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Chatbots Explained : Everything You Need to Know

Updated: Jun 6, 2022

The Ultimate Guide to Chatbot
The Ultimate Guide to Chatbot

You sure have come across chatbots on websites today, and you know they serve a crucial purpose of problem solving. In this blog we are going to cover everything we know about chatbots; what are they, the purpose they solve, how can you use them on your website and more. Read on.

What is a Chatbot?

A chatbot is a software that uses artificial intelligence to simulate human like conversations for customer experience touchpoints. A conversational AI if you will. Chatbots can be a simple elementary program that can answer a simple query with one line response or it can be a sophisticated web assistant that can churn out a set of instructions based on previous user query and intent.

You have interacted with a chatbot at least once, knowingly or unknowingly. Say you want to buy a dark chocolate and you begin your research on a website. A minute into the research you see something pop-up on the window asking if you need help. Or say, you're on a banking app, trying to look for a solution to a financial query where you are given step-by-step process to navigate to the right page. Well, these are a few scenarios where you encounter a chatbot.

You will also encounter a chatbot when you visit our website for the first time.

How does chatbot work?

Chatbots are driven by artificial intelligence, automated responses, NLP and machine learning. They are designed to process data and give responses to all kinds of queries.

What's interesting about chatbots is the variety of ways that you can design to make it work. It all depends on what your goals are. Today, we see three types of chatbots at work:

Rule Based Chatbots

These chatbots follow pre-designed rules, often built using a graphical user interface where a bot builder will design paths using a decision tree. For example: A chatbot that you may find on the banking website/app has a set of pre-designed rules which will resolve your query based on the rule you select.

AI Chatbot

AI chatbots provide a more human-conversation like experience and continuously improves over time. It uses natural language processing by leveraging semantics to understand context of what the person is saying.

Alexa for Business is a prime example of a AI powered chatbot. You can create custom skills which can help customers ask question, place/repeat order or products or services or engage with content simultaneously simply by speaking.

Live Chat

This is the most rapid, human-to-human interaction on websites that helps reduce the sales cycle by interacting with the visitors at their moment of highest intent. You can choose from saved replies or come up with an on spot quick for the target accounts.

For example: Swiggy chatbot, wherein, after selecting a few pre fed options, you can opt to chat with a representative in order to further resolve your query.

Benefits of a Chatbot

The pressure to show exceptional results and constantly improve customer experience has increased immensely for the marketing and sales team. Today, the customers want quick and accurate answers along with human interaction which can result in human sales team reaching a saturation point. Hence, technology becomes the answer.

This is why a few brands have adopted chatbots to do the work for them. Here's how it plays to their benefit:

1. Better conversion rate optimization :

Chatbots can ask relevant question and improve the conversation with the help of answers received. This results in resolving the customer query that leads to sales which will also better the conversion rate.

2. Qualify lead generation :

Companies would love to talk to each and every lead prospect, qualify them before converting them as customers. But, that's only (probably) possible to do on a large scale in a world run by machines. Thanks to chatbots, it has become possible to qualify leads on a large scale and improve sales acceleration.

3. Reduce customer attrition rate :

What's the perfect answer to high volume support inquiries? Chatbots. When customers become frustrated with the cliché responses, chatbots provide quick support to retain the customers and prevent churn.

4. Automate business processes:

Chatbots are capable of more than just chatting. What companies are looking for today, is a one stop solution from starting a conversation, qualify the leads, setup the meeting and to finally convert. Chatbots can do just that if the right information pre-fed.

Why are Chatbots so important today?

Its simple, chatbots are important because they are able to solve customer queries that would otherwise result in a customer getting frustrated.

Here are some common problems that customers face while interacting with businesses online?

  • Not able to navigate the website pages.

  • Not getting answers to simple questions.

  • Difficulty in finding basic business information such as business hours, address, contact number etc.

We live in a one-click, on demand world where customers expect to find quick answers to their questions. The experience online market is providing does not match with how people prefer to buy.

Here's how chatbots can provide solutions for the above stated problems:

  • They can provide quick answers in case of emergency

  • Resolving complaints or a pending query

  • Giving detailed answers for complex questions

  • Means of providing human-like conversations / interaction.

This means that the customer problems and the use of a chatbot sit in perfect balance with other. The customers wants the chatbot to solve their queries, and if a chatbot is not able to do that, then the customers want the chatbot to connect them to a human.

So, how do business use the chatbot to its best potential and overcome its limitations? Well, for now the most viable option is to make the chatbots able to interact, send emails, or schedule a call based on the user preference. When a complex situation arises, getting in touch with a human assistant is always the right idea.

The future

As chatbots evolve to better communicate with the customers, the overall feedback has been tremendously positive. According to the Juniper Research, by 2023, chatbots will help industries such as retail, banking and healthcare save $11Billion purely on customer inquiries

Apart from customer interactions, about 50% of the chatbot usage will be through apps to build more brand credibility. They would be able to assist IT help desk and customer service employees by learning to answer the repetitive questions customers ask and improve response time.

Chatbots are constantly evolving and becoming more widely used to offer the best possible customer service. By interacting with customers in real-time, customer service chatbots can provide a level of service that is otherwise not possible. By the end of 2021, chatbots will have helped businesses gain market share and be a significant investment in customer service experience.

There is also a buzz in the online industry that voice bots would run about 80% of the customer support section in the ecommerce business. This could result in savings of upto $8 billion.


Overall the future of chatbots look bright and they are here to stay for the foreseeable future but it is in the way they will be developed that would truly decide its fate. As the famous saying goes, Only Time will tell.



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