The AI Chatbot Guide - Everything You Need To Know

Jairo Guerrero

Jairo Guerrero

| 11 min

The AI Chatbot Guide

Everything You Need To Know About AI Chatbots

AI Chatbot technology is the most efficient and effective way of communication. AI Chatbots are as practical as it gets. Think about it, a piece of conversational software interacts with you, understands what your needs are and tries to offer a valuable response. The best part is that with an AI chatbot you do not have to hire more team members and therefore have a more scalable organization.

AI Chatbot technology has enabled what is known as Conversational AI: chatbots simulating human interactions with the use of large sets of data, Natural Language Processing, and Machine Learning.

Basically AI chatbots emulate the way we humans communicate with each other. Interactions are possible without having an actual person on both sides. Yes, you guessed it, AI Chatbots are at the core of business automation.

With AI chatbot technology it is possible to automate customer interactions, allowing you to help thousands of your customers at the same time without putting extra pressure on your workforce. With AI chatbots, you can serve thousands of customers without having to expand your team.

In this article we will dive into all you have to know about AI chatbots:

  • What is an AI Chatbot?

  • What Are the Benefits Of Using An AI Chatbot?

  • What Is The Difference Between a Regular Chatbot and AI Chatbot?

  • How Do AI Chatbots Work?

  • How to Build an AI Chatbot?

  • What are common business applications for AI chatbots?

  • How are AI chatbots used in different industries?

  • The Intelligence Behind AI Chatbots: Natural Language Processing

What is an AI Chatbot?

An AI Chatbot is a software solution that allows people to get personalized support and advice throughout a simple conversation dialog window. AI chatbots provide automated answers to incoming questions from users on websites, apps, or social channels.

The AI chatbot answers user questions by understanding the question and generating an appropriate answer based on the knowledge you have added to the AI chatbot's brain. Because it is powered by artificial intelligence, the chatbot learns to recognize the intent of the question. AI chatbots learn from every user interaction, making it better at answering questions over time (and data).

We all use AI chatbots quite often: in eCommerce Websites or Apps or to solve a SaaS subscription problem.

💡 Check our guide with The Best AI Chatbots

The intelligence behind AI chatbots is called Natural Language Processing. More of this in our article Unlocking the power of NLP & NLG.

What Are the Benefits Of Using An AI Chatbot?

AI chatbots have many advantages. So first, let's pose a challenge for AI chatbots and indeed for any AI technology:

The data available is the only challenge for an AI chatbot to deliver its best.

Just like a human employee would, a chatbot also has to learn. Once the bot goes live, data onboarding begins. Initially, there will be questions that the chatbot cannot answer. When you add the right information to the chatbot to the database, the chatbot becomes even smarter. The knowledge of the chatbot grows the longer it is live and the more time you invest in improving it.

In this sense AI chatbots will train themselves to be more optimal with time.

AI Chatbot example by

By making better use of big data, AI chatbots can better perform more complex processes that were previously the preserve of humans. AI chatbots can essentially automate various tasks in the industry such as accounting, customer service, marketing, and HR processing services.

Now AI chatbot challenges have been exposed, let's see the benefits.

24/7 Availability

AI chatbots are the main point of contact for your business, day or night. After closing time or during the weekend, your website visitors can get the answers they seek.

With AI chatbots you are always available. Artificial intelligence allows the chatbot to answer a wider range of customer questions over time. Being available 24/7 reduces user frustration and will boost your customer satisfaction.

Multi-Platform & Multi-Channel

You can launch the same chatbot on your website and connect it with all your social media channels. You can respond to customers at any time on every channel. By being active on a number of popular or trendy channels, you are where your customers are and still working from a single chatbot conversation overview.

💡 Check Our Guide To Build Your Own WhatsApp Chatbot

Lower Service and Operational Costs

AI Chatbots can handle +90% of first-line contact. Your customer service team will have more time to optimize and focus on relevant tasks. Smaller and repetitive tasks can be easily automated and monitored with an AI chatbot.

An AI bot can have hundreds of conversations at the same time and only transfer conversations to human agents when necessary. Thanks to customer service automation, your team has more time for the 15% that remains, perhaps complex matters, which they can handle in peace.

📚 Learn About The Best AI Chatbots for Customer Service

Complete customer profiles - Integrated CRM

AI chatbots collect relevant information from your site visitors and customers enriching the complete customer profile. You can allow your chatbot to ask for details including name, company name and email address.

AI chatbots can restore previous information to prevent visitors from repeating themselves, and your service agent has detailed information about each visitor, allowing you to provide the best possible personalized support.

You can integrate AI chatbots with any other tool or channel you already use.

AI Chatbot example for customer service by Watermelon AI

Benefits of AI chatbots for your customers

  • Personalized support.

  • Faster responses.

  • Full availability.

Benefits of AI chatbots in your businesses

  • Less workload.

  • Team efficiency.

  • Happier customers.

  • Reduced service costs.

  • Improved business operations.

Benefits of AI chatbots for your team

  • More time for relevant work.

  • Higher team performance.

  • Happier colleagues.

  • Less stress.

What Is The Difference Between a 'Regular' Chatbot and AI Chatbot?

These two types of chatbots are often confused. Let's first define the two most used chatbots:

  • Rule-based chatbots: or 'Rules-based chatbots' are chatbots that only work according to the rules they know. The chatbot builder writes down the question and answer combinations, shares them with the chatbot and the customer goes live. The customer or site visitor is taken to the correct answer via buttons. The biggest problem: it is not possible to ask a rules-based chatbot an open-ended question.

  • AI Chatbots: chatbots that learn from a data set and generate unique answers based on the question formulated by the user. For AI chatbots, you open a conversation instead of following predefined rules.

Do not bother building every single step of your chatbot workflow, implement our AI Chatbot Builder and automate most of your interactions with customers.

When the customer’s question doesn’t exist among the pre-planned content or they don’t understand the buttons, they also don’t get their answer. The road to get to an answer is also often longer, because the customer needs to take a specific path to get to the specific information he or she is seeking.

This is also the main difference between an AI-chatbot and a rule-based chatbot. An AI chatbot can be asked an open question, or even interpret single-word questions, and still produce a correct answer. A rule-based chatbot’s conversation is limited to communication with buttons.

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What is Conversational AI then?

AI chatbots opened up a new way to automate communication. As AI chatbots can respond to almost any user question this creates literally a human-machine conversation.

Conversational AI gives customers the chance to talk to a business as if they were actually speaking to a customer service representative. This is made possible by Artificial Intelligence technology that allows almost any piece of software to become a team member of the customer service department.

💡 Read Our Guide What is Conversational AI?

The AI also helps to make the conversation more pleasant and natural, so that your customers feel more comfortable talking to the AI. Having a personal conversation that is similar to a conversation with a human customer service representative can improve the customer experience and attract new leads to the business.

How Do AI Chatbots Work?

Artificial intelligence ensures that every piece of software can understand human nuances. Think of logical reasoning, understanding jargon or solving complex problems.

AI Chatbot Workflow by Watermelon AI

The way an AI chatbot works when having a conversation with any user can be summarized as follows:

  1. The AI chatbot gets initially trained with a (large) set of data. From this training it gets the ability to respond almost to any user's questions.

  2. Then when a user starts a conversation by interacting with the chatbot interface,

  3. The AI chatbot uses the NLP (Natural Language Processing) to analyze the user's intent and prepare the right most optimal answers based on the initial training,

  4. Then, using a conversational language, the AI chatbot responds to the user with the most optimal data

  5. The conversation continues until the user gets all their questions solved,

  6. And based on the interaction with the user, the AI chatbot will learn and add more data points for potential answers, getting much better performance each time a conversation happens

The brain behind this process is deep and machine learning, which allows the technology to develop algorithms. Machine learning allows computers to learn multiple question-and-answer variations, which then allows the chatbot to respond to even more questions with the correct answer.

How to Build an AI Chatbot?

You can implement a chatbot manually, or use a platform. If you have the right resources and the right budget, you can launch an AI chatbot in the matter of days.

One platform to build your own chatbot can be, for example Google’s Dialog Flow. With this enterprise solution you can build, among other use cases:

  • Voicebots for customer service, or

  • Chatbots for B2C conversations

Yet, Google's Dialog Flow requires rather a high budget and a strong technical expertise in the company. That’s why some companies choose to outsource the development of their chatbot.

Fortunately, there are ready-made solutions to build AI chatbots, where you don’t need to do any programming. Instead, your role in building the chatbot includes adding the content that the bot needs to know. This content often already exists - on FAQ pages, in databases customer surveys, etc.

The step-by-step plan below describes how you build a chatbot using the chatbot platform from Watermelon.

💡 Check Our Guide To Build Your Own WhatsApp Chatbot

1 - Build conversations instead of code - No a line of code needed

You build up the conversations that the bot has by outlining the context in which the chatbot can do its work. The only thing you are responsible for is the content. We provide the code, interface and AI technology. By providing context, the chatbot understands exactly how to answer the questions and the answer will always be correct.

2 - Let the AI chatbot learn from your business data

Much of the content for your chatbot exists on your FAQ pages today, from your databases, or in the CRM you use every day. The AI chatbot will learn from all of this data, then you’ll polish with extra details and then you bot is ready to help.

You too can have an AI Chatbot that acts as a CRM. Depending on which platform you use.

You also add different instructions so that the bot can learn to interpret the different ways a question is asked. You determine the tone of voice and branding of the bot. You can also complement your conversation style with emoji, GIFs or photos. Do you want a more business approach? Make the avatar of your chatbot appear in a suit!

3 - Connect with your customers in any channel or platform

Once your AI chatbot is ready you can connect it with any platform such as WhatsApp, Facebook Messenger, Instagram. Even you can connect it with automation software like Zapier.

If there are specific requirements that you want to implement for your business you can always use the chatbot API endpoints to build a custom bot solution unique for your company.

You can integrate any platform and tool to your AI Chatbot.

4 - Test, learn and improve

After you've added your content, you can test your AI chatbot. Test it yourself before it goes live in the same dashboard you built it with. When you publish the chatbot, all incoming calls from all channels end up in the same data center. The AI chatbot learns from every interaction and gets better over time.

💡Check Our Guide: The Best Chatbot Builders

What are common business applications for AI chatbots?

The most relevant business use cases for AI chatbots are:

  • AI Chatbot for e-commerce: An e-commerce chatbot is just like personal customer service for your customers. With this chatbot, your customers can get the best and most personalized experience in their shopping experience. The chatbot can provide information about the products and services you offer, as well as suggest offers or sales items.

    • Check how we automated more than 1,5k conversations for:

AI Chatbot for ecommerce example - by Watermelon AI

  • Customer service AI chatbots: With an AI chatbot for customer service you can answer frequently asked questions quickly and efficiently. You will remain available for a 24/7 service for round-the-clock customer engagement. You will collect valuable feedback from customer comments and can process returns quickly.

    • Check how we decreased their customer service workload by 20% for: AFAS Software.

  • AI chatbots for sales and marketing: With AI-based sales chatbot, you can generate leads, maintain relationships with potential customers, and increase conversions through automated interactions. The conversations are easily accessible to customers and provide a more effective way to communicate with customers.

    • Check how we built 10 chatbots, integrated them into their sales process and decreased by 10% the amount of unnecessary calls for: MegaGroup.

How are AI chatbots used in different industries?

AI chatbots are industry agnostic. Same as customer service, you have to have chatbots present regardless of which industry you work on. The most common industries using chatbots are:

  • Ecommerce / Retail: for improved customer satifaction and customer service.

  • Education: to share information and materials about open days, available fields of study or news about your institution to encourage engagement.

  • Healthcare: from helping to alleviate concerns to streamlining the overall care process among all patients.

  • Financial services: to improve the effectiveness of your customer contact center.

  • Goverment: to offer citizens an easily accessible way to get information and ask questions.

  • Tourism: the dream of every company in the travel industry: 24/7 availability, offering immediate answers to customers in a variety of languages.

💡 Handover the bot conversation to a human agent with The Best Live Chats for eCommerce

The Intelligence Behind AI Chatbots: Natural Language Processing

When a chatbot has artificial intelligence, that means the chatbot can independently answer the question, even if it's asked in a way it doesn't know word-for-word.

First, the chatbot instantaneously searches a database of information.

Then Natural Language Processing ensures the interpretation of the question that's being asked is linked to the right text: the answer.

Natural Language Processing technology ensures that human nuances are understood, even when the sentence structure of the question may vary. The chatbot understands the intent of the question and provides the chatter with the right answer.

More of this in our article Unlocking the power of NLP & NLG.

Boost Your Productivity with your own GPT-4 chatbot . Get Started Today.

Transform your Customer Service with Watermelon's AI and GPT-4 Powered Chatbot Solution. Try it free now.

Book Your Demo

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