What Is an AI Chatbot? — And How To Identify Their Must-Have Features

AI chatbots in customer service are digital assistants that use artificial intelligence to understand and respond to customer inquiries in real time. They can help resolve simple issues around the clock and free up your agents to focus on complex issues that require critical thinking and empathy. By assisting with things like self service, simple transactions, and prompt problem resolution, an AI chatbot provides an extra layer of support for service teams.

With 83% of decision-makers planning to increase their AI investment next year, according to the latest State of Service report, it's clear that AI chatbots are here to stay. But if you're new to AI, you may be wondering, "What exactly is an AI chatbot and what are its benefits?" We'll walk you through the fundamentals, their role in customer service, and identify some key features you should prioritise.

• AI Chatbot defined
• What are the benefits of an AI chatbot for customer service?
• What are some types of AI chatbots in customer service?
• What features should I look for in an AI chatbot?
• Get started: enhance the customer experience with AI chatbots

An AI chatbot is software that simulates human conversation with an end user. They are typically used in customer service as virtual assistants that help customers navigate through simple tasks or processes. These might include answering FAQs, providing product recommendations, and facilitating transactions. They help streamline processes by offering anytime responses, which reduces wait times, boosts overall efficiency, and improves customer experience.

Unlike traditional chatbots, which rely on preprogrammed rules and responses, AI chatbots use natural language processing (NLP) and machine learning (ML) to understand and dynamically respond to user queries. This enables them to engage in more natural and contextually relevant conversations, adapt to user inputs over time, and handle a wider range of issues with greater accuracy and efficiency.

AI chatbots support service teams by taking basic tasks and transactions off their plates. With simple tasks covered, live agents can put more of their energy toward solving complex problems and building relationships with customers — situations that often require empathy and compassion, which AI is less equipped to handle.

Here are some of the other key benefits of AI chatbots for customer service teams:

• Improves efficiency and productivity. AI chatbots help save your customers and agents time. They can quickly assist with basic customer inquiries, solve straightforward issues, and collect and share information. If an issue escalates beyond their capacity, they can facilitate a resolution by connecting the customer with a live agent — and getting them up to speed prior to the interaction.
• Offers 24/7 support. Chatbots can help with simple issues 24 hours a day. During busier times when live agents may be tied up, they can offer support by handling routine requests. They can also reply to customers during off hours, and collect information for live agents, so that inquiries do not go unanswered and can be handled immediately when live agents return to the office. This helps your team deliver consistent support and can improve customer satisfaction.
• Enhances engagement and experience. AI chatbots can anticipate customer needs, deliver useful messages, and suggest next steps — helping to enhance the customer experience. Their ability to provide personalised recommendations — such as new products or services — can increase your value to customers and keep them engaged with your company.
• Provides self-service options. Our research found that 61% of customers would rather use self-service options for simple issues. AI chatbots can point them toward resources such as FAQs, knowledge base articles, and help centres. This is a win-win for organisations; they can cater to customer preferences while saving resources.

When used for customer service, AI chatbots primarily handle basic service tasks and simple workflows. However, there are chatbots that specialise in accomplishing specific functions. AI agents extend beyond these tasks by handling complex interactions, making autonomous decisions, and integrating with broader systems for a more comprehensive customer service experience.

Five common types include:

• Transactional chatbots: These bots help with straightforward tasks such as processing orders, providing product information, or scheduling appointments. They streamline routine transactions, freeing up human agents for more complex cases.
• Informational chatbots: Designed to deliver knowledge-based support, informational chatbots can answer frequently asked questions and provide relevant resources or documentation to users so they can find the answers they need quickly. These bots can help teams ramp up their self-service support efforts.
• Problem-solving chatbots: These bots are used for diagnosing and resolving customer problems. They can guide users through troubleshooting steps and escalate issues to human agents if necessary. By addressing urgent concerns, they minimise resolution times and contribute to higher customer satisfaction scores (CSAT).
• Feedback and survey chatbots: Used to send customer satisfaction surveys and collect feedback, these bots gather valuable insights to improve products, services, and customer experiences. This data helps teams analyse and understand customer feedback — crucial for ongoing strategy and communication refinement.
• Hybrid chatbots: Combining elements of various chatbot types, hybrid chatbots offer versatility and flexibility in customer service interactions. They're also generally the most expensive to develop. They can seamlessly switch between transactional, informational, or problem-solving modes based on user needs and preferences, allowing them to resolve a greater variety — and higher volume — of customer issues.

Costs associated with developing AI chatbots can vary depending on several factors, including the complexity of the chatbot, its functionality, and the development approach. Service teams should prioritise their most important problems and select chatbot features accordingly.

Once you know what you want a chatbot to handle, it's time to choose the best customer service solution for the job. Here are some important features to consider and how service teams can use them to maximise their benefits.

• CRM integration: Look for a chatbot that can integrate seamlessly with your customer relationship management (CRM) software. This will allow you to speed up issue resolution, automate routine tasks, and provide personalised, intelligent, and multilingual service based on your stored customer data. CRM integration also makes deploying these bots more efficient because relevant data is already present.
• Built-in templates: A chatbot solution that offers templates can help you launch your bots quicker. Templates give you tailored solutions to choose from (suited to common and more specific situations) that can be built in seconds.
• Omnichannel capacity: The ability to meet your customers where they're at is key in customer service. An omnichannel contact centre chatbot can support your service efforts by being available for live chat on websites, mobile apps, SMS messaging, and more.
• Bot analytics: Good AI chatbot software will give you access to reporting, KPIs, and analytics so you can measure success. Using bot performance metrics, chat data, and cost information, you can track and optimise your bots' value against your customer metrics goals. You can also use data to improve your strategy and your bots' understanding of customers.

AI chatbots are a powerful tool you can use to enhance customer interactions. With the right features, service teams can deliver chatbot experiences that both streamline operations and engage users. Whether it's ensuring natural conversations, providing immediate assistance, or increasing productivity, AI chatbots can support your service efforts and enhance the customer experience.

Staying updated on both technology trends and customer needs will be crucial for service teams to keep their chatbot strategies relevant and effective. With the right approach, you can work toward achieving smoother and more valuable interactions — and better CSAT.