How chatbots and artificial intelligence can improve CX

Chatbots and artificial intelligence have become topics of conversation wherever we go – from casual elevator conversations about ChatGPT to all the teachers concerned that their students won't write their own essays anymore.

Few people, however, possess a deep understanding of the possibilities and challenges of these technologies. To help you navigate this (not so) unknown universe, we’ve prepared a guide that will help you get a better grasp of how chatbots and artificial intelligence can improve CX:

what is a chatbot and how does it work?
how are chatbots and artificial intelligence related?
how can chatbots and AI contribute to customer experience?
compelling statistics about AI chatbots
the best practices for using AI chatbot solutions

What is a chatbot and how does it work?

A chatbot is a conversational technology designed to interact with humans as naturally as possible, either through text or voice-based interfaces. In general, they work on an input-output model: the user sends a command to the system, which processes it and returns with an appropriate response.

It’s important to highlight that the specific functioning of chatbots depends on whether or not they are powered by artificial intelligence. Take a look at the differences between rule-based chatbots and AI-powered chatbots below.

Rule-based chatbots

As the name suggests, this type of chatbot follows a script of predefined rules created by a human. Its objective is to anticipate users' needs and provide the answer that corresponds to them. “If the user says A, do B” – that kind of thing. As a consequence, these chatbots’ ability to understand human language and handle complex queries is very limited.

AI-Powered Chatbots

On the other hand, AI customer experience chatbots are able to use Natural Language Processing (NLP) to interpret what the user says. With the help of a machine learning algorithm, these chatbots seek to extract the context of the conversation to generate a relevant response, both in terms of content and tone of voice.

The greatest advantage these AI-powered chatbots have over their rule-based counterparts is the ability to learn from user interactions, which allow them to improve their performance over time and, ultimately, handle more complex queries.

Take Nuuly, an online fashion platform that offers a carefully curated collection of clothes for rent, resale, and thrifting. The company’s team utilizes Intercom's automation features to enhance its support abilities and address FAQs with ever-increasing efficiency, allowing them to handle an increasing number of customer inquiries.

How are chatbots and artificial intelligence related?

Chatbots and artificial intelligence are closely related. AI provides the underlying technologies and techniques that power the capabilities of many bots. Some of these technologies include:

Natural Language Processing (NLP): This is what allows chatbots to understand not only what you say (text), but how you say it (sentiment analysis).
Machine Learning (ML): This is what enables bots to decode what you say, learn from the data, recognize patterns, and make predictions or decisions based on those patterns.
Natural Language Generation (NLG): Lesser known than Natural Language Processing and machine learning, NLG focuses on producing human-like content as the output of a conversation. Its objective is to qualitatively improve the experience of those who engage with this technology.
Knowledge Representation and Reasoning: You might call this the bots’ treasure chest. This is what enables them to store and access knowledge that can then help them produce accurate and informative responses in future conversations.

Can AI be used to improve customer experience?

Yes, and many companies already do so. Chatbots, virtual assistants, social media monitoring tools, automated email responses, and Interactive Voice Response (IVR) systems are just a few examples of how AI is already being utilized in business settings.

Overall, AI tools for customer experience are able to automate repetitive tasks, reduce response times, and improve customers satisfaction by providing contextual and personalized responses to customer queries.

More specifically, when chatbots and artificial intelligence work together, they’re able to guide customers through troubleshooting processes, such as:

Account login or access issues
Device configuration or setup
Payment or billing inquiries
Usage of specific product or service features

Additionally, AI algorithms help companies analyze customer data and anticipate their behavior in a given situation, facilitating the creation of more appealing and personalized offers.

However, there’s currently an investment gap. According to Intercom’s The State of AI in Customer Service 2023 Report, 69% of support leaders plan to invest more in AI in the year ahead, but only 38% have actually done so.

This suggests that early adopters have a tremendous opportunity to stand out, make a substantial impact, and gain a competitive advantage.

Can chatbots be used to enhance customer experience?

They most definitely can. And whether you’re aware of it or not, you’ve almost certainly interacted with a few of them already.

According to a Gartner survey conducted in 2022 with 50 respondents, approximately 54% of organizations are currently utilizing chatbots or other conversational AI platforms for customer-facing applications. The study also predicts that by 2027, chatbots will serve as the primary customer service channel for around 25% of these organizations.

The growing adoption of conversational technologies, among which the chatbot stands out, suggests that companies recognize their ability to improve the customer experience. Check out some of the practical applications of this tool:

1. 24/7 availability

If you’re still unclear about the advantages chatbots confer to customer experience, consider this simple fact: robots don’t sleep. Bots are capable of answering questions any time of the day, whether your representatives are on the clock or not.

Given that customers expect you to respond within 40 seconds, consistently providing a near-instantaneous response can offer a significant competitive advantage over rival businesses.

2. Self-service capabilities for basic inquiries or tasks

Another great function of chatbots and artificial intelligence is their ability to quickly resolve queries to reduce your workload. As a matter of fact, by offering bots as a self-service option, you can reduce the resolution times and improve customer satisfaction at the same time.

2. Seamless handoff to human agents when needed

As powerful and useful as they can be, there are still situations and scenarios in which AI and chatbots simply cannot provide an adequate answer. Fortunately, we still have human-run customer service departments to back them up.

Whenever additional help is needed, these tools can seamlessly pass conversations to support reps. It makes for an effective system that prioritizes optimization and efficiency without sacrificing quality of service.

Thus, you ensure that the customer experience is tailored to the urgency and complexity of the issue presented by the customer, as well as providing a human touch whenever necessary.

If you want a seamless human handoff and no misleading answers from your chatbot, read this: Everything you need to know about Fin, the breakthrough AI bot transforming customer service.

4. AI-powered recommendations and product suggestions

Approximately 7 out of 10 customers value personalization, as long as it relies on information they have directly shared with the business. This suggests that personalization and privacy aren’t mutually exclusive.

Spotify is a company that understands this very well. In addition to the algorithm that suggests new songs and podcasts based on what you’re already listening to, they also created Wrapped, “a celebration of the year gone by and an invitation to join in on the fun.”

Source: Spotify

Does customer service involve chatbots, artificial intelligence or both?

Customer service can involve both chatbots and artificial intelligence. As we mentioned, AI tools for customer service are part of a broader universe, one where machine learning, natural language processing, and deep learning combine to generate concrete solutions to respond to customer queries more effectively.

Chatbots, in turn, have a more specific field of action. They can be the front line of a company's support team, handling routine inquiries, while more complex or specialized queries are escalated to AI systems.

However, as customer service is an activity traditionally performed by humans, the inclusion of technology can generate uncertainty about the future of this job.

It’s important to remember, though, that neither of these instances suggests that bots are going to steal work from humans. In fact, by having to dedicate less time to repetitive tasks, customer support professionals will almost certainly experience significant changes for the better in their daily responsibilities.

The previously mentioned report from Intercom shows that there’s huge potential for AI to ease the burden on support teams, which will consequently help reduce burnout and attrition. John O’Hara, Director of Customer Experience at Logikcull, believes AI can be a major boon for both agents and customers:

If you want to learn more about customer attitudes towards this technology, read: How do your customers feel about AI chatbots?

Compelling statistics about AI chatbots for customer service

At Intercom, we’re all about data. Here are some of the most interesting numbers about chatbots and artificial intelligence from our State of AI in Customer Service 2023 report.

72% of support leaders think that AI offers companies a competitive advantage.
67% of support leaders believe they are already seeing value from their automation efforts, such as chatbots for customer service and routing.
60% of support leaders expect to reduce support costs over the next five years by adopting AI.
58% of support leaders have seen improvements to their CSAT scores after implementing AI and chatbots.

Best practices for using AI chatbot solutions

According to Statista, the global AI market is expected to exceed $500 billion by 2024. Further, research from other fields suggests that the market is projected to expand to over $1.5 trillion by 2030.

With so much money pouring into chatbots and the artificial intelligence field more broadly, you need to have a plan of action to maximize your ROI and improve the experience you offer your customers.

Here are some of the best practices for using AI chatbot solutions:

1. Train your team to work with – rather than against – technology

According to Linkedin’s 2023 Workplace Learning Report, 89% of learning and development experts agree that proactively building employee skills will help navigate the evolving future of work. However, when employees are asked about their experience in the last six months, only 26% say that their organization challenged them to learn a new skill.

When it comes to chatbots and artificial intelligence, a lack of thorough training and preparation for your workforce can impose challenges and even long-term obstacles. After all, many customer service representatives fear that they will eventually be replaced by “machines” (though most experts believe this is far from the case).

Without a sophisticated understanding of how chatbots and AI are being incorporated into their departments, employees may experience the kind of uncertainty that can generate resistance and even resentment toward these new tools.

The solution? Train your team to work with technology and not against it, and show the tangible advantages utilizing these advanced resources can offer everyone. Sam Miller, Customer Support Operations Manager at Dental Intelligence, took this advice to heart:

“Combining automation and human support, blending those two together, allows our teammates to do what they do best – be creative, be empathetic, and do the things that only humans can do, and that’s to find unique solutions to difficult problems.”

2. Adapt the tone of voice to the channel

Customers use different channels depending on the urgency and complexity of their queries. Because of this, it’s fair to assume that they expect more agility when they opt to engage with a chatbot.

The chatbot's tone of voice must adapt to the resources of this channel – always keeping in mind, of course, your overall brand positioning. Rich media, like emojis and GIFs, can be a great tool to convey a warmer conversational experience.

3. Create relevant FAQ responses

Speed is not the only part of a chatbot’s response that’s important; accuracy remains absolutely critical. When designing the outputs for your FAQs, keep in mind that 95% of US customers say being communicated with in a way that makes them feel valued affects their decision to do business with a company.

4. Enhance the user experience through personalization

Alongside data-driven insights, personalization should be a priority in consumer-facing interactions. The data back us up here: 71% of customers now expect personalization in their interactions with companies, and 76% get frustrated when they don’t receive the level of personalization they were hoping for.

Keep learning about chatbots and artificial intelligence

Chatbots and artificial intelligence have come a long way over the past few years, and the future holds even greater, more jaw-dropping advancements. If you want to keep up to date with the possibilities, challenges and innovations this rapidly ascending technology presents to the customer experience industry, check out these articles:

The State of AI in Customer Service

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