Chatbots 101: What They Are and Why Use Them

December 2, 2021
Jordan O'dell-Fontana
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We've all seen a chatbot before (there's one at the bottom right of your screen right now!), so you may have noticed that they're becoming increasingly more popular. What's the secret behind the 17 billion dollar industry, and why do consumers now expect all businesses to have one?

First of all, what is a chatbot...

In its most basic form, a chatbot is a computer program which simulates and processes human conversation.

It can be as simple as a set of pre-written responses to pre-determined inputs, or as complex as machine-learning and AI integration to simulate a personalised conversation, as similar to a real human as possible. However, most chatbots, which can be found today, fall into the first category—they identify human queues and keywords, then select from a database of pre-written responses to answer consumers' questions and queries.

In business, chatbots are commonly used to improve the customer experience, by providing customers a way to instantly answer common questions, without going through the arduous process of contacting a customer service agent. In particular, they are used as part of the customer support funnel, to weed out basic or repetitive questions, leaving the most complex issues to the customer support agents. Chatbots can also be used for marketing and sales, to tell a brand story or even events.

Why use chatbots?

With the onset of the 2020 pandemic, and the technology adoption spike that followed, consumers now expect to be able to interact with businesses entirely online and entirely at their own pace. With 60% of consumers reporting to have used chatbots in the last year, and 48% saying they're willing to in the future, chatbots are necessary to keep up with the high consumer demand. Chatbots are also part of the preferred method of communication, as 68% of consumers believe messaging is the most convenient way to interact with a business.

Self-serve support systems, such as chatbots and knowledge bases can help reduce costs dramatically. One study from Gartner found that human-based support channels cost an average of $8.01 per contact, whereas self-service solutions, such as chatbots only cost about $0.10 per contact.

The research is clear - chatbots are the future of customer support. Customers are expecting them and they're a trend in the industry which is not going away anytime soon. However, you don't just have to rely on the word of others, here are some direct benefits that come from implementing chatbots:

 1. Instant, round the clock response times and reduced resolution times

Faster response and resolution times are what the modern consumer wants, with 73% of consumers says that companies valuing their time is the most important thing they can do to provide good customer service. Because bots don't need to sleep, at some level, you can provide 24/7/365 support to your customers, without having to employ an international team of around-the-clock support agents. Furthermore, 90% of consumers consider resolution times as the most critical issue related to customer service, and 90% also rate an immediate response as essential or very important when related to customer service. Research shows that support teams who have implemented chatbots are 60% more likely to have a definite improvement in resolution times. This means, chatbots not only get to your customers faster, but can help you help them more efficiently.

 2. Reduced customer support team workload

The core responsibility of a chatbot is to answer repetitive questions that your customers have, such as "How can I sign up for a membership?" or "When will my order ship?". Did you know that these routine inquiries can make up nearly 80% of all customer service inquiries? Allowing chatbots to handle these interactions means that your customer support team can focus on the more complex issues. This saves your customer support team time, improving the quality of your business' customer service, thus improving your customer satisfaction and earning more sales. When customer service agents were interviewed, after the implementation of chatbots, 79% said that their skills were improving because they were handling more complex issues, and 72% of those interviewed believed it made them more valuable to the company.

 3. Increase in customer satisfaction and other customer metrics

One less-obvious benefit to implementing chatbots is the increase in customer satisfaction. When customers are getting their problems addressed immediately and quickly, and the support team is better equipped to deal with a wide variety of complex issues, it makes customers happier. Support teams who use chatbots are 27% more likely to meet increasing customer expectations than those who don't. What's more is that research shows that the implementation of a chatbot increases the likelihood of increased customer satisfaction by 30%. This increased customer satisfaction has a direct link to other metrics such as conversion rates and customer retention. In fact, interactions with chatbots are reported to increase conversion by 36%.

 4. Increase in revenue and customer spend

While all businesses strive to achieve a great experience for their customers, at the end of the day, most decisions come down to ROI. Chatbots are a great investment, with business leaders across a variety of industries reporting that chatbots have increased their sales by 67%. One Facebook study also found that 53% of customers are more willing to buy from a business that utilises chatbots on their website. What's more, is that the implementation of chatbots and customer experience optimisation in general can lead to greater per-customer spend. One study found that 75% of consumers surveyed are willing to spend more with a business that provides great customer experience.

Getting started with chatbots

Implementing a chatbot can sound like a daunting task, but worry not!  We've got your back.  Check out some of our additional blogs to learn more.

Ready to dive deeper?  Tap the chat icon below to get in touch with our team and see how we can help you design and launch a chatbot to elevate your customer experience.

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