How do AI chatbots work and why you should consider them

AI-powered chatbots have become the staple for effective customer service in the modern era. In fact, 80% of businesses intend to use AI chatbots over the next five years to provide their shoppers with real-time support, as well as offer a more streamlined and efficient guide through the buyer’s journey.

The reasons why AI chatbot adoption is increasing are part of an ever-growing list:

  • The old way of building rule-based chatbots is no longer effective
  • AI chatbots continuously improve based on their interactions with people, and Kindly's chatbots have even taken one step closer to becoming self-learning, thanks to our new Bot Improvements feature
  • They complement live chat and other existing softwares
  • They help brands sell more by increasing conversion rates and average order value
  • AI chatbots automate customer support, saving teams time, money, and valuable resources

So how do AI chatbots work and what are the benefits for your brand? Let’s now take a deep dive and answer those questions.

Do chatbots use AI?

Not all chatbots are equal. In fact, there are immense differences between traditional rule-based chatbots that are beginning to show their limitations towards the demands of today’s businesses, and against their more modern counterparts, Conversational AI Chatbots.

The New Way: Conversational AI Chatbots

Conversational AI Chatbots use natural language processing (NLP) and machine learning technology to interpret the meaning behind the questions asked by shoppers. Rather than relying solely on keywords or phrases, AI chatbots learn to interpret human language and the subtle nuances behind the words shoppers type.

To take things even a step further, Kindly’s AI chatbots also take note of shopper behaviour on your website and react in a helpful manner, which helps replicate the personalisation found during the in-store shopping experience. This enables for a more proactive and informative virtual shopping experience that helps shoppers find the items they truly want to buy.

The Old Way: Rule-Based Chatbots

In contrast, rule-based chatbots lack the ability to empathise with human behaviour and the meaning behind certain words. Rule-based bots respond solely to the keywords and phrases input into the bot and provide responses that directly connect to the wording of the questions asked. While they can still be helpful, these bots lack the ability to have more in-depth and helpful conversations with shoppers, limiting the conversion rates and average order value (AOV) attained from those experiences.

Why customers prefer a custom AI chatbot

Custom AI chatbots are much more effective at interacting with today’s digital shopper, of which most are Millennials. Millennials have effectively surpassed baby boomers as the largest buying demographic in the world. It’s believed that millennials were responsible for over $1.4 trillion of consumer spending in 2020 alone. This is, without question, the buying block that e-commerce brands must support to further enable growth for their businesses.

Why are AI-powered chatbots best positioned to support millennial shoppers? Here are 3 key reasons that highlight these benefits.

Sell more

Since AI chatbots integrate with other forms of software, most notably conversion optimization solutions, they can help brands increase total revenue derived from each shopping experience. Millennials will likely react to product recommendations that are personalised to their tastes and interests. For example, Hertz Sweden implemented an AI chatbot with CRO technology to help boost sales for their business. Working in tandem, these solutions drove a 23% increase in total revenue for the brand.

Improve customer support

Nobody wants to spend hours on the phone stuck in a queue for customer support and Millennials and Gen Z shoppers are particularly averse to jumping on the phone. According to studies, 75% of shoppers in these demographics say phone calls “take too long” to get the answers they need. AI-powered chatbots respond to any enquiries in real-time, eliminating those time consuming waits and delivering more satisfying customer service.

Reduce costs

Since chatbots help automate customer support, companies can actually save money on customer service and hiring costs by adding AI chatbots to their website experiences. Take a look at, Helthjem, a leading shipping and logistics company in Norway, who have been able to reduce the number of enquiries routed to customer support by 10% by using an AI chatbot. By reducing those support tickets, customer support staff earned back more of their time to focus on more complex enquiries that require human involvement. This keeps the employees happy and motivated, as they know they are making a difference in their work.

The elements of AI chatbot architecture

Now, what are the technical components of a chatbot that allow it to function as it does for your business? There are detailed blueprints explaining how these bots are assembled in great detail, but the summarised version is this:

AI-based chatbots are powered by artificial intelligence that learns to interact with humans using machine learning technology. This technology enables the bots to understand, interpret, and respond best to open-ended questions in order to facilitate detailed conversations with shoppers in need. This gets to the heart of how conversational commerce, as a practice, benefits your business and your customers as a two-way technique to create meaningful relationships between brand and consumer.

How to make an AI chatbot work for your brand

If your business is new to chatbots, especially a Conversational AI Chatbot, you may be wondering how best to integrate the bot into your site experience. But there’s no need to worry about that. At Kindly, we have a very simple and straightforward process to help you get your chatbot up and running on your own website in as little as three to four weeks.

Step 1: Set a goal

Like with any business decision, it’s important to know what you’re trying to achieve before you start implementing a solution. Define how you want the chatbot to help your company and what that will mean for the future of your business. When you know what you’re trying to achieve, it makes it easier to measure the impact, quantify the results, and calculate ROI.

Step 2: Build an implementation plan

In this context, implementation means identifying what to program into the chatbot for the first phase of the release. The chatbot learns and evolves based on the knowledge and insights initially shared by your team before the AI expands the bot’s knowledge of your products and solutions. Bring together a team of super users within your organisation who know your products and benefits in great detail. This is the group that will build the bot’s initial understanding of your business so that it can begin to interact with your shoppers.

Step 3: Commit to improvements and iterations

Sometimes, the best way to learn is by doing and that’s how your chatbot will offer the best version of what it can provide. As the chatbot engages with shoppers, it will archive all of the conversations that your team can review. Those conversations will describe how effective the bot has become at answering customer questions and providing directions to the optimal solution. Based on those findings, you can reprogram the bot with improved responses and different iterations of those responses to best service your shopper’s needs. It really is a case of trial by fire, but that’s how you discover the best results!

Step 4: Let Bot Improvements automate your chatbot optimization

As mentioned further up, Bot Improvements brings Kindly's chatbots one step closer to becoming self-learning. What this feature does is that it significantly reduces the manual labor and time spent on making the necessary changes to your chatbot. It also contributes towards increasing the precision and relevance of replies to customer enquiries, which is a huge benefit to both you as an organization, and your customers. The task of going through archived customer conversations one by one can be pretty tedious and time-consuming, so our automated solution will save you and your chatbot teams even more time.

3 AI techniques used in chatbots

What are some of the best ways you can use a chatbot to benefit your business and your customers? There are any number of ways that chatbots can help improve the shopping experience and directly contribute revenue to your organisation. But here are three prime examples of AI techniques chatbots use to improve the chatbot experience.

Technique 1: Enable instant real-time customer support

This is one of the biggest benefits of a chatbot. In so many organisations, customer service teams are bogged down with repetitive tasks. A majority of questions from shoppers are, in one form or another, different versions of the same question, often related to pricing, features, delivery, etc. Rather than subject your team to those tedious tasks, you can program the chatbot to provide real-time answers to those common questions. This way, shoppers get the information they need and your support team can shift more of their own time and resources towards big picture ideas that will benefit your company’s growth.

Take the Norwegian Block Exchange (NBX) as a primary example. With their chatbot, they’ve seen a 90% reduction of inbound customer support enquiries thanks to its neverending availability. It’s a great way to let your customers know that your service and support is always available whenever they need it.

Technique 2: Automate static information and generate warm leads

Chatbots aren’t only tools to automate customer support; they can also contribute to your lead generation campaigns. By automating static information such as price ranges for different types of products, you can give shoppers a clear overview of what to expect in terms of pricing with your business. This is excellent low-funnel marketing that can get people over the last hurdle they need to enter your lead generation funnel. You can use these automated guides as a warmup, and then invite those customers to book a call or a demo to learn more about what you have to offer.

Renault Norway had precisely this idea in mind when they implemented Kindly’s Virtual Shopping Assistant into their website. Specifically, they used the chatbots and conversion optimization software to personalise offers to shoppers and motivate them to book a test drive, especially with their electric cars. The strategy proved very effective, and Renault reports that 10% of all their digital leads are driven by Kindly’s conversational commerce solutions.

Technique 3: Help customers find the right product for them

At the end of the day, your business will only grow if shoppers are able to get the items they need and derive some form of satisfaction from the experience. Chatbots can function as virtual shopping guides that direct users to the items they want or need, based on the details of the conversation. A clear path to conversion increases your potential to boost revenue for your business and also improves overall customer satisfaction. Satisfied customers are most likely to become repeat customers that will spend even more with your company so always treat the chatbot as a means of generating lifetime value from your shoppers.

Birk Sport, a Norwegian bike shop chain, provides a great example here. When you first land on the website, you have the option to click on the chatbot bubble to activate it. It does things like:

Helps you navigate the jungle of different bike types for non bike experts. Helps you find the right bike for your budget and use. Helps you make a choice that they're happy with, which in turn reduces returns. Helps you find their bike buying guide. Shows you a list of bike categories you can ask questions about.

AI chatbot development services

At Kindly, Conversational AI Chatbots are one of the bedrocks of our Virtual Shopping Assistant platform. They’re programmed to proactively sell your products, features, and services to best assist shoppers with their own needs. You can improve customer satisfaction through automated support, iterative shopping guides, and even increase your lead count using the capabilities of your chatbot.

With an AI chatbot at your side, the sky is truly the limit for wowing your customers with an outstanding website shopping experience.

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