An AI chatbot is a human-developed software tool that uses Artificial Intelligence to solve users' queries. Users interact with the chatbot through text and voice to get information, answers to questions, and specific data.
AI chatbots provide real-time information based on the data they are trained with. They don’t give a fixed set of answers to any question, instead, they keep updating themselves with new information that offers the best solution to users. This makes testing an inevitable part of the launch of the AI chatbot.
The working of AI chatbots is dependent on two advanced technologies: machine learning(ML) and natural learning processing (NLP).
Machine learning plays a pivotal role in the upgradation of AI chatbots. As the chatbots get trained on huge sets of data, the best part is they get more accurate with more user interactions. During user interaction for any kind of question and information, they understand and set the parameters and respond accordingly. With a higher number of user interactions, the chatbot's response gets better.
Meanwhile, NLP enables chatbots to interpret the language and context of users' questions. It simplifies users' commands into keywords, sentences, and key information. It breaks down text inputs into components like words and sentences, identifies key information, and interprets meaning based on context. This allows the chatbot to respond in a way that feels natural to the user.
The best examples of AI chatbots working on these technologies are ChatGPT, Siri, and Alexa. All of these chatbots harness the power of machine learning and natural language processing to give concise responses to users.
The power and market value of AI chatbots are already making a blast. In 2022, the estimated global chatbot market was at $5.3 billion, and from 2023 to 2030, it is expected to grow at a CAGR of 23.3%.
As time progresses, AI chatbots are evolving, leading to increased implementation. From individuals to businesses, everyone using them enhances their efficiency and increases productivity. From providing information to scheduling meetings and sending reminders, they can do everything.
Let’s dive into full-fledged knowledge of AI. How AI chatbots are different from traditional ones. Real-life usage of AI chatbot, benefits of chatbot in your business, cost of building your own AI chatbot, and things to remember on building an AI chatbot.
According to Forbes, 80% of the business intend to deploy some form of AI chatbot by 2025. AI chatbots work on free sets of tremendous stored data that make it quite efficient for users’ questions. It is becoming a favorite choice of the business.
Whether it’s EdTech, Saas, or an e-commerce business, AI chatbots are a popular choice. All thanks to the multi-function features of these chatbots that increase business efficiency along various verticals.
The following are the major advantages of using AI chatbots over traditional ones that make it more flexible, accurate, and preferable.
1. Adaptability: AI-powered chatbots are capable of understanding complex inputs and answering accordingly. They are well capable of understanding and responding to different tones, sentence structure, context, and even nuances of language.
It makes interaction more real, and natural and increases user experience.
2. Continuous Learning: This is one of the best qualities of the AI chatbot as compared to the traditional one. These chatbots leverage NLP and machine learning to improve. With each interaction, they identify patterns, understand intent, and accurately assess their response quality.
3. Handling Complex Queries: The continuous learning with each conversation enables AI chatbots to understand complex queries and respond accordingly. They don’t need any manual change to give answers to any complex questions.
4. Personalization: This is the favorite part of the potential customer and is so important for the business. AI chatbot personally interacts with each prospect and it gets even more personalized as the conversation gets old.
This AI quality feels human to the potential customer which increases the user experience and the conversion.
On the other hand, traditional chatbots work with predefined rules and combinations. These chatbots work on fixed-prepared scripts and give answers to the user based on them. They can give answers to simple questions and provide common information, but unlike AI chatbots, they fail to answer any complex questions or give factual information, adopting flexibility and evolving with time.
The use of custom AI chatbots has increased significantly in recent years due to their superior features over traditional chatbots. But, the ground truth is that 40% of consumers don’t care whether it’s a chatbot builder or custom AI as long as it resolves their query.
It’s the concern of the businesses to choose the right fit chatbot to perform their work.
When businesses plan to integrate an AI chatbot there are broad options they can go with- chatbot builder and custom chatbot building. Depending on the requirements, size, and budget businesses choose between these two options.
Both chatbots come with several pros and cons that are given below
Chatbot builders are pre-designed and defined platforms. It allows users to create AI chatbots using drag and drop interface and pre-created templates. This means even a non-tech person can create AI bots through chatbot builders.
There are a number of AI chatbot platforms that offer creating bots such as Landbot, Tars, and IBM Watson.
It offers creating chatbots with the same predesigned design and template. It is highly focused on creating interactive and conversational interfaces. It is one of the best options for businesses looking to automate their lead conversion, customer engagement, and onboarding processes.
It also supports API integration which means various applications and databases can be connected to it. This increases the user experience at a more personalized level.
It is also a drag-and-drop chatbot builder platform that businesses use for multiple purposes. It takes care of marketing, customer support, and lead analytics. Tars offers over 1000 templates across various industries such as healthcare, real estate, finance, and more.
Tars is specially designed for lead generation, it helps businesses convert prospects into customers through custom conversational support.
IBM Watson is an advanced platform that offers AI chatbot building for more complex works.
Unlike chatbot builders, a custom AI chatbot is built from scratch as per the business requirement. Frameworks like Google Dialog Flow or Microsoft Bot Framework are being used in creating.
Based on the business location, industry, requirement, and size it can be customized again and again.
So, there is no hard and fast rule to choose one chatbot over another. It majorly depends on the size of the business, its needs, technical expertise, and budget. As discussed above both chatbots have advantages and disadvantages.
1. Inability to Learn: Traditional chatbots are not capable of understanding and learning from human interactions. Their response rate and quality remain the same until developers change it.
2. Predefined Responses: They can only answer the question which is already installed in it. But, when a user asks questions that are out of installed questions then they fail to answer. So, it only functions on predefined responses.
3. Limited Conversational Scope: Rule-based AI can’t work properly when it comes to conversational responses to customers. Sometimes it works and some it doesn’t work so the conversational scope in traditional chatbots is not certain.
4. Poor Handling of Ambiguity: If a user’s input falls outside of the programmed responses, the chatbot may fail to provide relevant or meaningful help.
When a user asks questions that are out of the programmed response installed by developers, the chatbots are not able to answer.
The AI chatbot market has seen a huge spike in recent years and there is no doubt about the future of it. In 2024 itself, the market of artificial intelligence has grown to over $184 billion. It is highly expected that it will cross over $826 billion by 2030.
All thanks to the advancement of AI and the digital transformation led by the demand for automated customer support. Regardless of the size of the businesses in various industries, they are adopting AI chatbots to enhance their efficiency.
AI chatbots are being adopted in some of the major industries like healthcare, banking, real estate, and customer service. It’s the multipurpose features of AI that made him popular among various industries.
1. Rise of conversational AI- chatbots backed by natural language processing (NLP) and machine learning (ML) are becoming popular among businesses. It is highly capable of understanding complex questions and context and giving personalized solutions. This makes conversational AI the first choice for businesses in sales, marketing, and customer service.
2. Multichannel chatbots- As per the need, businesses integrate chatbots across multiple channels or platforms. The common ones are websites, voice assistants, and messaging apps. This way businesses connect with customers at a much personalized level.
3. Multilingual Support- A global business is always intent on expanding into various regions and countries. This is where AI chatbot helps businesses interact with their prospect in multiple languages. It is helping a lot for any global business to reach its potential customers globally.
1. Wide Use- A recent study suggests that around 47% of businesses are already using AI chatbots in some form. Sectors such as banking, healthcare, and telecommunications are among the top users.
2. Small and mid-sized businesses- Earlier it was only big-size and budget businesses that used to invest in AI chatbots. But, in recent times small and mid-sized businesses also identified the power of chatbots and started using them.
1. Hybrid chatbot- There is no doubt that AI chatbot is an evolving tool and able to solve complex problems. But, soon, we will see hybrid chatbot tools, a combination of AI and humans.
AI will handle routine tasks and transfer highly complex problems to human customer representatives. This will skyrocket the prospect experience and turn into a higher conversion.
2. E-commerce and sales- The use of AI in e-commerce and sales have already been started but not much. With the advanced features of AI chatbots, it’s highly expected that their use will increase in these sectors.
AI chatbots provide information, give recommendations, and assist in buying guides to the users. This will increase the conversion rate of the businesses which will lead to higher profits and save customer acquisition costs.
3. Data security and optimization- With the use of AI in different industries, data security and safety have become a major concern especially. Industries like health and banking consist of super sensitive data.
It will be sooner when AI developers will focus on adding strict data safety and protection in the tool. This will ensure the optimization of the customer’s data
AI is designed and developed for the ease of customers and businesses. And it works their role on multiple levels in the various industries. Many of the chatbots work on the technical level but, there are also many popular real-life usage of the AI chatbots.
This usage is applied in the real world daily to solve customer problems. Some of the industries where the implementation of the chatbot is so common and popular are mentioned below.
67% of consumers worldwide have used a chatbot for customer support. The tricky part is that they don’t know if it’s a bot or a human being.
This feature of the AI is probably used by all the companies in different categories. The quality of handling many potential customers at a time and the 24/7 support system are what make AI chatbots special among businesses.
Chatbots are well efficient in answering various types of questions, giving information, solving questions, tracking orders, follow-ups, and more. All these support of AI play a vital role in customer support.
Health is a sensitive subject that requires special expertise and experience to work in. But, chatbots are evolved enough to work in this industry for various tasks. Chatbots schedule patient meetings with Health Express, reduce waiting time, give health solutions, and much more.
One of the significant uses of chatbots in the health sector is the AI bot used by Babylon Health, which is used for multiple roles. Babayon used it for collecting visitors' medical data, booking appointments, and event guide solutions as in the case of the patient.
The retail industry is huge. It consists of many sectors such as fashion, and electronics which have bigger market sizes. So, the integration of AI in these sectors increases rapidly.
Chatbots give product information, reviews, and recommendations as per customer requirements. This support helps customers in deciding the right product for their needs.
Banking and finance are the other most common industries where AI chatbots are used extensively. From checking balance to transition history and preparing expense sheets to budget advice they do all.
AI chatbots also give investing information, guidance, and tips. It also manages money according to income and expenses.
AI chatbot has already started making a difference in the growth of the businesses. Many businesses in various industries started using chatbots to upscale their business. And they are the ones who are getting much more advanced forms of benefit from the tool in various tasks.
The early user gets more time to try, test, and customize as per their need and business now they are using it in full-fledged form. Here are the major businesses that have successfully implemented chatbots to their business:
To complete various tasks, Bank of America developed an AI tool known as Erica. The tool helps customers open accounts, manage their accounts, loan pay reminders, and guidance.
Erica is also capable of giving investment advice and financial. These versatility features of the tool from solving basic to complex questions of customers increase the customer experience and engagement.
In April 2024, BOA’s Erica crossed 2 billion interactions, which shows the importance and power of AI bots. Also, it diminishes the call center cost for the bank.
H&M developed an AI tool for answering and guiding their customers. When a customer buys a product they have various kinds of questions and doubts and this is where the chatbot assists them.
Questions like what would be the right size, trending style, and buy guidance are mostly asked by the customers for the right purchase. AI assistants help each customer in choosing the right outfit for them.
Such personalized guidance increases the brand value and trust of H&M among customers. Due to this more and more customers are visiting taking help for their purchase.
Along with working on brand value physically, Starbucks also did the same in the online world for more customer acquisition. My Starbucks Barista provides a facility to order voice and text commands via the mobile application itself.
You can also make an order from the purchase history just with voice command. Such a facility enhances customer convenience resulting in a win for the businesses in the future.
The AI chatbot is a multifunctional tool that benefits businesses in various verticals. After the pandemic, customer dependency on online solutions has increased drastically. This made businesses focus on chatbots on an even deeper and larger scale.
A recent report suggests that businesses that use chatbots see a 35% improvement in customer satisfaction.
From solving customer queries to handling business operations, and offering recommendations to purchase guidance, the chatbot takes care of all of them. This feature adds to the business benefits in multiple ways, below are the closer at those benefits:
For any business, the prospect's attention is the first and foremost priority. A prospect convert into a customer if they get their questions answered, and information, and feel satisfied.
An advanced feature of the AI takes care of all these aspects of customer needs. Chatbots respond to the same question again and again even if it’s asked by the same customer. It can track orders, information, and reviews.
With 24/7 availability features AI replies to the customer instantly even out of business hours and increases user experience. Chabot can be integrated with types of CRM and the internal system which give real-time response. It can be pricey, and reviewing products. All these features of the AI enhance the efficiency of the business.
The automatic customer interaction gives the liberty to cut off hiring and training customer support teams. Chatbot answers to many customers at once for which a team is required.
The recent reposts also estimated that businesses can save up to 30% with the use of AI chatbots over human customer support. Chatbots are also smart enough to respond and solve common problems by themselves. This decreases the frequency of calls and live chat help for human customer support.
The personalized response to each potential customer is what sets them apart from conventional bots as well as human support. They use the previous purchase data of customers to suggest a product and guide for the next purchase.
Chatbots work on various platforms whether it’s websites, social media or messaging applications. So, businesses are free from the platform type where potential customers are visiting.
With the machine learning features, AI has become so advanced that it analyzes the pattern from customer’s questions and queries. Then the chatbot collects these patterns as data to recommend products and provide information.
The data and reconnection get more and more personalized and accurate with the increase in number of customer visits. Chatbots don’t need any external support, their self-learning features are a true gift for businesses.
Knowing about AI chatbot features, efficiency, and benefits is one thing but, the real is knowing the cost of building it. Well, broadly speaking the price of creating an AI chatbot from scratch may vary from $20,000-$80,000 depending on the complexity.
The price of the custom AI chatbot depends on the two major category factors:
However, a platform-based chatbot costs less as compared to a custom one. But, there are limitations along various verticals in the chatbot platform.
Following are detailed comparisons of the initial cost price, final cost price, and running and maintenance costs between these two platforms.
Platform-based chatbot is built on a framework provided by third-party platforms. Such platforms give pre-generated templates, drag & drop options, and natural language processing (NLP) features.
By using these prepared features, it can be generated with minimal customization. Considering the features of the chatbot platform, it can be a good option for small businesses needing simple solutions with limited customer volume.
Businesses develop custom AI chatbots depending on their needs. It requires a team of experts to develop a custom chatbot. Here, the interface can be customized which is best suited to the prospect.
The NLP can increase with time and requirements. In short, there is full liberty to change it as per desire. It is best for the company looking for advanced features, evolving chatbots, and full control over data.
Chatbot platforms come with limited features and customization options. Here all the features depend on the third party. The initial or set cost for this chatbot typically ranges from $500 to $5,000. However, some platforms provide 1 to 3-month free trial subscription options.
On the other hand, custom-developed AI is fully customizable across all verticals. The best one is the evolving features. The initial development cost may range from $5,000 to $49,000+, depending on the scale of maintenance, retraining, and feature enhancements.
Before finding the cost of building a custom chatbot, businesses must be clear on their requirements, such as features, traffic, potential, NLP, integration options, and more. This will give a rough idea of cost estimation for the development.
There are various stages of AI chatbot development, involving from designing to the final product.
There are three major departments on development teams. These teams can work on a house or freelance basis
1. Developers- Back-end and front-end developers are needed from the initial to the final stage of chatbot creation. They create, integrate, and customize the chatbot as per the need.
The charge of a developer can vary from $50-$180 per hour depending on the experience and the location. A chatbot may take 250-500 hours in full development.
2. UI/UX designer- The designer creates user-friendly interfaces with the collaboration of developers. Typically, a UI/UX designer charges $50-$180 per hour. It usually takes 50-100 hours of full designing for a chatbot.
3. AI expert- They ensure the functionality of the AI chatbot with multiple rounds of testing. They check if the chatbot works according to the development.
It has a very high skill role in the development of chatbots. The standard charge for an AI expert can vary from $80-$250 per hour depending on the experience and the work complexity. Generally, it required 100-180 hours of testing and training for an AI chatbot.
There are majorly three types or forms of the AI chatbot. They categorize on the basis of the features, needs, and work.
It usually takes $5000 to $15000 to develop a simple AI chatbot from scratch. There are limited customization and features. It is best to deal with simple and small tasks.
It takes $20,000 to $50,000 to create a mid-range AI chatbot from the initial to the final stage. It works best for small to midsize businesses. This AI chatbot works efficiently for customer service. However, the features and scalability are limited.
This is the most advanced form of AI chatbot highly capable of dealing with all kinds of tasks. Usually, it took $60,000 to $1,00,000+ to create a complex AI chatbot from scratch.
It has a full-fledged customization option with high scalability of the NLP. This helps in higher customer experience and makes it efficient to deal with complex tasks.
Once a custom AI chatbot is developed then it doesn’t mean it's a one-time expense. There is ongoing expense involved depending on the size and complexity of the chatbot.
There are four sectors where maintenance costs are needed:
To keep accurate and relevant chatbot responses it requires regular training with new data. For a simple chatbot, it may take a $500 to $5,000 annual training charge, and for advanced features, it needs $5,000 to $20,000.
There are many NLP providers in the market, among all Google and Amazon are the most popular and efficient ones. Typically they charge between $0.004 to $ 0.2 per request. So, the higher the volume higher be NLP costs.
When businesses grow small to mid-size or mid-size to big size then there is a need for feature addition and customization. It can be changing the interface, adding more integration options, and so on.
Annually, it can cost $5,000 to $15,000 depending on the customization and business size.
To ensure the running performance and accuracy of a chatbot there is always a need for a routine update. It is applicable to all types and sizes of custom AI chatbots.
It also involves saving the chatbot from bugs that happen when users interact with the bot in unexpected ways. Typically, it takes $4,000 to $15,000 a year to fix them.
Building and using an AI chatbot is a lucrative investment regardless of the size and the industry type of the business. From designing to final products there are multiple stages and steps which need to be completed carefully.
These stages involve various field experts to proceed with the development of chatbots. When there are a number of stages and persons involved in the process so there are always chances of mistakes.
So, businesses always need to be attentive to these mistakes and have a practical approach. Below are the inevitable steps that need monitoring before, during, and after the chatbot development.
This is probably the most important step to begin with. A business must be clear about the purpose and features of the AI chatbot.
Depending on the size and industry type the purpose of the chatbot can be defined. The integration of features like customer support, scheduling meetings, and completing complexes should also be cleared.
NLP is the brain of the AI chatbots. It comes in different versions depending on the needs of the business one can be chosen.
For simple tasks, basic NLP is enough. If there is a complex task then it has to be upgraded for advanced NLP models such as GPT-4 and BERT. The chatbot integration platform should be capable of supporting it well. If the audience is multilingual then advanced NLP can work according to the respective customer.
Building a prototype with the required features is a great move for any growing business. It allows users to interact with the chatbot before the final launch. This way the real feedback and confusing points can be identified.
A recent report said that companies that continuously train their AI chatbots experience 20% higher accuracy in responses. This can be achieved through continuous training and updating of chatbots.
For any kind of NLP-integrated AI, there must be room for updating. This can be done according to the company's needs and user experience data.
The first and final goal of any business or company is to grab customer's attention and convert them into successful leads.
Designing a chatbot with a catchy interface and replying in short and simple sentences is the best approach. Adding a quick response button with high response is an even better practice to build a user-oriented AI design.
The security of the customer’s data is one of the most important tasks for any company. Each customer interacts with the chatbot with different problems and to get the solution they share various personal details. Now, it is the company's responsibility to secure their data.
So, the chatbot must be hosted on a safe platform. Also, AI chatbots should meet data privacy standards.
AI chatbots are revolutionizing customer interaction across various industries by utilizing advanced technologies such as machine learning and natural language processing. Their ability to learn from user interactions allows them to provide increasingly accurate and personalized responses, setting them apart from traditional chatbots. So, choosing a chatbot for your business is very crucial.
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