Conversational AI

How Conversational AI is Transforming Customer Service 

The last few years have seen customer preferences for communication go through a phenomenal change, mainly due to the accessibility of on-demand messaging. The availability of multiple channels for communication has further increased the expectations of modern customers for cross-platform interactions with the brands they interact with. 

However, managing consistency across these platforms and conversing via different mediums is no mean feat for businesses as it requires a great deal of time, effort, and resources. 

This is where conversational AI comes into the picture.

With the global conversational AI market expected to grow a whopping 22% between 2020 and 2025, the technology is all set to bring a revolution in the customer service industry.

Data also suggests that by 2025, almost 95% of interactions between brands and customers will be powered by conversational artificial intelligence technology, indicating a tremendous shift in how brands and consumer interaction will look in the future.

So, in this post, we'll explore what conversational AI is, the way AI customer service chatbots work, conversational AI applications, their challenges, and how this technology is transforming the customer service industry.

Table of Contents

What is Conversational AI?

Conversational AI refers to a set of coming-age technologies that can recognize as well as respond to speech and text inputs. It is designed to simulate human-like conversations with people.

In the context of customer service specifically, the term 'conversational AI' describes the use of AI-based tools such as voice assistants or chatbot software to interact with customers. While AI chatbots are equipped to understand messages in human conversations despite grammatical errors, typos, or colloquial phrases and can take context into account while processing a request, the latter is simply based on a set of preprogrammed keywords. 

How Does Conversational AI Work?

Conversational AI primarily works by employing machine learning (ML), natural language understanding (NLU), and natural language processing (NLP) to engage in customer conversations.

NLU helps decipher the meaning of users' words and remembers what has been said to be able to maintain the context and continuity of spoken words.

ML technology 'learns,' 'improves,' and 'determines' an appropriate response after understanding the customer's intent. It collects information from its interactions, followed by using that information to enhance itself as time goes by.

On the other hand, NLP is the process through which AI understands usage. It works by learning to recognize words and phrases, followed by natural language generation so that it can talk with your customers using voice assistants and text to speech features.

For instance, if a customer sends a message on Facebook Messenger asking for the shipping details of a recently placed order, the conversational AI chatbot will know how and what to respond. It will do this based on prior experience answering similar kinds of questions and because it understands the phrases, words, and language that tend to work best in response to shipping-related queries.

Also read : Revolutionizing Business Operations: Advantages of AI Virtual Assistants 

Why Do Businesses Need Conversational AI Tools?

Conversational AI is a great tool that can help improve consistency across your organization by eliminating the number of mundane tasks agents need to do every day. Here are some of the other prime reasons why businesses and customer service departments today need conversation AI tools.

1. Personalized Customer Experience 

Personalization is one of the biggest advantages of having chatbots integrated with conversational AI. It helps with everything from knowing customers better, building clear user profiles, and being able to offer products or services specifically tailored to their unique needs.

Overall, integrating conversational AI for business allows you to provide the right answer for each user or customer in an empathetic way and accordingly make recommendations based on their individual preferences for enhanced customer satisfaction. 

2. Excellent Customer Service 

From a customer's perspective, there's nothing more frustrating than having to wait for hours to get urgent queries resolved or having to explain and repeat the same issue to multiple operators in different conversations.

Conversational AI and customer service chatbots play an important role in turning such experiences into excellent customer service by answering consumer queries through voice assistants whenever they need—be it buying products, solving problems, or simply asking product or service-related questions.

Furthermore, conversational AI makes all communication channels available to users 24/7, thus, giving the convenience of quick and constant support for customers around the clock for a better customer service experience.

3. Marketing Effectiveness 

Businesses generally find it quite challenging to market their brand to an audience. Conversational AI technologies help companies create a unique identity for their brands and develop a distinct competitive advantage in the market.

For example, incorporating an AI-based chatbot into marketing initiatives enables businesses to develop an extensive buyer profile, easily access their buying preferences, and accordingly design personalized content tailored to their unique needs and choices.

4. Instant Client Support 

Customers love to communicate using instant messaging apps or social media channels. Businesses, on the other hand, are looking to build their presence on all these channels for building and marketing their brand effectively.

Customer service conversational AI and voice assistants provide companies with the capability to manage and respond instantly to customer queries received via these social media channels and help increase customer satisfaction.

Organizations can offer instant client support by automating conversations with clients across different channels with the help of conversational AI while also staying true to their brand's voice and tone.

5. Better Customer Engagement 

Online assistants based on conversational AI are excellent for customer engagement as they can offer a range of customer services to clients, including product recommendations, shipping-related information, delivery details, and FAQs.

Providing customers with this kind of consistent, 24/7 support (with minimal or no wait times) generates deeper customer satisfaction and engagement. 

Challenges In Using Conversational AI 

While conversational AI presents scope for an exciting advancement in technology, it also poses issues with its text-based predecessor. In this section, we'll discuss some of the challenges of using conversational AI tools.

1. Need For Human Oversight 

While this may seem obvious, customers often wish to interact with human agents or voice assistants that embody qualities like empathy and can respond to their questions accordingly.

However, even after continuous improvements aiming to make chatbots more "human-like," they can still seem mechanical with a need for human oversight.

In most cases, chatbots can handle customer interactions that follow a known path with relative ease, but they're unable to improvise as soon as the conversation takes a different turn.

2. Needs More Data 

Noisy data or data that doesn't provide much value to conversations is one of the key challenges in using conversational AI. Among these also include background noise such as doorbells, kids, dogs, and more.

This makes it important to filter the audio files of these sounds and accordingly train the AI system to identify the sounds that matter and those that don't.

3. Less Accurate 

Accuracy is another major challenge in using conversational AI. Since human beings speak multiple languages and also the same language differently, it's still quite difficult for machines to fully comprehend such spoken language variability during customer interactions with complete accuracy. These include aspects such as emotions, accents, dialects, nuances, and pronunciation. 

4. Need for Standardization

Another challenge in using conversation AI is the fact the machines are typically trained to give standard answers to customer queries.

In situations where a customer is not satisfied with the answer and rephrases the question, the machine still gives the same answer, making it clear to the clients that they're interacting with a machine and not a human being. This can get annoying for customers and can prevent them from proceeding any further.

Added Benefits of Conversational AI in Customer Experience 

There are several other benefits of using conversational AI for improved customer service experience, some of which were discussed above. Here are a few more:

1. Optimal Data Collection 

Voice-based conversational AI is a robust technology, especially for businesses and customer service departments looking to make optimal or better use of their internal data as well as anticipated data collection.

Apart from enhancing agent and overall customer experience, conversational AI also increases customer satisfaction as it functions by consuming all of the data that a company has gathered and stored, enabling the AI to train on the data and discover the specific topics customers are requiring help with. 

2. Helps Improve Efficiency 

One of the focus areas for most businesses when trying to drive down customer support costs and help improve other KPIs is the efficiency of human representatives.

Conversational AI can be an excellent solution to address this and improve agent efficiency. It also helps reduce customer wait times, which is one of the main areas of frustration when seeking support.

By implementing conversational AI and customer service chatbots, contact centers can significantly reduce or eliminate wait times and allow support agents or representatives to focus on other important tasks.

3. Cost Effective 

AI in customer service can be instrumental in helping businesses reduce their overall customer service and support costs, including the cost of hiring and training agents.

How? AI chatbots can automate various manual, time-consuming, and repetitive tasks like customer support requests, thus, allowing customer service agents to focus on more complex queries and higher-value tasks, leading to cost savings and increased efficiency.

4. Provides High Accessibility 

Another advantage of conversational AI platforms is their higher accessibility due to their multilingual nature. Since language translation software generally comprises chatbots and virtual assistants, conversational AI can effectively identify, interpret, and provide responses in almost any language.

This keeps language limitations from no longer impacting any customer service interactions. Besides, a multilingual chatbot also enhances both the affability and accessibility of your business to a wider range of audience.

5. Improves Conversion Rate

Conversational AI can help you increase your sales and conversion rates by letting you learn more about your target audience and giving them what they need anytime, anywhere. It engages with customers in a modern and innovative way, offering solutions instantly without much hassle, thus, improving conversion rates significantly.

Further, conversational AI platforms and customer service chatbots offer you a detailed analytics dashboard where you can analyze even the minutest details about every chatbot/voicebox interaction to check the number of users leaving your website or other touchpoints with timely resolution of their queries.

Leverage Conversational AI for the Best Customer Service Experience

Every business today aims to provide exceptional customer service to its users and resorts to various advanced technologies to achieve this. Regardless of the type of industry, conversational AI can be implemented to achieve this objective for multiple use cases.

From providing personalized recommendations and dealing with client support to handling queries about using a product or service, conversational AI-based chatbots or voice bots can take care of end-to-end customer experiences.

The need for businesses is to leverage these conversational-AI-based tools intelligently to automate customer service delivery and build a brand of loyal customers in the long run.

Also read : AI in Business: Impact, Benefits, and Applications


What are conversational AI Tools?

Conversational AI tools enable businesses to communicate with their customers automatically. An example of a conversational AI tool is any messaging or voice assistant, whether it is in text or audio format.

What is the difference between conversational AI and chatbots?

Conversational AI is a broader term that refers to specific AI-driven communication technology such as chatbots and virtual assistants (like Amazon's Alexa). Chatbots are simply computer programs that simulate human conversations to create better experiences for customers.

What algorithms are used in conversational AI?

Conversation AI mainly uses machine learning, deep learning, and natural language processing as techniques in its algorithms.