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What is a Chatbot? Types of Chatbots and How They Work (2023)

Enhancing and improving your customer service operation by hiring more employees is no small feat. You have to find the right candidates, train them in your company’s policies and standards of service, find people to manage them, and constantly deal with inevitable employee churn.

To help close the gap and take the burden off your customer service reps, many companies turn to automated chatbot tools to handle basic customer queries and improve customer experience.

Chatbot platforms have rapidly advanced in recent years. The acceleration of AI technology means they can now provide instant replies, personalized customer experiences, and robust post-purchase journeys. Chatbots might be what you need to level up your company’s customer support system (and possibly save some money in the long run). Here’s how modern chatbots work and how to implement them.

What is a chatbot?

A chatbot is a software application that simulates human conversation to provide information to users. Customers interact with chatbots as though they’re speaking to another person, asking questions, and making statements using regular conversational syntax—the chatbot replies using similar syntax, creating the illusion of one-on-one dialogue.

Chatbots aren’t limited to your website. Companies use them on social media (such as with Facebook Messenger or X chatbots), email, and SMS or messaging apps to answer frequently asked questions or handle unique customer service requests.

Some businesses use chatbots on automated phone lines, through which they can help customers schedule appointments or check account balances. A growing field of chatbot technology uses virtual assistants, like Google Assistant or Amazon’s Alexa, which can execute tasks and hold vocal conversational exchanges with human customers. The best AI chatbot is one that is trained to represent your brand while tackling the most common pain points your shoppers face. 

How do chatbots work? 

There are two levels of chatbot. Question–answer bots rely on previous data and information to create rules and provide solutions for specific inquiries. They use existing knowledge bases, customer support documentation, and past conversations to identify patterns similar to the original inquiry. By doing this, they can send the most appropriate response in a matter of seconds, with a high chance of accuracy.

The next level of chatbot uses powerful AI technology to appear even more human-like. These chatbots leverage a mix of deep learning, machine learning, and natural language processing (NLP) to recognize patterns in conversations and provide appropriate, life-like responses. These chatbots can pull from a wider source of information to generate even more targeted, useful responses for customers. The idea is that the more they’re used, the more they hone their pattern matching so they become increasingly accurate. 

What are the benefits of chatbots?

  • Dynamic information
  • Speedy information retrieval
  • Lower costs
  • Room to scale up
  • Tailored experiences

Chatbots provide value to large corporations and small businesses, which might explain why a quarter of businesses are using chatbots on their websites. Chatbots offer five critical benefits:

Dynamic information

Chatbots provide more precise, adaptable information than static FAQ lists on web pages. Because a chatbot simulates human conversation, customers can ask specific questions rather than settle for broad, pre-formulated answers.

Speedy information retrieval

In most cases, chatbots work faster than human customer service agents. They are, after all, computers. Chatbots fetch information in a matter of seconds, which can improve customer satisfaction and boost conversion rates. 

Even small businesses find they save time. Chat tool Shopify Inbox helped children’s brand Wood Wood Toys quickly answer customer queries and cut down the back and forth that comes with email.

“With Shopify Inbox, we can deliver a good customer experience, and answer shoppers’ questions accurately, more often, and faster,” says Rennie Wood, founder of Wood Wood Toys. “If somebody reaches out with a problem, I bet eight times out of 10 we can solve it and win the sale.”

Lower costs

Investing in a chatbot can require a hefty initial financial commitment. However, chatbots are far less expensive over time than training and employing a human workforce. Companies looking to improve their bottom line often turn to chatbot computer programs.

Room to scale up

Human customer support can create bottlenecks when there aren’t enough agents to handle every inquiry. Chatbots can handle far larger volumes of requests at once while engaging clients with the cadence of a live chat.

Tailored experiences

Some 73% of shoppers prefer to buy from brands that personalize the experience. Chatbots use a combination of customer information and AI pattern matching to deliver unique responses to each customer in real time. This provides a highly tailored experience for every shopper. 

Types of chatbots

Over the years, chatbot development has produced two main types of chatbots: rule-based chatbots and predictive conversational chatbots. Both can serve small business needs, though conversational commerce chatbots are more sophisticated and cost more to implement.

Rule-based chatbots

Best for: Sharing specific information, like order details, recommended products, or your returns policy. 

Also known as declarative or task-oriented chatbots, rule-based chatbots use simple computer programs where specific customer inputs generate specific chatbot outputs. If a rule-based chatbot is well programmed, it can produce conversational language but remains relatively limited in answering complex questions.

This type of chatbot is more task-oriented and less representative of a person. Usually found on websites that answer common queries, it can be a good way to direct customers to relevant products, share order details, and point shoppers to key information on your site. If you want to create the feeling of a one-on-one conversation with the same conversational syntax a real person might use, you might be limited.

Conversational chatbots

Best for: Answering specific questions and replicating human interactions.

Also known as conversational agents, predictive or artificial intelligence chatbots, conversational chatbots use artificial intelligence (AI), machine learning (ML), and natural language processing (NLP) to generate human-like dialogue. 

They’re great for providing information unique to a customer and sharing personalized responses in a conversational, human-like way. AI technology helps conversational chatbots adapt to the cadences and nuances of a customer’s speech in real time. They can also track customer preferences to produce more qualified leads than rules-based chatbots. AI chatbots perform best when accessing large datasets, such as those stored in a company’s customer relationship management (CRM) software. 

This type of chatbot acts as a virtual agent or digital assistant and can find unique information about each shopper to make every interaction highly tailored. They can be proactive and identify when a customer might need something and deliver it to them before they even have to ask. 

Tips and best practices for implementing chatbots

  1. Choose your channels
  2. Build out a chatbot strategy
  3. Write your chatbot scripts
  4. Set up a memorable welcome message
  5. Match your chatbot’s personality to your branding
  6. Test and tweak
  7. Offer a real-person alternative

Follow these tips to make the most of your chatbot and create an engaging experience for customers. 

1. Choose your channels

Consider where you want to install your chatbots—social media? Your website? Somewhere else? Think about the platforms your customers are most likely to use and how they commonly get in touch with you. For example, if you find that shoppers tend to reach out and ask questions on Instagram, it might be worth choosing a chatbot that integrates with your social media channels. 

If you want to automate communication across multiple channels, choose a multi-platform chatbot solution. With Shopify Inbox, you can manage conversations from a variety of places in one central dashboard. 

2. Build out a chatbot strategy

The key to creating a successful chatbot strategy is understanding your customers and mapping out paths that align with their pain points and user journeys. Start by identifying common questions and friction points. You can use these to build out touch points within your chatbot that solve these issues. For example, if customers often struggle to find their order information, you can create a journey with your chatbot that directs them to the information they need. 

Use an “if this, then that” approach to your chatbot strategy. For example, if a shopper does this, the chatbot does that.

A chatbot conversation with RAINS about order information.
Clothing brand RAINS maps out potential journeys for people who want to know about their orders.

3. Write your chatbot scripts

Once you’ve identified your core chatbot journeys, you can write out scripts for each scenario. Use your brand personality to choose the right words and make sure your scripts are consistent across each journey. 

NuFace’s chatbot uses the on-brand “love” to refer to its customers.
Beauty brand NuFace uses the endearing term “love” to refer to its customers via the chatbot.

4. Set up a memorable welcome message

Your chatbot is a great opportunity to start a dialogue with customers—but first impressions are important. Starting off with an engaging, fun welcome message will spark conversation and encourage shoppers to interact with your chatbot. You can alternate greetings depending on the page a shopper is on or the platform they’re using to reach out to you. 

Chatbot welcome message from Edible Beauty using Shopify Inbox
Edible Beauty uses a warm welcome message with emojis and a casual tone of voice.

5. Match your chatbot’s personality to your branding

Your chatbot should carry through your brand experience just like a real person would. Make sure your scripts are on brand and use words that customers associate with your industry and products. If your brand has a lively, fun personality, don’t be afraid to show that in your scripts, and use emojis if it’s a good fit.

6. Test and tweak

Before you send your chatbot out into the world, test it using multiple queries and questions to see what information it delivers. Once it’s live, schedule time to check how it’s doing and tweak any scripts or answers that aren’t aligned with your brand personality. Get feedback from customers, too. Ask them how they felt while chatting with your chatbot or whether they found it confusing or helpful. 

7. Offer a real-person alternative

For complex queries, nothing beats the help of a real person. Your chatbot won’t be able to help in every single scenario, so it’s important that you always give shoppers the option to chat or speak to a real person if they want to. Make sure you state how long they might need to wait for a response and point them to useful documents in the meantime. 

Opening chatbot message from Fenty that gives shoppers the option to speak to a real person.
Fenty gives shoppers the option to speak to a real beauty adviser though its chatbot.

How to implement your own chatbot

You can add an ecommerce chatbot to your store by partnering with a chatbot vendor. These providers develop proprietary software to handle AI and natural language processing and tailor their platforms to customer interactions, such as checking order status and answering product questions.

Shopify’s platform makes it easy to integrate a chatbot, either with Shopify Inbox or Shopify-compatible chatbots found in the Shopify App Store. Popular vendors include Zendesk Chat, Zowie, Certainly, and DeepConverse. Most offer free trials, but expect to pay for a monthly subscription once the trial expires.

The best part is you don’t have to be a master programmer to add chatbot AI to your online store. Vendors typically provide tech support to help you load a chatbot as an application programming interface (API). Some provide simple lines of HTML5 code to add to your website, while others use drag-and-drop modules that make it easy to create chatbot scripts.

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Chatbots FAQ

What are the different types of chatbots?

There are two main types of chatbots: rule-based and conversational. Rule-based chatbots are programmed to generate specific responses to specific kinds of questions. Conversational chatbots use AI and natural language processing to interact with humans in a more adaptive, dynamic fashion. However, these require far more computer processing power and cost more to implement.

What are chatbots used for?

Chatbots simulate interpersonal conversation. A computer program mimics the language and cadence of a human assistant or customer service agent to provide information in an engaging, responsive manner.

What is the most popular chatbot?

The most popular chatbots are virtual assistants by big-name brands, like Apple’s Siri, Amazon’s Alexa, and Google Assistant. These all use powerful AI technology to deliver useful, targeted information to individual shoppers.

What is a chatbot example?

Chatbots appear on websites as dialogue boxes where users can type their questions. They can function through email clients and social media platforms like X and Facebook Messenger. Chatbots can also power automated phone systems, where a human-like voice guides callers and answers questions.

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