Instant Assistance: How AI Chatbots Are Improving Customer Service

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Kacper Rafalski

Updated Jun 13, 2024 • 19 min read
chatbot

As competition and customer expectations rise, providing exceptional customer service has become an essential business strategy. Utilizing AI chatbots is one of the main methods for meeting customer needs and optimizing processes.

These conversational AI applications can efficiently handle customer inquiries and provide support around the clock, thereby freeing up human support agents to handle more complex customer issues.

To what extent is the use of artificial intelligence chatbots prevalent in customer support? Are customers inclined towards conversing with a chatbot as opposed to a human representative?

It is anticipated that the chatbot industry will experience substantial growth and reach around 1.25 billion U.S. dollars by 2025, which is a considerable increase from its market size of 190.8 million U.S. dollars in 2016.

According to Emily Potosky, Director, Research, in the Gartner Customer Service & Support practice, “While self-automation has been happening for a while in the software space, this trend will become more present internally in customer service because reps now have improved access to automation tools.”

Size of the chatbot market 2021 to 2030

Source: Statista

AI chatbots are commonly used in the retail industry. Precedence Research shows that 21.50% of applications are segmented into customer relationship management (CRM).

AI  in retail market 2022

Source: Precedence Research

Further, the Statista’s global survey of hotel professionals conducted in January 2022 found that the adoption of chatbots in the hospitality industry was projected to rise by 53 percent during the year.

According to Tidio’s study, the majority of consumers, specifically 62%, would choose to utilize a chatbot for customer service instead of waiting for a human agent to respond to their queries.

Benefits of conversational chatbots in customer service

Speed and efficiency

AI chatbot offers immediate assistance to customer inquiries, providing real-time responses without the need for human intervention. Their automated and efficient nature enables them to swiftly resolve routine queries, leading to quick resolution and improved customer satisfaction.

24/7 availability

Unlike human support agents who work in shifts or have limited availability, conversational bots can operate 24/7 without any breaks. They are always there to answer user queries, regardless of the time of day or day of the week. This ensures that customers can access support whenever they need it, even during non-business hours or holidays.

Personalization

There are multiple ways to enhance personalization using conversational artificial intelligence solutions. Here are some examples:

  • Customer profiling: AI chatbot can collect and analyze customer data, such as past interactions, purchase history, browsing behavior, and demographics, to create customer profiles and understand customer preferences, needs, and context.
  • Natural Language Processing (NLP): Advanced chatbots equipped with NLP capabilities can understand human language, including sentiment, intent, and tone. This allows them to provide personalized responses.
  • Contextual conversations: The tools can maintain context within a conversation, allowing them to remember and reference previous interactions.
  • Dynamic content: Chatbots can dynamically generate content based on customer interactions. For example, as virtual assistants they can send tailored product recommendations, provide personalized offers or discounts, and deliver customized content such as articles, videos, or tutorials.
  • Interactive decision trees: The conversational AI solutions can be programmed with interactive decision trees that guide customers through a personalized path of questions to understand their requirements and provide appropriate solutions.
  • Integration with customer data: Chatbots can be integrated with other customer data sources, such as CRM systems or ecommerce platforms, to access customer information and provide tailored solutions. For example, a chatbot can retrieve a customer's order history and provide updates on order status or offer related products or services based on their purchase history.

Cost-effectiveness

Conversational AI reduces operational costs and increases profitability by automating repetitive tasks, providing 24/7 support, and handling a large volume of inquiries, resulting in improved efficiency, cost savings, and increased revenue opportunities.

Multilingual support

AI chatbot can provide support in multiple languages, allowing businesses to expand their customer base globally by leveraging language recognition and translation capabilities to communicate with customers in their preferred languages, overcoming language barriers and providing a seamless support experience for customers around the world.

language_bot

Source: HootSuite Blog

Scalability

Chatbots can handle multiple conversations at once, allowing businesses to serve a larger customer base without increasing staffing needs by leveraging their ability to engage in parallel conversations with customers, providing efficient and scalable customer support without the need for additional human resources.

Improved data collection

Chatbots can collect valuable data on customer inquiries, preferences, and behavior, providing insights to inform business strategies by analyzing and recording interactions with customers, identifying trends, patterns, and customer preferences, which can be used to improve business operations, product development, and marketing strategies, leading to informed decision-making and better customer engagement.

Enhanced customer engagement

The conversational AI tools can increase customer engagement and satisfaction through prompt and personalized interactions by providing quick responses to customer inquiries, offering personalized recommendations, and delivering tailored solutions that meet customer needs, resulting in enhanced customer experience, increased engagement, and higher levels of customer satisfaction.

Tidio window

Source: Tidio

Improved brand image

Conversational AI solutions can enhance a business's brand image by providing modern and innovative customer service solutions through cutting-edge technology that reflects the business's commitment to staying current with customer service trends, offering seamless and convenient interactions, and showcasing a forward-thinking approach, thereby positioning the business as modern, customer-centric, and innovative in the eyes of its customers.

Use cases for conversational chatbots in customer service

1. Customer inquiries and support

Conversational AI solutions can handle and resolve complex customer inquiries and provide support by leveraging advanced natural language processing (NLP) capabilities, interactive decision trees, and access to relevant data sources, allowing them to understand and analyze complex customer queries, provide accurate responses, and guide customers through issue resolution steps, resulting in effective and efficient support for complex customer inquiries.

2. Sales and marketing

The virtual agents can assist in product recommendations, cross-selling, and upselling by leveraging customer data, preferences, and browsing behavior to offer personalized recommendations and suggest related products or services during customer journey, resulting in increased sales and enhanced revenue opportunities for businesses.

Imagine you are visiting an online clothing retailer's website and start a chat with their chatbot to inquire about a pair of jeans. The chatbot engages with you in a conversation and asks about your style preferences, size, and desired fit. Based on your responses, the chatbot uses its recommendation algorithm to suggest a few options of jeans that match your preferences.

After you express interest in one of the suggested jeans, the chatbot takes the opportunity to cross-sell by recommending a matching belt or a pair of shoes that would complement the jeans. The chatbot may also offer an upsell by suggesting a premium version of the jeans with additional features or a higher-end brand.

Decathlon window

Source: HootSuite

3. Booking and reservations

Chatbots can assist in booking and reservation processes for, among others, businesses in the hospitality industry by offering a seamless and convenient way for customers to make reservations, check availability, and receive booking confirmations. Here's an example of how chatbots can assist in the booking and reservation processes:

  • Reservation inquiries: Customers can interact with the AI chatbot on the hotel's website, social media, or messaging platforms, and inquire about room availability, rates, and amenities. The chatbot can provide real-time responses based on the hotel's booking system and help customers find the best option based on their preferences.
  • Booking assistance: Once the customer decides to make a reservation, the AI chatbot can guide them through the booking process by collecting necessary information such as check-in and check-out dates, room type, and payment details.
  • Confirmation and reminders: After the booking is completed, the conversational AI can generate a confirmation receipt and send it to the customer via email or messaging platform. The chatbot can also send reminders to the customer closer to the check-in date, ensuring that the reservation is top of mind and reducing the chances of no-shows.

4. Order tracking and delivery updates

AI bot can provide real-time updates on order status and delivery information. After a customer places an order, the chatbot can automatically send a confirmation message with order details, including the order number, items ordered, and estimated delivery time.

Haptik window

Source: Haptik

The AI powered chatbots can also provide a summary of the order and request confirmation from the customer. It can also provide real-time updates on the order status and location by integrating with the business's order tracking system.

Moreover, the chatbot can send proactive notifications to customers as the order progresses through different stages, such as order processing, out for delivery, and delivered. These alerts can be sent via messaging platforms, SMS, or email, depending on the customer's preferred communication channel.

If there are any changes to the delivery schedule, such as delays or rescheduling, the chatbot can promptly notify the customer and provide updated information.

5. Onboarding and training

Chatbots can assist in onboarding new customers and providing training on product usage by delivering personalized and interactive tutorials, answering frequently asked questions (FAQs), and guiding customers through the onboarding process. Here's an example of how chatbots can assist in onboarding new customers and providing training on product usage:

  • Welcome and introduction: When a new customer signs up for a product or service, the chatbot can send a welcome message and provide an introduction to the product or service. The chatbot can provide a brief overview of the key features, benefits, and functionalities, and set the stage for the onboarding process.
  • Interactive tutorials: Chatbots can deliver interactive tutorials to new customers to help them understand how to use the product or service. For example, the chatbot can provide step-by-step instructions, visual demonstrations, and interactive simulations to guide customers through different tasks and workflows.
  • FAQs and troubleshooting: The AI tools can address frequently asked questions (FAQs) and provide troubleshooting support to new customers. The chatbot can use natural language processing (NLP) capabilities to understand customer inquiries and provide accurate and relevant answers. The chatbot can also offer solutions for common issues, provide tips and best practices, and help customers overcome challenges.
  • Onboarding progress tracking: The tool can send notifications or reminders to customers, offer guidance on next steps, and celebrate milestones or achievements to keep customers motivated and engaged throughout the onboarding process.

6. Account management

A conversational AI solution can assist in account setup and management by guiding customers through the account creation process, handling password resets, and addressing billing inquiries. Here's an example of how chatbots can assist in the following tasks. Chatbots can help customers create new accounts by:

  • Providing step-by-step instructions
  • Capturing necessary information such as name, email address, and password
  • Validating the information provided.
  • Providing guidance on any additional steps required for account setup, such as email verification or setting up security questions.

Chatbots can handle password reset requests from customers by verifying their identity using various authentication methods, such as email verification, phone number verification, or security questions. The chatbot can then initiate the password reset process and guide customers through the necessary steps to create a new password.

These AI tools can also assist customers with billing inquiries, such as checking account balances, reviewing past invoices, updating payment methods, or resolving billing disputes. The chatbot can access customer account information in real-time and provide accurate and up-to-date billing details. If necessary, the chatbot can also escalate complex billing issues to a human representative for further assistance.

7. Troubleshooting and technical support

Chatbots can provide troubleshooting and technical support for product or service-related issues by utilizing their knowledge base and conversational capabilities. Here's an example of how chatbots can assist in troubleshooting and technical support:

  • Issue diagnosis: Chatbots can engage in a conversation with customers to diagnose their technical issues by asking relevant questions about the problem, symptoms, and device or system information. The chatbot can use natural language processing (NLP) capabilities to understand customer inputs and provide relevant responses.
  • Solutions recommendation: Chatbots can provide solutions or recommendations based on their knowledge base, which can include a comprehensive database of known issues and their corresponding solutions.
  • Interactive guides: Chatbots can provide interactive guides or tutorials to help customers troubleshoot and resolve technical issues in real-time. This can include guiding customers through a series of questions or actions to identify the root cause of the problem and providing solutions accordingly.
  • Escalation to human support: The AI powered tools can identify complex technical issues that may require human intervention and escalate the conversation to a human representative. The chatbot can provide relevant information and context to the human representative to streamline the handover process and ensure a seamless customer experience.

8. Social media engagement

Chatbots can be integrated with social media platforms to assist in social media customer service and engagement by responding to customer inquiries and complaints in a timely and efficient manner. For example, it is very common to integrate conversational Ai into Facebook Messenger.

Downsides of conversational chatbots in customer service

Lack of human touch

One limitation of chatbots is their lack of human touch, including empathy, which may make them unsuitable for all customer interactions. While chatbots can efficiently handle common inquiries and provide prompt responses, they may not possess the emotional intelligence, real conversational abilities that human agents can offer in certain situations where customers require emotional support or personalized attention.

Additionally, customers may have unique or complex inquiries that require human interactions and human judgment, creativity, or critical thinking skills that a chatbot may not possess. Chatbots rely on pre-programmed responses and may struggle to understand nuanced inquiries or provide customized solutions beyond their programmed capabilities.

Limited capabilities

Chatbots may not be able to handle complex issues that require human intervention, leading to customer frustration and dissatisfaction. Further, chatbots may encounter technical errors, such as misinterpretation of customer inquiries, leading to inaccurate or irrelevant responses.

Security concerns

Chatbots may be vulnerable to hacking and security breaches, leading to the potential compromise of customer data. There are several ways in which chatbots may be vulnerable to hacking and security breaches.

First, they may be susceptible to phishing attacks, where attackers try to trick users into revealing sensitive information such as login credentials or financial information. This can occur through the chatbot conversational interfaces itself or through links and attachments sent within the conversation.

Second, chatbots may be vulnerable to malware attacks. Malware can be introduced into the chatbot software through various means, including unsecured networks or malicious code hidden within messages sent to the chatbot. Once the malware is introduced, it can be used to steal sensitive data or take control of the chatbot.

How Netguru can help with introducing AI into customer service

Netguru is a company that provides AI consultancy services and develops AI software solutions. The team of proficient engineers, data scientists, and AI specialists utilize their knowledge of artificial intelligence, machine learning, and data analytics to deliver creative and tailored solutions for companies in different sectors.

When it comes to developing and implementing conversational chatbots for customer service, Netguru provides comprehensive services including discovery, strategy, design, development, integration, testing, deployment, and maintenance. We leverage industry-leading tools and technologies to build custom solutions that are tailored to each business's specific needs.

Here are some of the conversational AI chatbots projects Netguru worked on:

Improving online experience for retail customers

In an effort to enhance the online customer experience, an AssistBot was developed to assist buyers in finding the right products in IKEA online shop. The primary objective was to create a tool that was user-friendly and proficient in resolving customer issues.

By leveraging IKEA's product database, the AssistBot has an exceptional understanding of the company's catalog, surpassing that of a human assistant. Additionally, it has the ability to determine which products can be ordered online. Rather than leaving customers to navigate the complexities of tags, categories, and collections on their own, the AssistBot will offer guidance throughout the process.

ikea AssistBot

Speeding up the communication with donors with smart chatbot for NGO

During the Grand Finale, the GOCC Communication Center receives thousands of queries from people wanting to support the initiative, with many coming from online touch points such as Messenger. Responding quickly to questions about volunteering and the current fundraiser status is crucial for maintaining the organization's social trust that has been built on operational transparency over the past 30 years.

To streamline online communication, the most effective method was to automate responses to frequently asked questions. The organization required a chatbot that could easily integrate with Messenger and help volunteers save time by handling repetitive queries, allowing them to focus on answering more unique or specific questions.

The results:

  • The conversational AI chatbot was delivered during a short four-week research and development sprint.
  • The tool shared around 5,000 messages with donors and people looking for information on how to volunteer.
  • The solution automated responses to around 100 different questions.
  • In the run-up to and during the Grand Finale, the chatbot processed 80% of all queries on Messenger.
  • Volunteers at the GOCC Communication Center gained extra time to be able to answer non-standard questions.

Example interaction visualization - wosp

Example interaction visualization

Deliver excellent customer service with AI chatbot technology

Conversational AI chatbots are transforming customer service by providing instant assistance to customers, enhancing customer satisfaction, and reducing operational costs for businesses. The tools are powered by advanced machine learning algorithms that enable them to handle a wide range of customer queries and offer personalized solutions, thus improving the overall customer experience. As more and more businesses adopt conversational AI chatbots, they are likely to become a key driver of customer engagement and loyalty in the future.

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Kacper Rafalski

Kacper is an experienced digital marketing manager with core expertise built around search engine...
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