What is a Chatbot? Beginner’s Guide to Chatbot Technology

If you browse the internet, there’s a good chance you’ve come into contact with a chatbot. These conversational programs have proved a popular application of advanced tech, such as machine learning and natural language processing (NLP).

And all the signs are there that chatbots will continue to play a role in business for years to come – so learning as much as possible about them means you’re well-placed to benefit in the long-term.

In this essential chatbot beginner's guide, you’ll learn what they are, how they work, what they can do, and the benefits a chatbot provides for businesses.

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What is a chatbot?

Chatbots are computer programs with a persona – that of a robot (often a square-headed one with antennas). These robots’ primary purpose is to communicate with humans via text, voice, and touch.

Chatbots have been popping up all over the place for years now – literally, since you’re most likely to encounter them appearing at the bottom of webpages asking if you need any help.

Other possible places to meet these polite programs are messaging platforms (e.g. Skype, FB Messenger) or native apps, most commonly meant for employees and customer service. In fact, we compiled a giant list of chatbot statistics to show you how important these conversational bots are.

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What do chatbots really do?

Chatbots, no matter where you find them, are designed to have conversations with humans. These conversations range from the rudimentary (e.g. “Tell me what time the train arrives”) to the more advanced (e.g. the likes of Alexa and Siri).

Here are some things chatbots can do:

• Hold a human-like conversation
• Answer user questions
• Collect and analyze data
• Guide users through processes
• Use predictive analytics to provide personalized services to the users

They’re able to perform these actions by using tech to first process and understand what the user is saying. Then, they call on their “training”, possibly a database, to match the appropriate answer to the user's question. More advanced chatbots are able to understand context and intent – and, learn more about their human interlocutors and their preferences over time.

How do chatbots work?

Chatbots work by executing scripted actions based on user inputs that you designed in the backend (conversation flows). Once a user selects an option or asks a question, the chatbot will check the programmed responses and provide the next step in the conversation.

These conversational AI bots can respond back with simple "yes/no" options or based on recognized keywords provide detailed answers that sound more "human".

For example, a user is looking to open a banking account at their local branch. The bank implemented a chatbot that is designed to answer basic questions AND help set up accounts through a question and answer tree.

The user asks the virtual assistant about any specific documents that might be required to create an account. Based on rules setup in the backend, the assistant responds back with a link to a checklist of necessary documents.

Most bots can integrate with various other tools to provide a complete support stack for customers. In the example above, the bank integrated a knowledge base into their chatbot. So, when a user asks a question containing a keyword, the chatbot can link relevant help articles allowing the user to support themselves.

And if the customer is still unable to be helped by a chatbot, they can easily redirect to a live chat agent (an actual person).

What are the types of chatbots?

There are basically two types of chatbots:

• Rule-based chatbots
• “Smart” chatbots

Rule-based bots

These are your basic question-answer, decision tree program, that can only hold a conversation as long as the user says the right thing – and this is as good as it gets with them. An example would be asking the chatbot to pull an article from a knowledge base or asking how much a particular product costs.

Smart AI bots

These "smart" bots use more powerful artificial intelligence, machine learning and predictive analytics, and are therefore better equipped to “sound” human and learn as they go.

AI bots analyze a user’s input and employ technology like natural language understanding (NLU) to determine what the user means instead of just what they said. Then, they’re able to generate their own appropriate responses (think natural language generation or NLG). Understanding context is perhaps the key function of advanced AIs.

Perfect examples of these are: Google, Siri, and Alexa.

What are the benefits of chatbots for business?

Chatbots can help organizations smoothen their operations, engage customers, and handle requests and complaints faster. More specifically, they:

• Increase operational efficiency by allowing humans to spend more time on complex tasks instead of getting bogged down in basic issues.
• Improve customer experience by providing 24/7 support.
• Shorten response time because they can instantly reply to multiple users simultaneously (something a human can only dream of).
• Reduce costs by handling a larger volume of requests without any additional spend.
• Analyze market and customer data to offer instant insights and recommendations that meet the audience’s needs.
• Pre-qualify leads and support issues to provide context to live agents.
• Drive more sales by actively engaging potential customers with personalized experiences.
• Decrease human error since bots are pulling standardized information instantly from a database.

Here's a few trends on chatbots:

For instance, Chatbots Magazine predicts that chatbots have the potential to automate 30 percent of the tasks done by today’s contact center staff.

Also, Juniper research indicates that, by 2022, chatbots will save companies about $8 billion per year in customer supporting costs.

But more importantly, chatbots help companies increase their responsiveness and personalization abilities which, in turn, leads to better customer engagement and satisfaction.

How do you know you need a chatbot?

Chatbots are a big part of many companies’ digital transformation efforts, so there’s no reason to assume your company will never need one. However, implementing a chatbot should come only after you have a clear idea of the challenges it’ll help you resolve.

In general, a chatbot is a good idea when:

• Your support team spends too much time on repetitive requests from customers.
• You can’t afford or don’t want to have 24/7 human support.
• You’re looking for a way to engage visitors of your site who have come to view content.
• You want an automated way for users to find products or check stock availability in real time.
• You want a way to qualify leads before salespeople can reach out to them.
• You want to increase the number of channels you engage your audience on and your team is insufficiently staffed.
• You want to offer a way for your customers to check their accounts and get advice without having to engage live agents (common use case in banking).
• You want to offer better customer experience by providing an intelligent, personalized assistant to your customers.

Note: This list isn’t exhaustive; there are many ways you can use a chatbot to get real business value.

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Building a chatbot: A 4-step basic process

Chatbot design isn't a simple process – it requires planning and a lot of testing. But, it can be broken down into four generic steps:

1. Define your bot

What will your chatbot be doing? Will it provide support to customers, help them place orders, or ensure they can navigate your website? Perhaps all of the above? Be clear about your chatbot’s field of expertise. Also, give it a name and personality (will it be occasionally cheeky or always serious?).

2. Build out sequences

Creating conversation flows (or dialogue trees) between users and chatbots is essential, especially for rule-based chatbots. Think about the end goal of the user – for instance, booking a hotel room. Now, how would the user get there? They could start with asking for prices during the month of May, or perhaps about room availability. Then, one user might continue with booking directly, while the other might request hotel reviews.

The most common user journeys need to be accounted for. Start with the ‘trigger’ event: what question/request/button click will trigger a particular sequence and chatbot greeting? Then, continue building the outlines of the dialogues. For example, from “Question about pricing”, you could go to “Book a demo” or “See feature list”.

Also, the bot's answers could differ depending on what has come before. This might result in complex diagrams, so try to start small.

You can use software like Draw.io, Google Drawings, and Microsoft Visio to help you build sequences.

3. Paraphrase users

Anticipating what the user could say in specific situations is important to address their needs. Know which dialogues to expect. Take the flows you’ve collected and flesh out the type of requests or remarks the chatbot might handle. The key here is to also consider alternative ways of phrasing utterances. Different users may use different words. While you should think about the concept of the question, you should also think about the possible sentences that go with it.

Create your lists of situations-questions with alternative phrasing (you could use a spreadsheet to start). Also, consider abbreviations, slang or commonly misspelled words if possible.

4. Build specific chatbot scripts

First, pay attention to the chatbot’s greetings. First impressions count with bots, too, and you want to make sure you start off on the right foot with users. While building greetings, stay on brand and use friendliness to draw the user in. Same goes for goodbyes – leave the user on a positive note and with an invitation to come back.

Then, you need to craft the responses to the questions you’ve identified looking at the flows and additional questions that have come up. Alternative questions will often have the same response, so the response should cover multiple phrasings. If that’s not possible, craft the individual responses for each of the alternatives.

Whatever you write, it’s good to keep it short, be direct, and use humor only when appropriate. Another thing to look at is predefined inputs or “quick replies.” Bots will usually let you craft possible responses to present to users. So, instead of typing their own sentences, users can click on buttons and trigger specific sequences.

Chatbots for the win

Chatbots have different levels of adoption among different industries. One thing is for sure, though; they’re here to stay and evolve. The hype might start to decline, but that doesn’t mean AI assistants will disappear – on the contrary, they’ll become a norm in most industries, especially in customer service.

And, this means two things: one, your company should jump on the chatbot train if you haven’t already, and two, creating a chatbot that works well now is a definite competitive advantage.

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Now we want to hear from you.

Did your business implement a chatbot? How's it been working?

Are you still on the fence about installing a chatbot on your website?

Either way, leave a comment below and share it on social media.

Nikoletta Bika

Senior Content Specialist

Nikoletta Bika is an experienced content marketer, writer, and editor, with degrees in business and people management. She writes about data, tech trends, AI, and more.