and decision trees to answer questions. - AI Chatbots: These use NLP and AI, to learn from interactions and improve over time, providing more complex and personalized responses.
How do AI chatbots work?
AI chatbots use machine learning models to functions. These models are trained on vast amounts of text data to provide accurate answers to questions. In the customer service context, these models are provided data from your FAQs and help desks so that they can help your customers navigate through problems.
What are the benefits of using chatbots in customer service?
Chatbots provide several benefits, including: - 24/7 availability - Faster response times - Reduced workload for human agents - Enhanced customer engagement - Cost-effective customer service automation
What are some common use cases for chatbots?
Chatbots are widely used across industries, including: - Customer Support: Automating responses to frequently asked questions. - Sales: Guiding users through product recommendations and purchases. - Lead Qualification: Asking high-intent questions to qualify potential customers. - Banking: Providing information about accounts, loans, and credit card services. - Healthcare: Scheduling appointments and answering patient queries.
What are the best practices for implementing chatbots?
Some key best practices include: - Emphasizing customer needs and frequently asked questions - Ensuring strong data security and privacy measures. - Designing conversational flows that are empathetic and user-friendly. - Regularly updating and optimizing chatbots based on analytics and user feedback.
What challenges do chatbots face?
Chatbots can encounter challenges such as: - Lack of empathy. - Security risks. - Difficulties handling slang or complex human emotions. - Inability to make complex decisions or understand nuanced contexts.
How can businesses measure chatbot performance?
Performance can be measured using metrics like: - Customer Satisfaction Score (CSAT): Gauges user satisfaction with chatbot interactions. - Containment Rate: Measures how many queries are resolved by the bot without human intervention. - First Response Time (FRT): Assesses the speed of the bot’s initial response to user queries.
Can chatbots replace human agents?
While chatbots can automate many repetitive tasks, they cannot fully replace human agents. Humans are still needed for strategic thinking, complex decision-making, and situations requiring emotional intelligence.
What does the future hold for chatbots?
The chatbot industry is expected to grow significantly, with chatbots becoming more human-like and integrated across sectors such as E-Commerce, customer support, and social media. As technology advances, chatbots will handle more complex tasks, providing even greater value to businesses.
