The Ultimate Guide to Chatbots in Business

Chatbots started out as a trend, but unlike tiny flip phones and Myspace, they’re here to stay.

As more and more services switch to digital, namely customer support, chatbots are at their side. Advancements in artificial intelligence and natural language processing make this possible.

Adaptability is the primary appeal of these intelligent assistants. Chatbots can often be customized and molded to serve your company’s particular needs. A well-designed chatbot can then help reduce service costs and work as an efficient member of your support team.

This means chatbots aren’t just a time waster anymore; they’re employees. With a clear vision and careful planning, you can create a chatbot that effortlessly assists your agents and customers across channels.

This post will cover everything you need to know to get started.

  1. What are chatbots?
  2. What are the benefits of chatbots?
  3. How do chatbots work?
  4. Can chatbots replace humans?
  5. Do you need a chatbot?
  6. How to create a chatbot

What are chatbots?

Chatbot illustration.

Short for chat robot, a chatbot is a computer program that simulates human conversations. It interacts with users through instant messaging, artificially replicating the pattern of human communication.

Chatbots have been around since the 1960s. Conversational ELIZA was the first chatbot created by MIT professor Joseph Weizenbaum. In recent years, chatbots are taking on a more professional role as digital assistants for a variety of industries.

What are the benefits of chatbots?

If you’re on the fence about the value of chatbots or need a little more clarity, then here are the top benefits you can likely expect from employing your own chatbot.

For businesses

  1. Boosts customer engagement: Similar to in-store assistants, proactive chatbots can reach out to your customers while they’re browsing. If your chatbot is in the right place at the right time, you increase your chance of impacting your customer’s buyer journey .
  2. Automates simple tasks: Chatbots can alleviate your service agents from performing repetitive tasks like scheduling appointments, sending reminders or collecting customer feedback. This lets your agents focus on their important tasks.
  3. Cuts down service costs: Chatbots can’t replace agents, but they can help cut down your business’ service costs by up to 30% . They respond quickly to simple customer support inquiries, freeing up time for your human agents.
  4. Pairs well with live chat: Most chatbots can be connected to your live chat solution , which makes handovers quick and easy. Agents can also monitor the chatbot’s performance and chats from the dashboard.
  5. Screenshot of LogoEnergie's chatbot.
    LogoEnergie uses Userlike live chat to support its chatbot, Henry
  6. Available 24/7: Chatbots can provide instant, real-time assistance whenever. If your customers are active after business hours, chatbots can assist by answering simple questions and recommending product pages, blog posts and tutorials.
  7. Gives your company a voice: When face-to-face contact isn’t possible, chatbots can help shape customers’ perception of your company. You have full creative control over your chatbot so you can edit its voice, image and tone to fit your brand image.
  8. Easy to maintain: Once you get past the initial setup and awkward beginning phases, you can easily monitor your chatbot’s conversations and improve its performance based on new insights.

For customers

  1. Quick responses: Chatbots respond almost instantly, which means customers don’t need to wait in a queue just to ask a simple question.
  2. Easily accessible: A chatbot can live on every page of a website or in a messaging app, making it easy for customers to use when they get stuck. There are no waiting queues, and a chatbot cuts down the steps a customer needs to take to reach an agent.
  3. Cartoon of chatbots.
  4. 24/7 availability: This benefit goes both ways. For late night shoppers or those with busy schedules, chatbots become portable digital helpers. Customers can start conversations at any time and respond when it’s convenient for them.
  5. Relaxed conversation: For many customers, speaking to a chatbot may be easier than with a service rep because there’s no pressure to be conversationally engaged. Customers can skip the niceties and be blunt with their questions, which keeps the conversation quick.
  6. Direct and personal: Chatbots can’t pick up on nuances in conversation, but they can be trained to address customers by name and make personalized recommendations.

To learn more about chatbot consumer perceptions, watch our video:

Relevant articles:

How do chatbots work?

There are three main types of chatbots: rule-based, keyword recognition-based and contextual. Each has the same goal of figuring out what the customer needs and helping them to the best of its ability, but with different approaches.

A rule-based chatbot is preprogrammed to follow a flow map in response to the user’s request. These maps can be either simple or complex depending on the platform and what the company designs. This type of chatbot often uses a menu or buttons to converse with the user.

A keyword recognition-based chatbot works similarly to decision trees, but is programmed to also recognize certain keywords. From there, the chatbot makes decisions and gives answers based on its internal knowledge of that keyword.

A contextual chatbot can have free-flowing conversations and often learn from them. They can also follow mapped conversation flows, but they are often looser and open for topic deviation.

Graph showing the increase in user experience dependent on chatbot quality.

Each chatbot type uses artificial intelligence to make informed decisions, but natural language processing is what helps a chatbot understand intent and context. This is why some chatbots are seemingly “more intelligent” than others. It all depends on the chatbot’s internal knowledge base and programming.

Want to talk to a human about chatbots?

We'd be happy to answer any questions you have about using chatbots in your business and how to get started.

Book an appointment

Can chatbots replace humans?

A chatbot is only as successful and helpful as a business or provider makes it to be. If you spend more time (and likely money) on its development, then you get more out of it.

But it’s important to understand that every type of chatbot has limitations and cannot replace human agents.

Chatbots make great assistants however, and have made a positive impact on businesses and customers alike. For example:

  1. Capital One created the chatbot “Eno” to improve its relationship with its banking customers. Eno alerts customers about suspicious transactions, duplicate charges and unusually high spending. The contextual chatbot even helped identify almost $2 billion in tax-deductible charitable donations from customers’ accounts.
  2. GIF of Woebot.
  3. Woebot is a self-care chatbot that was created to make mental health more accessible. In collaboration with Stanford University, clinical psychologists created the companion, which was proven to help reduce depression symptoms in just two weeks.
  4. is an email chatbot that goes by the name Amy Ingram. Amy lives in your inbox and can schedule meetings and appointments at your request. Amy behaves very humanlike (people are sometimes fooled by how “real” she sounds in emails) and reviewers say that she’s a total timesaver.

Relevant articles:

Do you need a chatbot?

There are mixed messages online about the necessity of chatbots. Some articles say they improve customer service, others say they kill it.

To get some clarity, we created a survey to ask consumers how they truly feel about chatbots. They’re the ones using them afterall. We learned that people enjoy how quickly a chatbot responds, and are even willing to talk to a chatbot first instead of waiting for an agent.

Many respondents even said that they trust chatbots with basic requests, such as paying a bill or checking their order status. However, respondents also reported that some issues and questions were misunderstood by a chatbot and needed to be forwarded to an agent.

Creating a chatbot can also be an expensive and lengthy process. You may want a chatbot that speaks like a human and effortlessly completes tasks. But as Margaret Mayer, VP of Software Engineering at Capital One said, “the easiest-to-use technologies are the hardest to build.”

Here are some things to consider before creating a chatbot:

  1. Assess your company’s needs: Does your team need help with answering simple questions, gaining qualifying needs, engaging customers on your website, promoting products or helping with sales? Will you train a chatbot well enough to fulfill these types of tasks?
  2. Determine if you have enough data: If you’re a newer company, you may not have enough site visitors or website activity for a chatbot. If you want to improve your online presence but have never used chatting as a contact channel, live chat may be a better fit.
  3. See if it fits into your budget: Do you have champagne taste but a beer budget? Cost-effective decision tree chatbots work well for many businesses, but it may not be what you have in mind. Find out if you can afford what you’re looking for.
  4. Ask if your team can help manage it: Chatbots work independently, but they still need to be monitored. Can you or your agents spare time to oversee your chatbot’s performance?

Relevant articles:

  1. 8 Ways to Know if You Need a Chatbot For Your Business
  2. 10 Must-Try Chatbot Providers for Every Budget
  3. 4-Step Formula for Calculating Your Chatbot ROI
  4. 5 Realistic Customer Service Trends for 2021
  5. AI-Powered Customer Service — Hopes, Doubts and Applications

How to create a chatbot

Creating a chatbot gives you a lot of creative freedom, which can be exciting or intimidating (or both) depending on your team. We recommend starting with your chatbot user interface, which will help shape the user experience.

First, start by looking at examples of the current best chatbots. They’re clearly doing something right, so take notes of what you’d also like your chatbot to mirror or achieve.

Next, choose your provider or platform. Take advantage of free trials and demos to find the right chatbot provider. Read reviews about your top choices and ask their representatives for examples of companies successfully using their platform.

During the creative process, figure out your chatbot’s persona. Create a profile for your chatbot complete with its job duties, personality traits, likes and dislikes and an image.

Once it has a persona, start writing your chatbot’s script. Giving your chatbot a personality will help guide the writing process. Determine different conversation paths, write a variety of responses and ask other members of your team to chat with your bot and provide feedback.

Lastly, choose a catchy name. This step doesn’t have to come last, but it may be easier to name your chatbot once you have it. Chatbot names range from human to cutesy, so pick one that best represents your brand.

Once it’s created, connect it to your channels and live chat solution. After all your testing and fine tuning is done, integrate your chatbot into your website and anywhere else customers may find it useful. Monitor its performance, make changes where necessary and make it easy to escalate questions to agents.

Relevant articles:

At Userlike, we advocate for the power of combined messaging, live chat and chatbot support. That’s why we offer two solutions for integrating AI on your website. The first is our Logic Bot, which is a rule-based solution that works as front line support for your service team. It’s ideal for answering FAQs, performing small tasks, providing on-site navigation and sending rich media in the chat.

Product image of Userlike chatbot asking for a photo

The second solution is our chatbot HTTP API framework for connecting your bot built using an API. You set your endpoints and bot behavior mode (as a fallback or first response option, for example), and then you can use our chatbot API to distribute requests to the appropriate operator group. You can check out the full process in our chatbot integration tutorial.

Try Userlike if you’re interested in testing out a powerful live chat provider for chatbot support. We can help you with your chat support questions and get you set up on the path to digital customer service. Try our free 14-day trial to check us out.

If you need more advice or help with chatbots, we’ve written a variety of articles to help answer your questions. We hope they provide some helpful insight during whichever stage of the process you’re in.

All Userlike articles on chatbots