Why Businesses Are Investing in Chatbots

Sachin Modak


In 1966, Joseph Weizenbaum invented ELIZA, one of the earliest known versions of a chatbot. While ELIZA was only capable of holding very short conversations, Weizenbaum was astonished at the users’ emotional attachment to the program. Since ELIZA, many other chatbots have been invented, each pushing the capabilities of the technology further and further.

However, it wasn’t until recently that chatbots moved beyond academic circles and entered the lexicon of the tech community. Due to advances in machine learning and natural language processing capabilities over the last few years, chatbots have become promising enough for companies to begin investing in them. Despite the infancy of the chatbot trend, there are already current use cases for integrating chatbots into a customer experience strategy.

From a business perspective, there are two primary ways companies currently use chatbots:

  1. Utilize them as a customer engagement tool that can answer common user requests and guide them through different processes.
  2. Integrate chatbots into products to customize the user experience for individual consumers.

Both use cases are valuable, but it’s important to understand the distinctions between them so that companies can best integrate chatbots into their overall digital strategy.

Chatbots for Customer Engagement

There are two processes in which chatbots can add significant amount value to customer engagement: customer service and onboarding. Customer service is the low-hanging fruit that a lot of companies are already capitalizing on. For example, many businesses already have automated telephone responders for FAQs. As consumers shift more of their mobile phone communication from calling to messaging platforms, it makes sense to have chatbots act as automated software tools for FAQs.

Another example of customer service is to improve the purchasing experience for users. Earlier this year, Chris Messina published a popular blog post on what he saw as “conversational commerce”. His prediction started to come true as large brands started building chatbots on platforms like Messenger and Slack to interact with consumers. One of the more popular ones was Taco Bell’s “TacoBot”, a beta app which allows users to buy tacos through Slack. This is a great example of how a large brand was able to merge automated customer service with conversational commerce.

Outside of customer service, chatbots can help improve customer engagement by improving certain onboarding processes. To illustrate, imagine you’re on Messenger when you’re friend sends you a link to  try out a new app. You have to click on that link, get transported to another website or app, and then sign up or create a new account to use that service.  As you can see, there are a lot of steps that a user needs to take in order to ultimately sign up. While the number of steps increases, so does the level of friction for onboarding, which most likely will lead to potential users falling out of the pipeline. If a chatbot were present when your friend sent you that link, it could administer the onboarding process directly within Messenger and mitigate some of the friction. Some travel apps have already started experimenting with onboarding use cases with chatbots. In this post, Conversate, an AI startup, lists travel apps like Expedia, Hipmunk, and Kayak, that all use chatbots to various extents to start the onboarding process.

Chatbots Providing Customized User Experiences

This use case is usually observed in technology companies, where their core product offering is some sort of software. There have been massive improvements in the areas of artificial intelligence, machine learning, and natural language processing that allow companies to learn more about their users and provide them with new ways of interacting with applications. One of the conversational interfaces that companies have started to integrate into their software this year are chatbots.

At this year’s Google I/O conference, the company unveiled its new messaging app called Allo. On the surface, it looked similar to other group messaging apps like WhatsApp and Facebook Messenger. It allows you to chat, share pictures, and (most importantly) send emojis. However, what distinguishes Allo from most other messaging apps is Google Assistant, Google’s chatbot that’s integrated into Allo. Google Assistant is part of the conversation, and whenever a user asks it for something, it can use contextual clues to answer requests. For example, it can help suggest nearby restaurants and movies based on the group’s conversation. It’s able to provide customized information through its powerful search engine.

Another example of this use case is with Duolingo. Duolingo is a language learning app that allows users to develop conversational skills in languages like Spanish, Italian, French, and more. In October, Duolingo unveiled it’s new feature which allows users to practice their grammar and sentence structure by conversing with a chatbot. Duolingo has different chatbot “personalities” that can carry a conversation about certain topics.

What’s intriguing about these examples, compared to most chatbot use cases, is that they are driven by artificial intelligence. Currently, most chatbots are “dumb”; they simply follow a pre-set script or only have responses for certain keywords. While this shouldn’t discount the value add from them, these chatbots can’t learn from their users. On the other hand, the Google and Duolingo chatbots use the data from their conversations with users to better improve their own responses.

How Chatbots Can Help You

In the end, it’s important to understand how chatbots can be useful to your business. Are significant number of your users active on messaging platforms like Slack or Messenger? Are you experiencing resource strains on your customer service or onboarding processes? If so, it may make sense to invest in building chatbots on popular platforms to improve your customer engagement. Have you been collecting vast amounts of customer data that you could leverage to start an intelligent conversation with your current users? Do you feel that product customization for individual users can give you an edge over your competitors? Then it may make sense to invest in building chatbots within your mobile app to enhance your customer’s digital experience. While these two strategies aren’t mutually exclusive, it’s imperative to be clear on how you want to use chatbots so that they can live up to their potential with respect to delivering business value.

Want to learn more about building chatbots? See how Solstice created our own Messenger chatbot, built on top of our AI platform, Siena.