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What is an AI chatbot? A comprehensive introduction

Supercharge your customer journey with custom AI chatbots!

Artificial intelligence (AI) is transforming the way we interact with technology, and one of its most exciting effects is the rise of AI chatbots. These intelligent agents are becoming increasingly common across various industries and use cases.

However, despite their growing popularity, many people still don't fully understand AI chatbots or how they work. This can lead to misconceptions, and businesses may miss out on perfect opportunities to leverage this powerful technology. So, we've created this comprehensive guide to explain everything you need to know about AI chatbots.

Read on to discover what a chatbot is, how AI chatbots work, and learn the best ways to create custom AI chatbots that empower you to transform your customer experience and drive growth.

What is an AI chatbot?

An AI chatbot is a software application that generates human-like conversations to provide personalized assistance using natural language processing (NLP), machine learning, and other artificial intelligence technologies. Unlike rule-based chatbots, which rely on predefined scripts and fixed responses, AI can understand and respond to free-form customer input, allowing for more natural and dynamic interactions.

AI chatbots can intelligently analyze customer queries, understand their intent, and provide accurate, context-aware responses. Compared to previous technologies, this ability to comprehend and interpret human language allows AI chatbots to engage in more meaningful and personalized conversations that radically enhance the customer experience.

Chatbot technology can result in a 67% increase in sales, and firms that offer AI chatbots to customers report a 3x better conversion than traditional website forms. It’s no surprise that 62% of companies plan to roll out AI chatbots in the near future.

Sendbird, a leading provider of in-app chat and messaging solutions, offers a no-code AI chatbot platform that allows you to easily build and deploy custom AI chatbots. By leveraging Sendbird's intuitive chatbot tools, you can create intelligent, branded bots that seamlessly integrate with your existing systems, enabling you to deliver exceptional customer experiences at scale.

How do AI chatbots work?

AI chatbots work by leveraging technologies like natural language processing (NLP), machine learning (ML), and large language models (LLMs) to understand customer inputs, interpret intent and context, and generate human-like responses. They can also retrieve relevant information from knowledge bases through retrieval augmented generation (RAG) and function calling using APIs.

Tapping into the full potential of AI chatbots requires understanding the underlying technologies behind them. By gaining more insight into how AI chatbots work, you can make informed decisions about implementing and optimizing them to meet your specific needs.

Let’s get to the heart of AI chatbots and explore the key technologies that enable them to understand, interpret, and respond to human language in more detail.

What is Natural Language Processing (NLP)?

Natural Language Processing (NLP) is a branch of AI that focuses on interactions between computers and human language. NLP enables AI chatbots to understand and interpret the meaning behind customer queries, allowing for natural and intuitive conversations.

NLP relies on several critical features, including intent detection, entity recognition, and sentiment analysis. Intent detection involves identifying the customer's underlying goal or purpose behind their message, while entity recognition extracts relevant information from the customer's input, such as names, dates, or locations. Sentiment analysis allows chatbots to understand the emotional tone of the customer’s message, enabling them to respond with empathy and context-awareness.

What Is Machine Learning (ML)?

Machine learning allows AI chatbots’ underlying algorithms to improve over time and generate increasingly natural and accurate responses using a vast data corpus.

When chatbots are trained, they refine their understanding of customer intent, language patterns, and contextual cues. The machine learning process enables AI chatbots to adapt to various communication styles, handle complex queries, and provide personalized experiences.

What are Large Language Models (LLMs)?

Large Language Models (LLMs), such as ChatGPT, are trained on massive amounts of data, allowing them to generate highly sophisticated and human-like responses.

LLMs can understand and respond to a wide range of topics, making them incredibly versatile and capable of handling diverse customer queries. Sendbird, recognizing the potential of LLMs, has integrated various LLMs, including OpenAI’s GPTs, into its AI chatbot solution, empowering you to create chatbots that deliver exceptionally natural and engaging conversations.

What is retrieval augmented generation (RAG)?

Retrieval Augmented Generation (RAG) is a technique that enhances AI chatbots by allowing them to retrieve relevant information from first-party data sources, such as knowledge bases, FAQs, or product catalogs. By leveraging RAG, chatbots can produce more accurate, context-specific responses without retraining the LLM. This is a very cost-effective way to improve the AI chatbot experience.

RAG provides chatbots with a wealth of information beyond their initial training data, expanding their knowledge and improving the customer experience. When a customer asks a question, the chatbot can quickly retrieve the most relevant information from the appropriate data sources and incorporate it into its response, providing customers with precise and personalized answers.

What is function calling?

Function calling is a powerful feature that allows AI chatbots to connect with external third-party systems through their APIs to access real-time data, perform complex calculations, or execute specific actions on behalf of the customer.

For example, a chatbot integrated with a weather API can provide up-to-date weather information based on a customer’s location. Similarly, a chatbot connected to a booking system can help make reservations or check availability in real time.

Function calling greatly expands the capabilities of AI chatbots, enabling them to deliver more comprehensive and valuable customer experiences.

What are the benefits of AI chatbots for business?

Properly implemented, AI chatbots can be a game-changer for companies. They offer many benefits, from engaging customers and optimizing processes to delivering valuable insights. Let's examine the key advantages of implementing AI chatbots in your business.

Boost customer engagement and loyalty

One of the most significant benefits of AI chatbots is their ability to increase customer engagement and build loyalty. By training AI customer service chatbots on your company's data and content, you can provide instant, accurate, and consistent support 24/7 without being limited by business hours or time zones. These chatbots can handle routine queries and deliver personalized, human-like interactions at scale, reducing wait times compared to traditional support channels like phone, email, or web. Their responsiveness and personalization lead to improved customer satisfaction and increased brand loyalty.

Increase efficiency and reduce costs

AI chatbots can significantly boost operational efficiency by automating repetitive customer service tasks. This allows you to scale your support operations, as chatbots can handle a large volume of interactions simultaneously, and you can minimize staffing costs while delivering round-the-clock support. This efficiency and effectiveness frees human agents to focus on the more complex issues that require a personal touch. Chatbots can redirect the conversation to a human agent when a customer inquiry requires human intervention and ensures a smooth transition.

Enhance customer insights

Another valuable benefit of AI chatbots is their ability to provide deeper insights into customer needs and preferences. By analyzing chatbot conversation logs, businesses can identify trends, common pain points, and areas for improvement. Chatbots can also collect declarative data directly from customers, helping companies better understand their target audience. These insights can be called on to help optimize products, services, and internal processes, ultimately allowing you to take a more customer-centric approach.

Allow omnichannel deployment

AI chatbots can provide a consistent brand experience across multiple channels. By integrating chatbots into your website and mobile apps, you can ensure your customers receive the same level of support and engagement regardless of platform. This omnichannel approach allows you to meet customers wherever they prefer, ensuring accessibility and convenience.

Convert visitors into leads

AI chatbots can help convert website traffic into actionable leads. By engaging visitors with human-like conversation, chatbots can encourage them to take desired actions, such as signing up for a newsletter or requesting a demo. Chatbots can guide leads through registration processes without the need for traditional forms, making the experience more interactive and customer-friendly. Additionally, they can answer any nagging questions on high-intent pages, such as providing tailored pricing or accurate product details, helping to remove any remaining barriers to conversion.

Score leads

AI chatbots can automatically score leads based on their conversations, creating what is known as Conversation Qualified Leads (CQLs). This scoring system helps businesses prioritize and segment leads based on engagement and potential value. Additionally, chatbots can enhance lead profiles by gathering valuable context and insights from the conversations. This information can be used to personalize sales outreach and better tailor the customer experience.

Ease the customer journey

AI chatbots can help automate the customer journey by setting up sequences based on website visits and pages viewed. For example, chatbots can acknowledge and engage returning visitors differently, providing a more personalized experience based on their previous interactions. This level of automation encourages potential buyers to stick around and increases pipeline, as chatbots can guide customers through the buying journey with relevant information and prompts.

Accelerate time to revenue

AI chatbots can reclaim significant amounts of time for your sales representatives by connecting them with leads faster, accelerating the time to revenue. Chatbots can even provide reps with valuable context on each lead's needs and interests, allowing for a finely targeted and highly effective outreach. Additionally, by automating responses to common questions, chatbots can increase efficiency, enabling reps to focus more on high-value tasks and closing deals.

Gather and learn from customer data

AI chatbots provide valuable customer data that you can mine to make data-driven decisions and improve your products and services. By training chatbots using chat logs, you can identify common question patterns, optimize your responses for accuracy and relevance, and turn the best answers into the defaults. This continuous learning process allows chatbots to become more effective over time.

Deliver self-service

Modern customers expect instant gratification and the ability to solve problems independently. AI chatbots enable businesses to meet these expectations, offering a convenient and efficient self-serve experience that improves customer satisfaction. With AI chatbots, customers can resolve issues and find information independently without waiting for human assistance.

Enable instant personalization

AI chatbots can tailor interactions to each visitor's unique preferences. Chatbots can guide customers to the most relevant resources, products, or services by analyzing customer data and picking up conversational cues. This level of personalization creates a more engaging and satisfying experience, making customers feel understood and valued. With AI chatbots, businesses can provide these personalized experiences at scale without increasing headcount.

Cut response times

One of the most frustrating aspects of accessing traditional customer support is the long wait times. AI chatbots solve this problem by providing immediate responses to customer inquiries. Intelligent AI chatbots can ensure that customers always receive the information they need without delay, reducing human intervention and improving overall response times.

Provide multilingual service

AI chatbots can offer multilingual conversations, enabling you to help each customer in their own language. This is particularly valuable for companies venturing into new markets, allowing them to communicate effectively with diverse customers. Multilingual support also demonstrates a commitment to inclusivity and accessibility.

AI chatbot to human handoff

While AI chatbots can handle a wide range of inquiries, there are times when customers need to speak with a human representative. Using rules for conversation routing, chatbots can call on human agents when needed, ensuring your customers receive the appropriate level of assistance. This allows you to offer customized experiences for target accounts or high-value customers while managing conversations efficiently overall. This smooth integration of bots and humans creates a cohesive and effective support system.

What are the key use cases for AI chatbots?

AI chatbots have proven to be incredibly versatile tools, finding applications across various industries and business functions. From customer service and support to healthcare, ecommerce, and marketing, these intelligent conversational agents are revolutionizing how companies interact with customers, patients, and prospects. Let's explore some key use cases for AI chatbots and how they are leveraged in various sectors.

What is a customer service & support AI chatbot?

One of the most common and natural use cases for AI chatbots is in customer service and support. Chatbots can serve as the first port of call, handling routine inquiries and resolving simple issues without human intervention. By gathering relevant information upfront, chatbots can optimize the support process and ensure that customers receive accurate and timely assistance.

AI chatbots excel at providing quick answers to frequently asked questions (FAQs), such as those related to product specifications, pricing, shipping, or returns. Chatbots offer instant access to this information and improve customer satisfaction by reducing the workload on human agents. When more complex issues arise, chatbots can smoothly redirect the conversation to a human employee and pass on all the context gathered during the initial interaction.

What is a healthcare AI chatbot?

HIPAA-compliant AI healthcare chatbots can triage patients by asking about their symptoms and providing guidance on the best action. This can help prioritize cases and ensure patients receive the appropriate level of care promptly.

AI chatbots can also assist with administrative tasks like scheduling appointments and sending reminders. This automation reduces the burden on healthcare staff and improves patient engagement. Additionally, AI chatbots can answer basic questions about medications, treatments, and insurance, providing patients with readily accessible information. In this case study, a healthcare company dediced to provide support to its agent with an AI chatbot to meet their 30 minute service agreement and streamline the referral process to specialists.

In post-discharge scenarios, AI chatbots can offer patient education and follow-up support. They can provide instructions for self-care, monitor symptoms, and alert healthcare providers if any concerning changes occur. This proactive approach helps improve patient outcomes and reduces the risk of readmissions.

For a more in-depth look at how to implement AI chatbots in healthcare, check out our guide.

What is an ecommerce AI chatbot?

An AI ecommerce chatbot is an intelligent digital assistant interacting with customers on e-commerce platforms. It helps with tasks like answering questions, recommending products, assisting with purchases, and providing customer support, all in real time. Automating these interactions enhances the shopping experience, increases sales, and improves customer satisfaction.

An Ecommerce AI chatbots can easily navigate vast online product catalogs and leverage past purchase data to provide personalized product suggestions, increasing the likelihood of customer engagement and conversions. They can assist with order tracking, returns, and exchanges, providing instant updates and resolving common issues without human support.

They can play a valuable role in upselling and cross-selling relevant products. This boosts revenue and communicates that your business has a deep understanding of customer needs.

In the post-purchase phase, AI chatbots can handle support inquiries and gather valuable feedback. They can address common concerns, provide troubleshooting assistance, and escalate complex issues to human employees when necessary. With prompt and effective post-purchase support like this, chatbots build customer loyalty and encourage repeat business.

Sendbird's new Shopify chatbot is the best AI chatbot for elevating any online store shopping experience with exceptional AI customer service. This Shopify chatbot automatically connects to your store data via the Shopify API to build valuable knowledge for customer service. This plug-and-play AI chatbot automates product recommendations, FAQ responses, and customer support information delivery when needed.

What is a marketing AI chatbot?

A marketing AI chatbot is a conversational AI chatbot that engages customers in real-time on digital platforms. It automates tasks like answering queries, providing personalized recommendations, capturing leads, enhancing customer interaction, improving marketing efficiency, and driving conversions.

AI Chatbots can use data from various touchpoints, such as website interactions, social media engagement, and purchase history. They can also automate surveys and gather valuable customer feedback. They can engage customers in interactive conversations to collect insights on product satisfaction, brand perception, and areas for improvement. This data can then be used to refine marketing strategies and improve overall customer experiences.

AI marketing chatbots are also effective at promoting events, sales, and new product launches in a personalized way at scale. They can provide tailored invitations, share exclusive offers, and generate excitement around upcoming promotions. Chatbots deliver these messages through conversational interfaces to create a more engaging and memorable marketing experience.

In addition to promotional activities, AI chatbots can offer endless libraries of interactive content that educates and entertains customers. Quizzes, games, and interactive product demonstrations can be delivered through chatbot interfaces, creating immersive experiences that capture attention and drive engagement.

Finally, AI chatbots are crucial in lead nurturing and customer education. They can provide targeted content based on each customer's stage in the buying journey, offering relevant information and guidance to move them closer to a purchase decision. Chatbots help build trust and establish long-term customer relationships by delivering timely and personalized support.

What are the best practices for implementing an AI chatbot?

Deploying an AI chatbot is not just about installing software; it's also about ensuring that your chatbot delivers a seamless, effective, and rewarding customer experience. To achieve this, following the best practices that guide your AI chatbot's development, integration, and continuous improvement is vital. Adhering to these guidelines can create a service that meets your business objectives and exceeds customer expectations.

Keep it simple

Starting with a clear and narrow use case is essential when embarking on your AI chatbot journey. Rather than trying to create a chatbot that can handle every possible scenario, focus on automating a specific task or answering a set of related questions. This targeted approach allows you to deliver a more effective and reliable chatbot experience.

You can gradually expand your chatbot's capabilities as you gain insights and learn from customer interactions. Starting small and iterating based on real-world feedback ensures your chatbot remains relevant and customer-friendly.

Integrate your AI chatbot with your stack

To maximize the value of your AI chatbot, you need to integrate it with your existing systems and workflows. This includes connecting your chatbot with your customer relationship management (CRM) system, help desk software, and other relevant tools. By doing so, your chatbot can harness valuable customer data to provide more personalized and contextually relevant responses.

Sendbird's AI chatbot is already integrated into its support chat add-on software, Sendbird Desk. Function calls allow it to connect with third-party systems through their APIs to retrieve information and perform actions within other applications, enhancing its functionality and usefulness.

Additionally, ensure your chatbot can smoothly hand off conversations to human agents when needed. This is particularly important for highly complex or sensitive inquiries that require human intervention. By providing a seamless transition between bot and human support, you can ensure that your customers receive the assistance they need when they need it.

Update the AI chatbot knowledgebase regularly

The quality and consistency of your chatbot's training data play a significant role in its performance. It's essential to ingest first-party data regularly to ensure accurate and relevant responses. For example, Sendbird's Shopify chatbot ingests all the data from the Shopify store daily to ensure that answers provided using Retrieval-Augmented generation (RAG) are as accurate as possible.

Ensure that your training data covers various possible customer inquiries and intents. By anticipating and addressing a variety of scenarios, you can equip your chatbot to handle diverse customer needs more effectively.

Finally, regularly update and expand your training data based on real customer interactions. As you gather insights from conversations, incorporate this feedback into your chatbot's knowledge base. This continuous refinement process helps your chatbot adapt to evolving customer needs and improve performance.

Secure your AI chatbot

It's essential to prioritize protecting sensitive customer information and ensure compliance with relevant security and privacy regulations.

Implement robust authentication and access controls to safeguard customer data. This includes requiring secure login credentials and restricting access to sensitive information based on roles and permissions.

Ensure that your chatbot complies with applicable regulations, such as the General Data Protection Regulation (GDPR) for handling personal data of European Union citizens or the Health Insurance Portability and Accountability Act (HIPAA) for safeguarding protected health information in the United States.

Use secure hosting infrastructure and encrypt data in transit and at rest to prevent unauthorized access and safeguard customer information from potential breaches.

Continuously monitor and improve your AI chatbot performance

Implementing an AI chatbot is not a one-time effort; it requires ongoing monitoring and improvement to ensure its effectiveness and customer satisfaction.

Regularly review your chatbot's conversation logs to identify areas for enhancement. Pay attention to customer queries your chatbot struggles to answer accurately or interactions leading to customer frustration. When you encounter a particularly effective response, consider turning it into a preferred answer that your chatbot can use automatically in future conversations.

Track key performance metrics, such as engagement, success, and customer satisfaction scores. These metrics provide valuable insights into how well your chatbot meets customer needs and where improvements can be made.

Actively seek customer feedback and incorporate it into your chatbot refinement process. Encourage customers to provide ratings, comments, and suggestions after their interactions. This direct feedback is invaluable for identifying pain points and opportunities for enhancement.

How Sendbird helps businesses implement custom AI chatbots

With Sendbird's intuitive chatbot platform and robust chat features, you can harness the power of conversational AI chatbots to provide delightful experiences for your customers.

Sendbird offers:

No-code chatbot platform

One key advantage of Sendbird's chatbot solution is its no-code platform. It allows businesses to design conversation flows, create message templates, and define bot actions effortlessly.

Sendbird's AI chatbot enables seamless branding integration, allowing widget customization to match brand identity and provide a consistent and recognizable experience.

Seamless platform, system, and knowledgebase integration

Sendbird's AI chatbots can be easily embedded into websites with a simple Shopify app or WordPress plugin install. However, Developers looking to build a custom web or mobile integration can use our chatbot API and chat API to create the exact in-app branded experience they envision.

Through function calling the Sendbird AI chatbot can connect to any system with APIs to retrieve information in real time.

Various knowledge base sources with daily syncs are supported, such as URLs and files that can reside on Google Drive, Notion, or Salesforce, ensuring the bot's data is always reliable for effectively addressing customer queries.

Finally, the Sendbird AI chatbot is natively integrated into our support chat Salesforce connector and support chat agent desk software.

Cutting-edge Large Language Model (LLM) AI Capabilities

Sendbird integrates many state-of-the-art technologies LLMs offering various tradeoffs between cost, security, and performance, including:

AI chatbot analytics for actionable insights

To support data-driven decision-making, Sendbird provides comprehensive analytics that tracks key metrics such as engagement, responses, and customer satisfaction. These actionable insights enable businesses to continuously refine their chatbot strategies, optimize conversation flows, and proactively address customer needs.

By leveraging Sendbird's rich analytics, businesses can develop a customer-centric approach that improves the overall customer experience. Tailoring chatbot conversations based on customer preferences and pain points leads to higher satisfaction, increased loyalty, and better business outcomes.

Implementing AI chatbots is now more accessible than ever, thanks to no-code platforms like Sendbird. With its user-friendly interface, seamless integration capabilities, and robust AI features, Sendbird empowers businesses of all sizes to create custom chatbots that align with their unique requirements and goals.

Start your journey with Sendbird today and discover how custom AI chatbots can transform customer interactions, streamline operations, and drive your business forward. The future of customer engagement awaits – embrace it by taking advantage of Sendbird’s free trial.

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