2020

Chatbot Guide

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All you need to know to get the most

out of chatbots for your business

Since 2016, when Facebook opened Messenger for chatbots, chatbots have been widely adopted by brands. Everybody is now talking about chatbots and their value to businesses. But, what exactly are chatbots, and why have they become so important? In this guide, you’ll find answers to these questions and learn what makes chatbots significant.

Intro
How do chatbots work?
Chatbots and bots
Why do business use chatbots?
What is a chatbot?
The brief history of chatbots
How to create a chatbot?
Chatbot use cases
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What is

a chatbot

A chatbot is software that simulates human-like conversations with users via text messages on chat.

Its key task is to help users by providing answers to their questions. Chatbots can chat with multiple users at the same time and provide information within seconds. Because of that, they are now used on a wide scale to help both businesses and consumers communicate with each other on websites and mobile messaging apps.

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Fun fact: Chatbots exist under many names: conversational agents, AI assistants, chatterbots, or conversational interfaces.
How chat bots work - illustration

How do chatbots work?

Chatbots are powered by pre-programmed responses, artificial intelligence, or both. Based on the applied mechanism, a chatbot processes a user’s question to deliver a matching answer. There are two main types of chatbots, and those types also tell us how they communicate. They are rule-based chatbots and AI chatbots.

Rule-based chatbots

Rule-based (also command-based, keyword, or transactional) chatbots communicate using predefined answers.

They can be playfully compared to movie actors because, just like them, they always stick to the script. Rule-based chatbots provide answers based on a set of if/then rules that can vary in complexity. These rules are defined and implemented by a chatbot designer. At this point, it’s worth adding that rule-based chatbots don’t understand the context of the conversation. They provide matching answers only when a user uses a keyword or a command they were programmed to answer.

When a rule-based chatbot is asked a question like, “How can I reset my password?”, it first looks for familiar keywords in the sentence. In this example, ‘reset’ and ‘password’ are the keywords. Then, it matches these keywords with responses available in its database to provide the answer. However, if anything that is out the chatbot scope is presented, like a different spelling or dialect, the chatbot might fail to match that question with an answer. Because of this, rule-based chatbots very often ask a user to rephrase their question. Some chatbots can also transfer a person to a human agent when needed.

Customer service with chat bots - how chat bots work

It’s worth underlining that rule-based chatbots can't learn from past experiences. They respond based on what they know at that moment. The only way to make a rule-based chatbot better is to equip it with more predefined answers and improve its rule-based mechanisms.

On the other hand, the limitations of rule-based chatbots make them a very useful tool for businesses. Rule-based chatbots are the cheapest to build and easiest to train. Companies introduce them into their business strategies because they help to automate customer communication. The behavior of rule-based chatbots can be also designed from A to Z. This allows companies to deliver a predictable brand experience.

AI Chatbots

An AI chatbot is a piece of software that can freely communicate with users. AI chatbots are much better conversationalists than their rule-based counterparts because they leverage machine learning, natural language processing (NLP), and sentiment analysis.

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Machine learning

allows chatbots to identify patterns in user input, make decisions, and learn from past conversations.

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Natural language processing

helps chatbots understand how humans communicate and enable them to replicate that behavior. It’s NLP that lets chatbots understand the context of the conversation even if a person makes a spelling mistake or uses jargon.

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The sentiment analysis

helps a chatbot understand users' emotions.

Like rule-based chatbots, AI chatbots need to be well-trained and equipped with predefined responses to get started. However, as they learn from past conversations, they don’t need to be updated manually later. AI chatbots can understand multiple languages and read the customer's mood. This enables them to personalize their communication with the user.

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Fun fact: Some languages are more difficult to process for chatbots. Languages such as Polish, Finnish, Spanish or Hindi, whose verbs may present a wide range of variations, are more difficult for a chatbot to master than languages with less complex structures.

The fact that AI chatbots get smarter with every conversation means they simply mirror users’ behavior. This has already turned out to be a major challenge for chatbot creators and was well exemplified in the Microsoft experiment called “Conversational Understanding.”

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The experiment involved launching Tay, an AI bot, on Twitter. Tay was supposed to chat with millennials and prove a computer program can get smarter with "casual and playful conversations." The experiment showed that Microsoft’s assumptions were right, however, the results of the experiment were far from expected. After chatting with Twitter users for just a couple of hours, Tay started to send racist and offensive tweets, including messages like “Hitler was right” or “9/11 was an inside job.”

In response to that situation, in less than 24 hours, Microsoft took Tay down from Twitter and issued an apology for the incident which stated, “We are deeply sorry for the unintended offensive and hurtful tweets from Tay, which do not represent who we are or what we stand for, nor how we designed Tay. Although we had prepared for many types of abuses of the system, we had made a critical oversight for this specific attack.”

Learn more about chat bots - illustration

Microsoft's experiment showed that, in terms of AI, there is still room for improvement. Tay wasn’t trained enough which resulted in it “blindly” mimicking the language and behavior of Twitter users. These were intentionally teaching Tay inflammatory messages. After the experiment, Roman Yampolskiy, the head of the CyberSecurity lab at the University of Louisville, said that Microsoft’s experiment proved that chatbots are like children. They need to be taught what is appropriate and what is not.

The brief

History

of chatbots

To the surprise of many, chatbots aren’t a modern invention. They were born out of curiosity and creative thinking more than half a century ago.

Alan Turing - ChatBot Guide

1950

Alan Turing.

Alan Turing - ChatBot Guide

1950

Alan Turing. The man that started it all.

In 1950 Alan Turing, a computer pioneer, wrote a scientific paper titled, “Computing Machinery and Intelligence.” In the paper, the scientist implied that a computer program can think and talk like a human. To prove the point, Turing proposed an experiment called the Imitation Game, which, today, is known as the Turing Test. In the Turing experiment, the person designated as a judge was chatting over a computer with a human and a machine who were unable to be seen. The judge’s task was to differentiate between the computer and the real person. Turing suggested that if a judge couldn't say which responses belonged to a computer, it would prove the computer was able to simulate human language. Turning believed that by 2020, machines would be able to pass his test with ease.

In 1950 Alan Turing implied that a computer program can communicate like a human. To prove the point, he proposed an experiment called the Turing Test. In the experiment, the person designated as a judge was chatting over a computer with a human and a machine who were unable to be seen. The judge’s task was to differentiate between the computer and the real person. Turing suggested that if a judge couldn't say which responses belonged to a computer, it would prove the computer was able to simulate human language.

ELIZA - ChatBot Guide

1950

ELIZA.

The first chatbot.

ELIZA - ChatBot Guide

1966

ELIZA.

The first chatbot.

In 1966, an MIT professor, Joseph Weizenbaum, developed a computer program called Eliza. It’s considered to be the first chatbot in history. Eliza was a simple keyword-based chatbot that mimicked a human psychiatrist. The program communicated by matching user questions with scripted responses entered into its database. When a patient would say, “My mother loves flowers,” Eliza would reply, “Tell me more about your mother.” In this way, Eliza encouraged people to talk more. It also gave the impression she could understand human speech the way humans do. Of course, it was only the impression of understanding. Eliza’s creation gave rise to the development of natural language processing.

In 1966, an MIT professor, Joseph Weizenbaum, developed a computer program called Eliza. It’s considered to be the first chatbot in history. Eliza was a simple keyword-based chatbot that mimicked a human psychiatrist. The program communicated by matching user input with scripted responses entered into its database. When a patient would say, “My mother loves flowers,” Eliza would reply, “Tell me more about your mother.” In this way, Eliza encouraged people to talk more.

1971

Parry

1971

Parry

In 1971, Kenneth Colby, a psychiatrist from the Stanford Artificial Intelligence Laboratory, was wondering whether computers could contribute to understanding brain function. He believed that the computer could help in treating patients with mental diseases. These thoughts led Colby to develop Parry, a computer program that simulated a person with schizophrenia. Colby believed that Parry could help educate medical students before they started treating patients. Parry was considered to be the first chatbot that passed the Turing Test. Back then, its creation initiated a serious debate about the possibilities of artificial intelligence.

In 1971, Kenneth Colby, a psychiatrist from the Stanford Artificial Intelligence Laboratory, was wondering whether computers could contribute to understanding brain function. These thoughts led Colby to develop Parry, a computer program that simulated a person with schizophrenia. Colby believed that Parry could help educate medical students before they started treating patients. Parry was considered to be the first chatbot that passed the Turing Test.

In 1978, Colby developed the first intelligent speech prosthesis. It was a computer program that helped people with communication disorders to speak.

1988

Jabberwacky

In 1988, a self-taught programmer called Rollo Carpenter created Jabberwacky. It was a program designed to simulate human conversation in an entertaining way. Jabberwacky learned from past experiences and developed over time. It reflected users' personalities and behaviors.

1992

Dr. Sbaitso

In 1992, Creative Labs, a technology company based in Singapore, developed Dr. Sbaitso. It was an AI speech synthesis program that imitated a psychologist. The program was distributed with sound cards sold by the company. They wanted to show the digitized voices their cards were able to produce.

1995

A.L.I.C.E.

Developed in 1995 by Richard Wallace, Alice was an NLP chatbot that simulated a chat with a woman. Alice was inspired by Eliza and designed to have a natural conversation with users. Its code was released as open-source, which means it can be reused by other developers to power their chatbots.

Alice was an inspiration for Her, an American science-fiction romantic drama. It's a film about a man, Theodore Twombly, who falls in love with a chatbot.

2001

SmarterChild

SmarterChild was an intelligent chatbot built on AOL Instant Messenger in 2001 by ActiveBuddy, the brand creating conversational interfaces. SmarterChild was designed to have a natural conversation with users. It’s considered to be a precursor to Apple’s Siri.

2010

Virtual assistants

Since 2010, when Apple launched Siri, virtual assistants have been on the rise. Siri was the first personal assistant available worldwide. Google followed in Apple’s footsteps by releasing Google Now in 2012. Microsoft's Cortana and Amazon’s Alexa were both released in 2014.

2016

Chatbot platforms

In 2016, Facebook opened its Messenger platform for chatbots. This helped fuel the development of chatbot platforms. In 2018, LiveChat released ChatBot, a framework that lets users build chatbots without coding. So far, there have been over 300,000 active bots on Messenger.

What’s the difference between chatbots and bots?

Although the terms chatbot and bot are used interchangeably, there’s a significant difference between them.

A chatbot is a computer program designed to communicate with users. Chatbots analyze users' questions to provide matching answers. Businesses use chatbots to support customers and help them accomplish simple tasks without the help of a human agent.

A bot is an algorithm that interacts with web content. Bots help businesses and users perform helpful, mundane, or complex tasks faster online. Below, are some different types of bots.:

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Search engine bots called crawlers are used by Google and Yahoo to index the content of the web and scale web cataloging. This helps users easily find information related to their search intent.

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Feed bots look for new information on the web to add to news sites.

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Copyright bots look for content that violates copyright laws. They help companies and authors check whether their proprietary content has been used without approval.

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Fun fact: If you block bots on your website, they won't be able to index your content in search engines. That means that users won't be able to find your website.

Unfortunately, businesses have learned to also use bots for malicious activities. They release so-called ‘bad’ bots to create havoc on the web and hurt competitors. For instance, companies launch click bots that deliberately generate fake clicks. They hurt advertisers paying for those clicks and create quite a headache for marketers who get unreliable data. Bad bots can also break into user accounts, steal data, create fake accounts and news, and perform many other fraudulent activities.

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How to build a chatbot - ChatBot Guide

How to create a chatbot?

Chatbots can be created from scratch or by using a chatbot platform. Both ways have their pros and cons.

Building a chatbot with a platform

Using a platform is the easiest way to create a chatbot. Platforms have a low learning curve. They let you drag and drop predefined elements to design chatbots and launch them without coding.

Kacper Wiącek, Technical Support Hero at ChatBot
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Chatbot platforms make business automation accessible. Many of them offer simple drag and drop builders. They allow for building and implementing chatbots with little or no coding. This helps to popularize chatbots among less technical users who get a chance to develop their own chatbot projects.

Kacper Wiącek, Technical Support Hero

To facilitate the building process, some platforms provide ready-to-use templates. You can use them as they are or customize them to your liking. Because of that, chatbot platforms are a good choice for brands that lack technical expertise but don’t want to spend money on hiring external developers.

Platforms also come in handy if you want to test, at low cost, whether your business could benefit from using a chatbot. Some companies only use chatbot platforms from time to time, like during the shopping season for instance. They use a chatbot to help busy support teams or just to promote their new products.

Another advantage of chatbot platforms is the ability to integrate them with third-party services. With integrations, brands can add a chatbot to multiple communication channels and unify their customer experience. On the other hand, platforms limit your chatbot capabilities. Unless you decide to build custom features or integrations, you can only operate within the platform’s scope.

Trend showing the interest in chatbot platform in Google Search
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Hand coding your chatbot from scratch

Building your chatbot from the ground up is a time-consuming job, but it gives you total control over your chatbot. You can customize your chatbot to serve the particular needs of your customers, power it to solve complex problems, and integrate with any platform you wish.

Before you decide to code your chatbot, consider whether it’s worth doing. To breathe life into your chatbot in-house, you would need to engage a team of developers or hire external bot-building services. That comes at a price. Also, take into account that the chatbot’s testing phase may take a lot of time.

The same can be said for updating your custom-made chatbot or correcting its mistakes. It’s a long game to play. If you’re not sure whether using a chatbot would be beneficial for your business, test an already available platform first. This will let you find out what functionalities are useful for you. You’ll be able to determine whether you need to build a chatbot from scratch or not.

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Why do businesses need chatbots?

Technological progress has radically changed the way people communicate. Face-to-face interactions have been largely replaced by online messaging. This has forced businesses to adapt to a new type of communication. To achieve success, brands need to provide a seamless buyer's journey. They need to respond to customer questions around the clock and across multiple channels.

Dariusz Zabrzeński, Head of ChatBot
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Chatbots help to automate a lot of business processes and lower the cost of acquiring a digital client. They let businesses deliver much better customer service and user experience, which are now key brand differentiators.

Dariusz Zabrzeński, Head of ChatBot

But living up to rising expectations of “always-connected” customers is not the easiest and cheapest task. The more your business grows, the more it costs to deliver 24/7 quality customer service. This is where chatbots come in handy. They allow brands to scale up their support services at a low cost. More and more often, companies are deciding to introduce chatbots into their marketing strategies because they allow for delivering personalized and consistent brand experiences. Long term, that translates into better brand perception and more sales.

Chatbot use cases

Marketing

Brands use chatbots to diversify their customer-engagement strategy. With chatbots, businesses engage website visitors proactively and, eventually, sell more products.

It’s for good reason that more and more companies are hiring chatbot conversation designers, which are people who know how to write engaging chatbot scenarios. Businesses have already realized that a well-written chatbot can work as a successful lead generation tool. It can collect newsletter subscribers, sales contacts, beta testers, or even job candidates by helping companies reach out to a larger audience with their message. One of the brands that took their online service to the next level using a chatbot is Sephora. The company uses a chatbot to educate customers about their cosmetics. Their AI assistant offers makeup tutorials and skincare tips, and help customers purchase products online. The company even enables its customers to try new makeup using AR technology implemented in their chatbot. By doing this, Sephora has managed to deliver their personalized customer experience both in-store and online.

ChatBots for marketing - ChatBot Guide

Customer support

Customers want their problems handled immediately and via the channels they prefer. Chatbots make that possible by redefining the customer service people have known for years.

They support customers 24/7 and enable them to solve simple problems, book appointments, or submit complaints. Take, for instance, Mastercard. The brand offers a chatbot on Messenger to help customers easily check their account transactions anytime they want. Restaurants, such as Next Door Burger Bar, use a chatbot to help customers order their meals online. Customer service chatbots allow companies to scale their services at low cost, but, more than that, meet changing customer expectations.

ChatBot for customer support - ChatBot Guide ChatBot for customer support - ChatBot Guide

Brands also use chatbots to boost the productivity of their support teams. Bots can function as the first line of customer support by taking over the vast majority of repetitive cases from live agents. They can group customers based on their issue type and, when needed, route them to agents.

Grzegorz Woźniczko, Head of Support at LiveChat
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Nowadays, customers want to be able to get in touch with companies at any given time. It elevates the first response time and availability to be even more important metrics than they were up to this point.

Grzegorz Woźniczko, Head of Support

Sales

Before purchasing a product, every customer must go through the sales funnel. Chatbots can take customers by the hand and walk them through all the stages of that process: awareness, interest, decision, and action. A Gartner report shows that businesses that utilize chatbots in their sales strategy can achieve up to 30 percent higher conversion rates.

By integrating into social media platforms, chatbots let brands connect with plenty of users and increase their brand awareness. Take, for example, National Geographic. The company has used a Messenger chatbot to carry out a daily quiz with users. By doing this, the brand attracted users' attention to their new ebook, Almanac. The brand’s bot also encouraged users to purchase the title by offering a 10% discount, which boosted its sales.

Harper Collins, the world-leading book publisher, is using the Epic Reads chatbot to help their community members find another book to read. The bot conducts a short survey with every user to find out what might interest them and recommends titles matching their preferences. By supporting prospects, the company helps book lovers make a decision and builds positive relationships with them.

ChatBot for sales - ChatBot Guide ChatBot for sales - ChatBot Guide

Another global giant, Starbucks, uses a chatbot to help customers compose their favorite coffee drink. It enables customers to order a drink on the go and pick it up at a chosen cafe. It translates into a better brand experience because customers don’t have to stand in a long line.

Chatbots can be of great use for sales teams as well. They help businesses eliminate unqualified leads and connect sales reps with qualified ones. This helps sales specialists spend less time on acquiring leads and focus more on building relationships with prospects.

On top of that, AI assistants are a great repository of knowledge about customers. The more the chatbot chats with your prospects, the more data it gains about their needs and preferences. This helps companies better tailor their offers and messages.

Alex Wilson,  Head of Sales at LiveChat
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Chatbots alleviate bandwidth so agents don't have to answer millions of chats but it helps prospects and customers get to the right person, at the right time. Chatbots can tag, qualify and route leads to the sales team in real-time, while using AI and machine learning to get better and better.

Alex Wilson, Head of Sales

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Summary

Chatbots are here to stay. They are already in our computers, phones, and smart home devices, and they have become an integral part of our life. Although the chatbot technology is not perfect, it helps both businesses and users quickly handle a lot of repetitive and dull tasks. That is probably the essence of chatbots. Their aim is not, and never should be, to replace a human. Through human-like conversation, they are here to help us in a way that is the most natural for us.

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