What Exactly Are Chatbots and How Do They Work?

What is a Chatbot?

At its most basic level, a chatbot is a computer program that simulates and processes human communication (written or spoken), allowing users to interact with digital devices as if they were interacting with a real person. 

It is possible to replicate the conversation of a human person through text or speech exchanges using a chatbot, which is also known as a chatterbot. Using chatbot virtual assistants to conduct simple look-up activities is becoming more popular in both the business-to-consumer (B2C) and enterprise (B2B) contexts, according to research. Adding chatbot assistants not only lowers overhead costs by making better use of support staff time, but it also allows businesses to provide a degree of customer service during hours when actual agents aren’t on duty.

It is possible for chatbots to have varied levels of complexity depending on whether they are stateless or stateful. A stateless chatbot approaches each discussion as if it were the first time the bot was interacting with the user. A stateful chatbot, on the other hand, can look back at previous encounters and frame new responses in the context of those conversations. When it comes to adding a chatbot to a company’s customer care or sales department, little or no coding is required. Today, a number of chatbot service providers enable developers to create conversational user interfaces for third-party business applications using a variety of different programming languages.

Chatbots – How do they work?

When it comes to building a chatbot, selecting the appropriate natural language processing (NLP) engine is perhaps the most crucial step. If, for example, the user communicates with the bot using voice, the chatbot will require a speech recognition engine to function properly.

In addition, business owners must decide if they prefer structured or unstructured conversations with their customers. Chatbots designed for structured dialogues are heavily scripted, which simplifies development while also restricting the types of questions that users can pose to the bot.

Scripted chatbots are typically employed in business-to-business situations to react to frequently requested queries or to execute simple, repetitive actions such as calls to action. In sales, a chatbot may be a convenient way for sales representatives to quickly obtain phone numbers.

Additionally, chatbots can be employed in customer service departments, supporting service employees with the processing of recurring customer requests. For example, a customer support representative may offer the chatbot with an order number and inquire as to when the order has been dispatched. Most of the time, when a conversation becomes too complex for a chatbot to handle, the call or text window will be moved to a human support representative.

Chatbots like ELIZA and PARRY were early attempts to develop programs that might, at the very least momentarily trick a genuine human being into believing they were having a discussion with another person. A Turing test was used in the early 1970s to evaluate PARRY’s effectiveness; testers were only successful in distinguishing between humans and chatbots to the extent that their performance was comparable to that of a random guess.

Since then, chatbots have progressed significantly. Deep learning, natural language processing, and machine learning (ML) algorithms are some of the artificial intelligence (AI) technologies that are used to create them, and they require huge amounts of data to function properly. Voice recognition becomes more accurate at predicting appropriate responses the more frequently an end user interacts with the bot.

What are the types of Chatbots?

Due to the fact that chatbots are a relatively new technology, there is some controversy about the number and classification of different varieties that are now accessible. However, some of the most frequent varieties of chatbots are as follows:

Chat scripted or quick reply chatbots

These are the most fundamental chatbots; they function as a hierarchical decision tree. These chatbots communicate with consumers by asking them a series of predefined questions that advance until the chatbot has answered the user’s inquiry in its entirety. A menu-based chatbot is similar to this one in that it requires users to select options from a predefined list, or menu, in order for the bot to have a better grasp of what the consumer is searching for.

The use of keyword recognition in chatbots is becoming increasingly popular. These chatbots are a little more complicated; they attempt to listen to what the user types and answer accordingly, utilizing keywords gleaned from previous customer responses. Customizable keywords and artificial intelligence are used in this bot to provide consumers with the most suited response possible. Unfortunately, when confronted with recurrent keyword usage or redundant inquiries, many chatbots have difficulty performing well.

Contextual chatbots

These chatbots are more complex than the ones listed above and require a data-centric approach. In order to remember talks and interactions with users, they employ machine learning and artificial intelligence (AI), which they then use to evolve and improve over time. Instead of depending on keywords, these bots use what customers ask for and how they ask it in order to deliver responses and enhance their performance in the future.

Voice-enabled chatbots

This form of chatbot is the wave of the future in the field of chatbot technology. Vocal communication from users is used by voice-enabled chatbots as input for generating responses or completing creative activities. Text-to-speech (TTS) and voice recognition application program interfaces (APIs) are two methods of creating them (APIs). Amazon’s Alexa and Apple’s Siri are two examples of virtual assistants now in use.

Hybrid chatbots

These chatbots include characteristics of both menu-based and keyword recognition-based bots. Alternatively, users can choose to have their inquiries answered directly by the chatbot, but they can also use the chatbot’s menu to make decisions if the keyword recognition process fails to give useful answers.

Examples of how a chatbot can be used

The usage of chatbots is becoming increasingly popular, both in the corporate and consumer industries. As chatbots increase in functionality, users will have fewer things to argue about when dealing with them. Between advanced technology and the shift in society toward more passive, text-based communication, chatbots are filling a need that used to be filled by telephone conversations.

Since its inception many years ago, chatbots have been implemented in instant messaging programs and online interactive games. However, they have only lately begun to be used in B2C and B2B sales and services. It is possible to add chatbots to a social network or use them to provide a single game participant with an entity to communicate with while waiting for other “real” players to join the game. Depending on whether the bot is clever enough to pass the Turing test, the individual may be completely unaware that they are conversing with a computer program.

Customer service chatbots are being used in sales to aid consumers purchasing online, either by answering non-complex product questions or by offering valuable information that the consumer may later look for, such as shipping prices and availability. Additionally, chatbots are used in customer support departments, assisting staff members in the processing of repetitive queries. Any conversations that become too complex for a chatbot to handle will be forwarded to a human support representative.

Chatbots are also utilized as virtual assistants in some cases. Virtual assistants are available from Apple, Amazon, Google, and Microsoft, among other companies. The role of a personal chatbot is played by apps such as Apple’s Siri and Microsoft’s Cortana, as well as hardware such as Amazon’s Echo with Alexa or Google Home.

The impact of chatbots on the customer experience

Customer expectations are changing and expanding as the digital world continues to evolve at breakneck speed. Many consumers want businesses to be available 24 hours a day, seven days a week, and believe that the quality of the customer experience given by a business is just as important as the quality of the items or services they offer.

Buyers are also becoming more knowledgeable about the wide range of products and services that are available, and as a result, they are becoming less inclined to be loyal to a particular brand. Chatbots are a response to the shifting requirements and increased expectations that have accompanied technological advancement. They are taking the place of live chat and other kinds of contact that were previously available, such as emails and phone calls.

When used in conjunction with messaging apps, chatbots provide consumers with the opportunity to find answers no matter where they are or what device they are interacting with. In addition, the contact is simpler because clients do not have to fill out forms or waste valuable time searching for solutions amid large amounts of information.

Chatbots have the ability to improve the customer experience in a variety of ways.

  • Minimizing the amount of time a consumer has wait for an answer and giving immediate responses
  • Offering customers with customer service 24 hours a day, seven days a week;
  • Reducing the possibility of unpleasant human-to-human encounters determined by the attitude and emotions of both the service or sales worker and the customer;
  • The reduction of the stress and annoyance that some customers experience when they have to call customer support by shortening the waiting time and streamlining the dialogue;
  • The enhancement of the redirecting of consumer inquiries
  • Adding unique aspects to the chatbot in order to further the brand’s personality
  • Using artificial intelligence-enabled chatbots to customize each customer’s experience.

Importance of chatbot

Companies aiming to boost sales or service productivity may find the time savings and efficiency gained by AI chatbots talking and answering recurrent inquiries appealing.

It is projected that chat-based communication methods will become more popular as customers continue to shift away from traditional modes of communication. Chatbot-based virtual assistants are increasingly being utilized to undertake routine chores, allowing human agents to devote their time and attention to more high-profile service or sales situations.

Benefits of chatbots:

Additional benefits, such as those discussed above in relation to the influence of chatbots on the customer experience, are gained by organizations as well. Improvements in customer service and higher levels of customer satisfaction, for example, boost the possibility that a firm will continue to profit from its loyal consumers in the future.

Additionally, chatbots are capable of conducting several discussions with thousands of buyers at the same time. Additionally, customers will not have to wait for a free representative, which boosts corporate efficiency while also saving time for them. Among the other advantages are:


Chatbots are a one-time investment that is both faster and less expensive than developing a dedicated, cross-platform software or recruiting additional people in the long run. Chatbots will not only lower staff costs, but they will also minimize the number of costly problems caused by human error. Furthermore, the cost of user acquisition is reduced as a result of chatbots being easily and immediately accessible and responding within seconds of receiving a request.

Increases the level of customer engagement

The majority of businesses are currently interacting with their clients through social media. Chatbots can be used to make this engagement more interactive by automating some tasks. Furthermore, buyers rarely communicate with the individuals that work in their companies. Customers can engage in conversation with chatbots without having to deal with the stress of engaging with a live human.

Consumer data is being monitored and analyzed.

Conversational chatbots collect feedback from each encounter, which can be used to improve the services and goods offered by businesses, or to optimize the website itself. In addition, by storing user data, they may watch consumer behaviors and purchasing patterns over time. This information can help businesses gain a better understanding of how to better market their products and services, as well as the most typical hurdles that customers encounter during the purchasing process.

Increases the number of customers

Lead generation, qualifying, and nurturing can all be improved with the use of chatbots. They have the ability to ask questions and provide information during the buyer’s journey, which may persuade the user and generate a lead. The chatbots will then send information on possible customers to the sales staff, who will then be able to engage with the leads.

The bots can then increase conversion rates by ensuring that the lead’s journey is directed in the appropriate direction — that is, toward a purchase. Finally, chatbots can assist sales teams in determining if a lead is qualified or not based on key performance indicators (KPIs) such as budget, timetable, and resources that have been defined. This will protect businesses from wasting time on unqualified leads and clients that require a lot of their time.

Increases the ability to scale to global markets.

Chatbots are capable of addressing consumer complaints and questions in a variety of languages. Furthermore, because chatbots are available 24 hours a day, seven days a week, they can be used regardless of the customer’s time zone.

Customer interaction that is proactive

The traditional approach to customer connection was one of passive consumer interaction, where companies waited for the buyer to contact them first. Chatbots give businesses the capacity to be proactive in their contacts with customers by initiating discussions and monitoring how customers interact with their websites and landing pages, among other things. Following the collection of information from observed consumer behaviors, it is possible to tailor incentives to a specific buyer, assist customers in navigating the site, and respond to any future queries.

It saves you time.

Chatbots can be used to automate tasks that must be completed on a regular basis and at predetermined intervals. Human employees will have more time to devote to other critical activities as a result of this. Furthermore, the capacity of chatbots to deliver quick responses protects clients from having to wait for responses to come through the system.

Chatbots will be around for a long time.

It is projected that the popularity of chatbots will continue to expand.

In the coming years, artificial intelligence and machine learning will continue to develop, bringing new capabilities to chatbots and creating a new level of text and voice-enabled user experiences that will continue to alter the consumer experience.

These enhancements will also have an impact on data collecting and will provide more in-depth customer insights that can be used to predict buyer behavior in the future.

Voice solutions are likely to become a regular and necessary feature of the information technology ecosystem in the near future. More emphasis is being made on the development of a voice-based chatbot that can operate as a conversational agent, understand many languages, and answer in the same language as it understands the dialogue.