Our digital world is constantly evolving, you need only look back on the last few years to be able to witness how new technologies have been adopted into businesses and our daily lives. And, one of these technologies which is relevant to all of us, is the rise of chatbots. Button-based, rules-based, AI-powered, voice and generative chatbots, each more advanced than the last, are all used throughout today’s digital landscape, designed to enhance one of the most influential factors in our existence, customer satisfaction.
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# The Rise of Chatbots

04 March 2024

Our digital world is constantly evolving, you need only look back on the last few years to be able to witness how new technologies have been adopted into businesses and our daily lives. And, one of these technologies which is relevant to all of us, is the rise of chatbots. Button-based, rules-based, AI-powered, voice and generative chatbots, each more advanced than the last, are all used throughout today’s digital landscape, designed to enhance one of the most influential factors in our existence, customer satisfaction.

The idea of providing effective customer service that doesn’t involve physical human resources is alluring, which is precisely why the integration of AI and chatbots into many businesses has become a game changer over recent years. These technologies are reshaping marketing tactics, helping businesses to streamline processes and manage customer interactions. However, although we know that chatbots provide access to 24-hour support and help organisations to save costs, where does this leave us when it comes to sought-after, authentic, human connection? Are chatbots ever likely to be in a position to compare?

We know that in general, interaction levels with chatbots is high, with 80% of users surveyed by Userlike confirming they had interacted with a chatbot at some point, and another 5.5% being unsure. This could encompass a number of interactions, whether that’s choosing to ‘chat to an adviser’ through a messenger service on a website, or conversing with Siri.

However, chatbots’ integration into customer service roles fell short of their original expectations. In 2016, there was a great deal of hype around chatbots, and the prediction was that they would become commonplace in our everyday lives. So much so, that Gartner predicted that by 2020, the average person will have more conversations with bots (and not know it) than with their spouse. Of course, we now know that this hasn’t happened (yet), and the fall in chatbots at this time can be attributed to a selection of factors. The key ones being that consumers found interaction time-consuming and complex, and chatbots needed more guidance from humans than was expected. Due to the complex nature of language, the data process power was simply not there yet.

Fast forward a few more years and AI is smarter than ever. Programmes such as ChatGPT, Bard and AlphaCode (among a plethora of others) assist businesses in a whole host of content production, so it is no surprise that this has also translated to chatbots. Additional technological advancements such as Natural Language Processing (NLP) has birthed a generation of ‘smart’ chatbots, that are designed to simulate human interactions with customers. Although this breed of chatbot still requires a great deal of programming to be successful, they seem to have found their niche within greater customer service strategies and operations.

## Chatbots: A Brief History

Although the term ‘chatbot’ is nothing new and has in fact been around since the mid 1960s, the premise for AI conversation was actually first discussed by Alan Turing more than a decade earlier. His original ‘imitation game’ predicted that by the year 2000, computers’ imitation of speech would be intelligent enough that it would be able to fool a human interrogator, 70% of the time. Although this prediction didn’t come to fruition, the development of chatbots and their integration in digital functions through to today is impressive.

1966 - the first rule-based ‘chatterbot’, ELIZA, was developed.

1972 - Parry, a natural language programme was the first to pass the Turing Test.

1983 - A new chatterbot, Racter, was developed and a book written by the bot was published: “The Policeman’s Beard is Half Constructed.”

1995 - A.L.I.C.E (Artificial Linguistic Internet Computer Entity) won the Loebner prize three times for being the most human-like chatbot of its time.

1997 - the Jabberwacky chatbot was launched on the internet (would eventually become Cleverbot in 2008).

By the early 2000s, instant messengers were beginning to adopt the chatbot SmarterChild, and there were more means for customers to communicate with businesses. More emotionally intelligent chatbots hit the market during this time also, whereby they were able to converse with users in a more empathetic or humorous way.

Siri and other virtual assistants became available in the 2010s, along with integration into social media, boosting usage exponentially across the globe. By the end of this decade, we reached a position whereby chatbots were integrated into our daily lives, providing fast and easy access for consumers to get in touch with businesses and other applications.

## Chatbots Unleashed: Riding the Digital Wave

There’s no denying that chatbots have had a meteoric rise as the superheroes of instant communication. Their integration has, on the whole, been well-received too, with 68% of users enjoying the speed at which chatbots answer them, and 90% of consumers’ experiences with chatbots either positive, or neutral. To demonstrate the impact they can have on businesses, we’ve highlighted a handful of case studies where the data speaks for itself…

- Hello Fresh launched its bot ‘Freddy’ to help manage surveys and quizzes, send automated deals and suggest recipes. They were able to reduce their response time by 76%, and boost incoming messages by 47%.

- Emirates Airlines combined conversational AI technology with on-site display ads. They experienced an 87% increase in engagement from consumers that saw the chatbot ad versus those that saw a standard display ad.

- Yun Partners, a recruitment firm, implemented a chatbot to manage pre-qualifying candidates, therefore shortening the application process and making it more efficient. Implementation allowed them to pre-qualify candidates simultaneously and at scale, 24/7. With a completion rate of 40%, Yun Partners were able to bring in a higher number of suitable candidates, whilst utilising lower human resources to do so.

## Why are Chatbots so popular?

It’s clear to witness the rise in interest in chatbots over recent years. Looking at Google Trends data, we can see a surge in the search term from late 2022, which also coincides with the launch of generative AI chatbot, ChatGPT. Considering the media noise around ChatGPT and its rapid adoption by businesses and individuals alike, this may have been the catalyst to launch an increase in worldwide search for chatbots and their capabilities.



When we dive deeper into some of the reasons why chatbots may have become so popular over recent years, there is a lot to be said for their benefits and capabilities. More recent advancements in technology are allowing businesses to save costs, and customers to get faster access to support. But what other factors may be driving interest in AI?

### Benefits for Businesses

- They help to generate leads. Some chatbot applications require personal details before the customer can even ask their question.

- Chatbots help save costs. They are inexpensive to set up, and automate various tasks such as answering questions or acting as a booking agent so that human customer service teams can apply themselves elsewhere.

- Customers can access fast, 24-hour support, as such, building up positive rapport and trust (assuming the chatbot is helpful).

- They can offer multi-lingual support, making round the clock customer service more effective for multi-country brands.

- Personalised support is popular with consumers; research compiled by Outgrow, a content marketing tool, highlights that according to business leaders, chatbots bring, on average, a 67% increase in sales.

- Chatbots bring an annual revenue boost of between 7-25% for ecommerce stores, and 47% of users are open to purchasing items through a chatbot.

- Due to their learning capabilities, they are adaptable to changing environments.

### Benefits for Consumers

- Access to 24/7 support to answer questions about products and services.

- The response from chatbots is instant, which aligns suitably with the fact that 96% of consumers expect a response from a messaging service within five minutes.

- Chatbots offer multilingual support so they can easily meet the requirements of an international customer base.

- They can send customers to specific pages they need, such as a checkout page, minimising effort for the consumer.

## Pandemic Showdown: Chatbots vs. COVID-19 Challenges

COVID-19 was a game-changer for chatbots. However, prior to the pandemic, around 2016, there was a short-lived chatbot hype, with lots of big players launching bots within a short space of time. Examples include Microsoft’s Tay, Facebook’s M and Amazon’s Polly. These, and plenty of others were relatively fleeting, due to the amount of human assistance required for set up and maintenance, and the fact that many chatbots couldn’t understand enough human language or process enough data to complete the complex requests companies promised.

This all changed when COVID-19 hit and lockdown measures came into effect. The catalyst being that the nation’s digital footprint increased exponentially overnight. Due to the sheer number of people seeking information from health websites, both the World Health Organisation and Centers for Disease Control and Prevention integrated chatbots into their websites. These bots were able to provide concise and accurate information in a timely fashion to an unlimited number of people. The use of chatbots in this instance meant that nations were able to access immediate information during a time of crisis, less misinformation was spreading across the internet, and users weren’t overwhelmed by a barrage of social media or Google search results.

This success then begged the question, what more could chatbots do?

### Chatbots’ Transformation and Increased Impact

COVID-19 was essentially the spark that chatbots needed to rise again. Much of the world was enforcing lockdown restrictions, and many businesses already employing the help of chatbots saw a huge increase in usage. For Example, from March to May 2020, retailers saw an 86% increase in customers using self-help services through chatbots. Embracing this new digital infrastructure was imperative at this time, as companies were being forced to enable home-working, or were having to furlough staff. For these organisations, there was extraordinary pressure to provide superior customer experiences and cut losses due to the pandemic. In opposition, many businesses were encountering unprecedented demand, and so chatbots were a welcome support for the existing human team. Each scenario meant that integrating AI into businesses to address customer queries became a critical aspect of organisational problem solving, supporting both businesses, and their customers.

We also know that the uptake on chatbots in recent years (or post-pandemic) has increased. In 2021, AI chatbots saw a 45% year-on-year increase in usage, and in 2023, 69% of consumers were satisfied with their last interaction with a chatbot (with 21% of respondents remaining neutral). In addition, 64% of businesses trust chatbots to provide personalised customer support rather than regular customer service.

These statistics provide good evidence to predict that chatbots will continue to rise in our future economy, becoming a staple resource for businesses across the globe.

## Where do Chatbots Fail?

The global chatbot market is predicted to be worth a massive 1.25 billion U.S. dollars in 2025, an increase of almost 85% since 2016. However, even though there are clearly a whole host of advantages surrounding chatbots, there is still work to be done to fully integrate them into our everyday digital lives. But where do they fall down?

A late 2023 study highlighted that 49% of consumers surveyed stated that they didn’t enjoy using chatbots during the customer experience, because they would prefer to talk to a human, or didn’t feel a bot would understand their inquiry. Further data reveals that customers felt that the chatbot took too long to help, could not understand or could not solve their issue.

Chatbots also struggle when it comes to emotionally charged situations. If a customer is upset or frustrated, chatbots are not able to convey empathy, likely causing additional stress to the user. However, this may not be the case for much longer. A new generation of empathetic AI / emotional AI is on the horizon. These bots are able to grasp and respond to human emotions, forging real connections with users. This ability, twinned with natural language processing (NLP), will allow businesses to use chatbots to further boost customer satisfaction and loyalty, relying on technology as opposed to human interaction for customer service functions.

## Chatbots in Digital Marketing

Customer service is not the only area where chatbots are a useful tool for businesses. Effective digital marketing revolves around data, and building personalised strategies based on that data. AI-driven marketing campaigns allow businesses to leverage artificial intelligence to produce personalised strategies, whether that’s around product recommendations, content creation, optimisation or answering FAQs. By gathering and segmenting data, AI can ensure that target audiences receive the right messages, at the right time, via the right channels. AI can be used to effectively plan email automation, through social media, predictive analysis, ad targeting and data analysis, among others. Through AI, businesses can achieve enhanced levels of customer engagement and increased conversions while delivering bespoke experiences that resonate with their audience’s behaviours and preferences.

## The Future of Chatbots

Based on the statistics we have explored and the general opinions surrounding chatbots, it’s clear that the effect of the global pandemic was a successful catalyst for the integration of chatbots across a plethora of different industries. We know that in general, customers are happy to use AI in order to receive quick support for straight-forward queries, but are not yet fully confident to discuss complex or emotional issues with chatbots.

However, it would seem that predictions for the future of chatbots are that they are going to become further integrated, more complex and more customisable; plus we already know that empathetic AI is on the way. If successful, this could easily remedy some of the concerns that consumers have around personal or complicated issues. ChatInsight predicts that chatbots will become more human-like, blurring the boundaries between human and bot conversations, that voice bots will become mainstream and chatbots for payments will take a substantial leap. Watermelon.ai also highlights that generative AI will continue to improve, making chatbots more accurate and reliable, and they will be able to extract information from various sources, such as videos, sounds and images, making them fully multimodal.

AI assistants are set to emerge and make even more human-based tasks easier, and custom AI models will become more popular to help businesses tailor intelligence to their specific needs. Gartner’s prediction is that by 2027, “chatbots will become the primary customer service channel for roughly a quarter of organisations”, so watch this space.

With the global AI market expected to grow annually by 37.7% between 2023 and 2030, either way, it is clear that chatbots are set to evolve, learn and integrate, assisting businesses across the globe with automating processes, informing strategies and supporting customer services.

## Introducing Chatbot AI into your marketing strategy

If you are considering the impact a chatbot may have on your marketing or customer service strategy, we’ve provided some future-proof ways in which you can introduce artificial intelligence into your organisation.

1. Effectively answer users’ questions via a ‘call centre’ chatbot. By programming a chatbot to provide troubleshooting links or information to customers’ queries, you can offer 24-hour support and improve customer satisfaction over time.

2. Understand more about what your customers want through feedback acquisition. Chatbots are effective tools for collecting data through customer feedback surveys. Ensure it is easy for the consumer, and questions are well-thought-out to gain useful insights.

3. Personalised recommendations can help increase trust, and conversions. Integrating a chatbot to analyse customer preferences and offer products or services that are specific to them aids in upselling, and helps customers feel like you know them, in turn building trust.

4. Lead generation chatbots can be useful for both data collection and qualifying leads. You could choose to provide discount codes through chatbot interaction, or ask potential customers a set of predefined questions to conclude whether they are a potential customer or not.

These examples are just a handful of ways in which chatbots could assist your business, and there are a number of different chatbot providers to help you craft how you want to use artificial intelligence.

If you are looking for guidance around how chatbots could be integrated in your business or want a helping hand with set up, our experts work with our client partners to craft message builders, set up various APIs, broadcasts, journey flows and more, each with a specific purpose that helps businesses thrive. If you would like to talk to us about artificial intelligence and how it can help improve and streamline your business functions, contact The MTM Agency today.

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