What is a chatbot?
Functions, advantages and possible fields of application
About this guide:
Chatbot – a true buzzword in the digital world for several years now. The topic of 'chatbots' is very multifaceted and complex, with a lot to learn. Especially now, as the relevance of chatbots continues to grow and the capabilities and features of the technology never cease to amaze. The number of applications for chatbots is continuously increasing: they communicate with customers, potential applicants, generate leads automatically or assist employees in applying for vacation. Because chatbots are such a diverse and interesting technology with much to offer, it's understandable that various questions arise. That’s precisely why this guide exists, including answers to all the W-questions as well as explanations and insights into all important categories and subtopics. Enjoy your reading!
Table of contents
Chatbot basics
- Definition: What is a chatbot?
- How does a chatbot work?
- What types of chatbots are there?
- Chatbots and artificial intelligence
- What are the advantages of a chatbot?
Areas of application for chatbots
Definition: What is a chatbot?
A chatbot is a technical dialog system that enables dialog between humans and technical systems. The conversation takes place via spoken language or text language. A chatbot always offers an option for input and output in spoken or written form, typically through a so-called chat widget.
The definition of a chatbot is also reflected in the term “chatbot” itself. This is made up of the verb “to chat” and “robot”. Put simply, a chatbot is a robot that you can talk to.
However, the technology behind it is much more complicated. The technical dialog system bundles all information in a single channel and uses this basis to process customer inquiries.
Chatbots are usually displayed in conjunction with an avatar on a website or messaging platform (e.g. Facebook Messenger) in order to respond to user queries, such as questions about products or services.
How does a chatbot work?
A chatbot works either on the basis of defined rules (also called “rule-based”) or on the basis of artificial intelligence. Rule-based chatbots use a catalog of defined questions and answers. AI-based chatbots can learn from existing dialogues.
The chatbot recognizes the user's intent and the content of the question, can independently create connections and thus, engage in more demanding, complex dialogues and provide answers to previously unanticipated questions.
When AI chatbots are connected to other systems — such as CRM software or logistics software— through interfaces (APIs) in customer service, they can provide individualized and personalized information and responses, such as the status of a delivery, a change of bank account for an insurance company, or an energy provider. All without human intervention.
What types of chatbot are there?
Not all chatbots are the same. In order to answer the question “What is a chatbot?” in detail, it helps to take a look at the possible variants of a chatbot. Even small technical changes can make a big difference. Basically, the following types of chatbot can be identified:
- Rule-based chatbots
- Smart chatbots
- Application-specific chatbots
Rule-based chatbot
Rule-based chatbots present the user with predefined answer options. However, if the customer asks a question that was not considered in advance during programming, the bot cannot answer. This digital assistant is therefore only recommended for simple and standardized processes. Automated extension of rule-based chatbots is not possible without problems, so this type of chatbot is increasingly receding into the background. You can find out more about rule-based chatbots here.
Smart chatbots
Smart chatbots or so-called AI chatbots are usually based on artificial intelligence (AI) and natural language processing (NLP). They recognize the customer's typed text and, thanks to NLP, understand the user's intention even behind complex and long sentences. NLP is used for the machine processing of natural language. The aim is to imitate an intelligent conversation, as if conducted by a human, using artificial intelligence. The NLP and AI-based chatbot, i.e. a free text bot, understands the natural language of humans and identifies the content according to:
- Intention and
- Entity.
'Word embedding' is a technique from the field of NLP. The system looks at the sentence as a whole and then assigns a vector for each word. With comprehensive preparation and a targeted concept, the chatbot developed has a significant influence on the user experience (UX). The key aspects here are effectiveness, efficiency and positive customer feedback.
“Word embedding” and other NLP functions are certainly not familiar to everyone - understandably so. If you would like to learn more about this, please read the articles by Kai, the Head of AI at moinAI. Kai explains how NLP understands human language in a humorous, simple way using examples: Learn more about Natural Language Processing now.
The advantages and disadvantages of chatbots with artificial intelligence
Advantages:
- Understand complex sentences and conduct dialogs
- Always keep track of the conversation and the context
- Ideal for an optimal user experience
- After development, usable on all platforms
- High savings potential through better efficiency in processes
- Build own database and constantly learn
- Provide data in real time
- High potential for generating insights
- Are available around the clock and answer customer queries effectively and quickly
- Cost-effective in the long run, as the acquisition costs quickly pay off through efficient automation
- See for yourself with the moinAI ROI calculators. Calculate your return on investment in customer service or marketing
Disadvantages:
- Initial programming causes high acquisition costs
- Not immediately usable
- Longer development time
Application-specific chatbots
Application-specific chatbots mix rule-based and intelligent dialogs that are enhanced with graphical interfaces. They improve the user experience through individual design. One example of this is calendar graphics that lead to an appointment or booking with one click. The customer does not have to type in the date manually and saves time.
The advantages and disadvantages of application-specific chatbots
Advantages:
- Ideal for online banking, consulting applications, insurance, hotels or restaurants
- Offer more convenience for the user when operating websites or forms
Disadvantages:
- The system takes a long time to become intuitive to use
- High cost factor for development and maintenance
- Every device and every platform requires new programming
Chatbots and artificial intelligence
What do chatbots and artificial intelligence have to do with each other? Are there chatbots without artificial intelligence? Yes, there are also chatbots that work without artificial intelligence, these are rule-based chatbots, e.g. so-called click bots. As mentioned above, click bots have pre-programmed conversation threads that a user can click through.
There are also chatbots without AI that allow free-text input, but their understanding is still relatively limited. They are particularly suitable for simple applications, commands, and keywords. However, they do not perform well in understanding connected sentences or phrases and cannot recognize context-dependent relationships. This is mainly due to the fact that human language is often ambiguous and contains many nuances. Non-intelligent machines cannot grasp semantic relationships, which makes it difficult for them to understand longer or more complex user requests.
Why should a chatbot be AI-based?
In order for semantic relationships and thus longer or more complex messages to be understood by the software, and for users to receive quick and competent assistance, artificial intelligence (AI) and chatbots complement each other very well. AI holds great potential for chatbot development. Many people criticize the responsiveness and comprehension of chatbots, especially when it comes to individual queries. However, AI can easily address this issue. AI makes it possible to truly understand user requests, not just in terms of language but also by identifying the user's true intent, even if it is hidden in long and complex sentences. This is achieved through deep learning methods. The two most important AI principles for the moinAI chatbot are Reassuring and Dreaming.
Reassuring means intelligent follow-up questions, i.e. if the AI is not entirely sure which topic area is meant by the question, it asks the user a follow-up question - if the user answers in the affirmative, this is returned as a positive signal and clarifies the topic area. In this way, the AI learns with each query.
Dreaming means suggestions for new topics based on AI recommendations. If similar questions keep cropping up that the AI doesn't know about, it still makes a suggestion for a new topic because this topic is obviously relevant. In this way, the chatbot gradually opens up new topics and at the same time adapts to the wishes and needs of users and their topics. This makes it possible for the AI chatbot to get to know the target group or website visitors as well as possible.
Another advantage of an AI chatbot is that the AI develops independently and is actually a self-runner: once trained and implemented, no further manual training is required, at least in the case of moinAI.
You can find out more about the exciting topic of “AI + chatbots” in the article What is an AI chatbot? Definition, advantages, function.
What are the advantages of a chatbot?
The advantages of a chatbot vary depending on the use case and purpose. Chatbots are particularly popular with companies and the associated customer communication in marketing & sales or customer service. Thanks to efficient automation and 24/7 availability, they perform well in these areas.
Does the following telephone message sound familiar to you?
"All of our representatives are currently assisting other customers —please bear with us for a moment."
We've probably all experienced phone messages like this before and quickly felt annoyed by them. This is one of the reasons why more and more people, especially those between the ages of 16 and 44, are making their inquiries online. It's convenient and quick. This is exactly where digital assistants such as chatbots come into play. They are available around the clock, save customers long queues, answer inquiries quickly and reliably, relieve the burden on employees and incur low running costs. A win-win situation for customers and companies alike.
The advantages of a chatbot
- Increasing efficiency
No matter in which area a chatbot is used, automation always increases efficiency. Because even more can be done in even less time without the need for more resources.
- Reducing costs
More efficient processes can save time and resources, which ultimately leads to a reduction in costs. You can find out how much a chatbot can save in marketing or customer service using our ROI calculator.
- Optimization of the user experience
Website visitors generally have little time and patience. Nobody wants to have to spend a long time clicking through websites and downloading PDFs to find the information they need. A chatbot can prevent this by navigating and guiding the user through the website. - Increase in customer satisfaction
An optimized user experience is evident in increased customer satisfaction. The concept is simple: When a customer receives quick assistance with a problem or has a question answered promptly, they are more satisfied than if they were left waiting in lengthy phone queues. - Improved availability
A chatbot is online 24 hours a day, seven days a week, 365 days a year. In addition, it can not only answer one query at a time, but is a true multitasking talent that can help a large number of users at the same time. This makes companies accessible at all times - regardless of the volume of queries.
"Word embedding" is a technique from the NLP area. The system looks at the sentence as a whole and then assigns a vector for each word. With comprehensive preparation and a targeted concept, the chatbot developed has a significant influence on the user experience (UX). The key aspects are effectiveness, efficiency and positive feedback from the customer. “Word embedding” and other NLP functions are certainly not familiar to everyone - understandably so. If you would like to learn more about this, please read the articles by Kai, the Head of AI at moinAI. Kai explains how NLP understands human language in a humorous, simple way using examples: Learn more about Natural Language Processing now.
Areas of application for chatbots
A bot is only as good as its programming. Once it has been developed correctly, it is able to work effectively as a self-learning system. Your company will benefit from the strengths of a self-learning chatbot, particularly in the following areas:
A chatbot in customer service
In customer service, a chatbot can answer many user queries automatically and fulfill the customer's need for quick and effective help. Whether the customer has to communicate with a human or a chatbot is of secondary importance - the most important thing is that the user and customer are helped quickly and effectively, and if the user asks a chatbot, they can always be sure that it will process their query, even at three o'clock in the morning. However, the self-learning chatbot not only serves as a point of contact for the customer, but also supports internal communication. Many companies use chatbots on the intranet, for example, as a service for their employees.
Good to know: If a chatbot doesn't know what to do next, it can be handed over to a human using a so-called "human takeover". This is possible either directly in the chat, i.e. from chatbot to live chat agent, or by forwarding a user's request to a stored service email address. Either way, it is very straightforward for users and the service team, and the combination of chatbot and live chat in particular offers seamless and quick transitions.
Advantages of a chatbot in customer service:
Chatbots are welcome helpers in customer service or customer support. This is mainly due to the obvious advantages: 24/7 service and automated responses to user inquiries. The advantages are therefore undeniable: automated responses to user inquiries save support costs and resources - and not a small amount at that.
Looking for more advantages? Here are 5 more advantages of chatbots in customer service.
A chatbot in marketing
From brand building and competitions to storytelling: intelligent technology can implement viral campaigns within a very short space of time. A creative example of this is Jägermeister's Jäm-Bot, which creates a rap video from a chat history that users can then send to their friends.
Advantages of a chatbot in marketing:
A chatbot makes it possible to increase the number of leads, conversions and engagement on the website or social media channels in a measurable and scalable way by improving customer satisfaction and the user experience. These two factors are ultimately decisive in terms of a website visitor's willingness to buy.
A chatbot can captivate users with the offered product or service by providing expert advice, assisting users, guiding them, and answering questions. This is especially relevant in e-commerce. By using a chatbot, an ideal customer journey can be created for the (potential) customer, ideally leaving no desires unmet.
In addition, user engagement is increased since a chatbot can actively address website visitors. Instead of merely waiting for a pull action from the user, push communication can be utilized. Besides answering questions, a chatbot can offer much more: quizzes, trivia games, announcements, small talk, and various promotional and marketing activities.
You can see that a chatbot in marketing has many advantages that you don't want to miss these days. In marketing, intelligent chatbots are used primarily to qualify B2B customer inquiries. With each incoming inquiry, the self-learning bot improves its knowledge and achieves particularly high conversions and click-through rates in online marketing.
A chatbot in sales
Digital assistants are also on the rise in sales and can be used perfectly, for example, to increase sales or acquire new customers. There are numerous possible applications during the purchasing process or in after-sales. In use around the clock, always absolutely "up to date" and reliable - the system paves the way for the sales discussion, answers questions about products, searches through completed contact forms for interested parties, integrates product databases or takes over appointment coordination for sales representatives in the field.
Advantages of a chatbot in sales:
Use a chatbot for cold calling? Probably not, but a similar function is conceivable. A chatbot is able to map a typical sales cycle, at least in phases. Be it by identifying new customers: A chatbot can recognize who is new to the website and which subpages the user clicks through. This knowledge is very valuable in terms of a possible approach. If a user visits a certain landing page, for example, the chatbot not only notices this, but can also actively address them.
Which then leads to the next phase: Making contact. By addressing a user or answering a user's question, the virtual assistant enters into a conversation with the user. If the user is now interested in buying, it is time to qualify them - no problem for a chatbot. Forms that can be integrated into the bot allow the chatbot to ask for all the necessary information, such as authorization, budget, requirements and time frame.
The chatbot not only asks for information and forwards it to the company: There is also the option of connecting the chatbot to CRM systems so that leads from the chatbot are recorded directly there. Then it is time for the human employees to start nurturing, a product demo, negotiations, etc. However, the chatbot does excellent preparatory work in sales processes. You can find out more about the advantages of chatbots in sales in the blog article: "A chatbot in sales & distribution: How companies benefit from it"
Which chatbot is the best?
Simply put, any chatbot that offers users real added value and can really help with questions and problems is good. In order to be able to help a user quickly with their request, the first step is for the chatbot to understand the request and be able to assign it to the right topic. This usually works with free text information using natural language processing (NLP) and artificial intelligence (AI).
AI and NLP help a chatbot not only understand requests, but also assign them to the correct topic or answer so that an informative conversation can arise.
Chatbots in our everyday lives
The well-known chatbots of large companies, such as Alexa or Siri, clearly show what users like: A quick understanding of the issue - even if something is not expressed grammatically correctly or individual words are missing. Helpful and equally quick answers with supporting elements, such as suggestions or links to further information. The ability to remember newly learned information and to develop independently.
Chatbots in corporate communications
Especially in customer communication, companies are increasingly using chatbots. The advantages they bring to both businesses and customers through automation are diverse and primarily depend on the use case. A chatbot in customer service ensures that recurring questions are answered quickly and easily. When used in marketing, a chatbot can advise website visitors, provide assistance, and persuade them about the company, brand or products through conversation. Of course, chatbots can also be deployed for multiple use cases simultaneously. But what makes a good chatbot?
As mentioned earlier, a chatbot effectively assists users when it is well-trained and based on NLP and AI technologies. However, the graphical design of a chatbot, as well as its texts, teasers and user engagement strategies, also hold significant potential for it to rank among the best. Many companies using moinAI demonstrate how this can be achieved with their chatbots. In the article 'The 6 best chatbots' you can learn more about how companies like Smartbroker, Geberit, Jägermeister and Velux successfully and creatively implement their chatbots.
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