What is the future of chatbots

The future of chatbots: what's next after the hype?

Yoav Barel

The really big hype about chatbots is over. And that is a good sign for the success of the technology: It is increasingly being used in customer service, where it is revolutionizing the customer experience. Compared to apps, websites or traditional call centers, conversational AI is proving to be more and more beneficial for both customers and companies - and is thus approaching the mainstream. But how will things continue in the years to come?

When a new technology hits the market, the reactions to it usually go through a certain hype cycle.

Chatbots have also caused this development: In 2016, the enthusiasm of the tech industry was at its peak - only to sink to a real low in 2018. Since then, approval has grown steadily and a vision is emerging: Billions of people will use their own natural language to interact with technology in the future.

EnlargeAfter the low point in 2018, interest in the use of chatbots is rising again

In order for this vision to become a reality, the developers of chatbots now have to overcome a critical point: Many technological innovations fail precisely at this point, when it comes to transferring a technology from an innovation-driven niche to the mainstream.

Fired by previous successes, chatbot makers are pushing the technology forward more than ever. Before we look at what successes suggest the future of chatbots, let's first take a look at the advantages chatbots offer over apps, websites and traditional call centers.

How companies and customers benefit from chatbots

The following graphic illustrates why Conversational AI is becoming more and more popular in customer service: On the customer side, the technology has the potential to continuously improve service. For the company, on the other hand, it reduces the costs that are expended for processing customer concerns. Chatbots therefore offer significant advantages over websites, apps and traditional call centers, which companies can adopt using various approaches.

EnlargeThe graphic shows why chatbot technology is becoming more and more popular in customer service

For small companies, the improved service through the use of Conversational AI and the associated increased user loyalty play a decisive role: Automotive Dynamics (AD), a car repair shop based in Arizona, used chatbots in their geographic Google advertising campaigns PPC. With resounding success: Before the use of chatbots, less than five percent of potential customers had booked a service after visiting the AD landing page. From the time AD started using a chatbot to answer questions and plan services, the conversion rate increased by a full 50 percent.

For large companies, on the other hand, the implementation of chatbots in customer service promises considerable cost minimization, as is clear from the example of the mobile communications provider Vodafone: It operates in 25 markets and processes more than 50 million calls from customers every month. If Vodafone were to automate only half of these calls, that would be around 25 million calls per month. With the average cost of three euros per call, the mobile phone giant can look forward to savings of over a billion euros per year.

Chatbots also offer great potential in the direct-to-consumer sector. The start-up Lemonade is the first insurance company to offer all of its customer service via bots and AI. And not only that: The insurance company also uses Conversational AI for the areas of policies and complaint management. With clear success: Policies are processed within 90 seconds and of the more than 100,000 policies sold in 2018, not a single case required human intervention.

Users also benefit from enormously increased speed. Processing a wide variety of issues takes an average of three to eight seconds. While Lemonade holds the world record for claims processing, customers of other insurance companies often have to wait several weeks for their case to be closed. Lemonade sees itself on the right track and continues to research and develop with regard to the automation of many backend tasks within the company through bots and AI. And the young company is by no means alone in this.

Chatbots: Quo vadis?

A large number of companies are contributing to the triumph of Conversational AI. If, for example, Whatsapp uses bots in the future, this will increase the spread of the technology enormously, as the news service already dominates numerous international markets. Apple business chat is also growing in the US market and is also becoming increasingly important in Europe.

Overall, the development of voice-first applications and the spread of voice assistance systems are on the advance, so that the voice function is increasingly being activated even with existing bots. The functions of the Google Assistant enable companies, for example, to develop their own personalized voice-first applications to complement existing chatbot infrastructures. In addition, higher-level NLP systems are designed with previously tested, high-quality multi-turn communication components. It is also to be expected that professionals will develop natural language technologies with better dialogue management than before.

All of these factors will contribute to the fact that more and more large companies like Vodafone will use bots and their use will have a significant impact on business. For small businesses, the integration of chatbots into their marketing and sales activities is becoming increasingly useful, and start-ups like Lemonade, whose business model is largely based on conversational AI, are bright times ahead.

The growing relevance of chatbots also favors the fact that the standardization of conversational AI is promoted both by industry associations and by the development of industry-wide middleware solutions.

Chatbot industry put to the test

Conversational AI is about to make a breakthrough as a mainstream technology and has the potential to significantly disrupt traditional customer service. However, companies and experts in the area of ​​chat & voice are facing two critical years: Now they have to pull together and form an industry in order to expand the current success stories in large and small companies as well as disruptive direct-to-consumer start-ups and extend.

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