With the increasing digitization of the world, communication patterns between individuals and businesses have also evolved. Among the popular ways of communication are chatbots, which usage is increasing globally. But, how many chatbot types are available and what is the difference between them? The categorization of chatbots is based on their purpose, functionalities, places of implementation, the technology used for their creation, and more, giving businesses the flexibility to choose the chatbot type that aligns with their growth strategy.
There are four primary categories of chatbots used by businesses categorized by their functionalities. One of these categories is the basic chatbot.
It is designed to handle simple and repetitive tasks. Typically used in customer service environments, basic chatbots can only respond to specific predefined actions and are not capable of carrying on a conversation. Although they can’t converse, basic chatbots can provide important information, educational tips, news, and showcase products and services. They have features like forms to fill out to request something or contact a business and buttons to click on to navigate and get more information.
An excellent example of a basic chatbot is the one used by Danexo, a small online car parts store in Bulgaria. The chatbot is used by potential business partners to request an account and individual customers to place an order for a part. The chatbot relies on forms and images with texts and does not use conversational AI. While basic in functionality, the chatbot is effective in handling routine inquiries and eliminating the need for phone calls.
Compared to basic chatbots, rule-based chatbots are more complex as they require specific rules to provide users with information. They utilize predefined flows to direct customers toward predetermined answers and specific sections within the chatbot. These chatbots are effective for handling simple queries such as yes or no questions, booking appointments, placing orders, and submitting requests.
A significant advantage of rule-based chatbots is that they do not require extensive training, which facilitates the process of creation and implementation, making it quick and easy.
However, rule-based chatbots face challenges in recognizing customer queries and rely solely on keyword identification to provide answers, which can lead to frustrated customers and a negative brand experience. Consequently, they often feel more mechanical than AI chatbots and lack the natural interaction that users expect.
Business AI Chatbots
Chatbots powered by conversational artificial intelligence (AI) utilize AI technology to recognize customer questions and provide responses. These chatbots simulate human conversation by analyzing user messages and providing relevant information from their database.
In addition to answering questions, the business AI chatbots can perform various routine tasks such as scheduling appointments and meetings, handling product and service inquiries, collecting customer information, conducting questionnaires and others. They are commonly used in customer service, marketing, and sales in many industries and handle more complex queries, that often require integration of the chatbot with external platforms and software.
The technology behind AI chatbots has advanced significantly, with the AI market projected to grow from USD 86.9 billion in 2022 to USD 407.0 billion by 2027, at a Compound Annual Growth Rate (CAGR) of 36.2% during the forecast period. Furthermore, the global chatbot market size is valued at USD 3.02 Billion in 2022 and is projected to be USD 24.58 Billion by 2030, growing at a CAGR of 21.58% from 2023 to 2030, as per a recent report published by Cognitive Market Research.. These figures highlight the enduring popularity of chatbots.
A prime example of an AI chatbot is the hotel AI chatbot at the complex Izgreva. In just 1 year of work, the chatbot communicated with over 16,200 customers, engaging in over 82,500 interactions. The hotel AI chatbot assists guests in making reservations, provides information about hotel services and the surrounding area, and is available in both Bulgarian and English to cater to international and local guests along with voice recognition for faster and easier online communication. It has helped guests from over 17 countries book their stay, generating over 50% of the customer inquiries for this small family hotel.
Voice AI assistants
Voice AI assistants are software programs designed to enable users to communicate with businesses using voice commands. They function as AI chatbots or virtual assistants, but with the added advantage of voice assistance, allowing users to ask questions and receive answers both in written and voice, or voice only.
Businesses find these assistants to be a potent tool as they provide a convenient and effective way for customers to interact through voice. This method of communication is preferred when users want to share information with friends or family, have their hands occupied, are unable to text, or have vision difficulties.
Hybrid chatbots combine basic, rule-based, AI chatbots and voice assistants. They can access a database of information and retrieve specific answers, and also provide information through clicking and scrolling. For businesses with more significant goals and specific requirements, hybrid chatbots offer more functionalities and may require custom integrations. By combining both AI and rules, hybrid chatbots become more flexible and capable than either chatbot type alone.
Chatbots have various applications, depending on their intended use
Chatbots for customer service and support
Chatbots come in many types, each serving a unique purpose. There are no 2 chatbots the same. One such type is customer service chatbots. These chatbots are designed to assist customers with queries or concerns they may have. They can answer frequently asked questions, offer customer support, promote products and services, and provide relevant information as required.
By handling routine tasks, customer service chatbots help employees save time, enabling them to focus on more complex tasks. These chatbots can function as digital employees available 24/7/365, thus maximizing the efficiency of the employees and the company.
Furthermore, customer service and support chatbots offer users self-service options that save time and eliminate the need to visit an office or wait for a phone call from a customer service agent. Additionally, they aid in customer data collection and employee motivation.
An excellent example of a customer service chatbot is TEZBot, used by the international travel company TEZ Tour, which offers trips in Bulgaria and abroad. TEZBot has saved an average of 12 minutes per customer in the Marketing and Reservations departments, which translates to over 850 working hours in just 10 months of service. The chatbot handles night shifts and weekend and holiday inquiries, resulting in significant time savings for the staff to focus on more valuable tasks.
Chatbots are used in various ways, including marketing. Marketing chatbots are designed to promote and sell business products and services. They can be included in marketing campaigns, send promotional messages, offer discounts, create quizzes and games, and more. Marketing chatbots can help to attract new leads and prospects, retain current customers, and assist with promotions.
For example, CapBot, the chatbot of Queen’s, which is part of Tymbark Bulgaria, a subsidiary of the Maspex Wadowice Group, one of the largest food and beverage companies in Central and Eastern Europe, was a purebred marketing chatbot. CapBot’s mission was to entertain users and inspire them every day, in addition to being one click away for casual conversation. Users can take a quiz, chat casually with the chatbot, or connect with a real person if they desire.
Conversational marketing is a growing trend that relies on chatbots and messaging apps to engage with customers on specific topics. Intelligent chatbots are used to interact with customers 24/7/365, providing exceptional user experiences, empowering customers throughout their journey, and helping companies build strong relationships, pipelines, and revenue.
Chatbots for sales
Chatbots for sales provide an innovative way for companies to sell their products and services while guiding customers through the buying journey and facilitating conversions. Conversational commerce, which involves selling through chatbots, SMS, and smart speakers, is a rapidly growing trend in marketing and sales. It is expected to experience a 590% growth from 2020 to 2025, with 50% of sales in conversational commerce happening through chatbots.
Conversational commerce allows businesses to engage with customers on social media platforms, such as Facebook Messenger, WhatsApp, and WeChat, as well as through SMS, smart speakers, or AI chatbots on their website. With an AI chatbot for conversational commerce, businesses can close the entire sales funnel, from the first interaction to the actual order.
One of the advantages of conversational commerce is that it is available anytime and anywhere. Customers can message a business through the chatbot widget on their phone or laptop, receive a response within seconds, and continue their shopping experience without any interruptions.
Another advantage of conversational commerce is personalization. Conversing with customers through AI chatbots allows businesses to learn about their preferences, including their favorite products, opinions on services, and search habits (when, and how they search). These statistics can be analyzed to better understand customers, improve products and services, and grow the business through effective marketing and sales.
Chatbots for education
Educational chatbots provide educational content to users, offering course materials, answering questions on various topics, teaching skills, and sharing tips and tricks. They are commonly used by EdTech companies, universities, schools, libraries, and other educational institutions to help users learn and to provide administrative support.
For instance, the Varna Regional Library’s uses a digital librarian – Ellie – an AI chatbot, for the past 5 years to manage requests for borrowed literature and facilitate communication between readers and the library. This has resulted in time savings for at least 2 librarians, allowing them to focus on other tasks.
Industry-specific chatbots provide information and support for a particular industry or type of business, such as healthcare, retail, real estate, financial services, hospitality, tourism, e-commerce and others.
Chatbots are utilized in various ways in healthcare, including providing medication and appointment reminders, helping patients manage chronic conditions, and offering medical advice, support and information.
Retail and E-commerce
In the realm of retail and e-commerce, chatbots are commonly used to assist customers in finding products or services that are personalized to their needs. They can also answer frequently asked questions and perform other customer service tasks.
Numerous chatbots are employed in banking to aid customers in managing their accounts, providing alerts for possible fraud, and checking financial status.
In the tourism industry, chatbots are utilized to help customers with a variety of tasks, such as booking flights and hotels, creating travel itineraries, and answering inquiries about hotels or tour services and other tasks.
Virtual assistants, like Alexa of Amazon, Siri of Apple, Google Assistant, and IBM Watson, are designed to help users with personal tasks like setting alarms, creating to-do lists, playing music, and performing specific commands. They differ from business AI chatbots in that they cater to personal needs and tasks rather than being geared towards customer service or business information provision.
Chatbot types according to the place of implementation
Chatbots designed for a company’s website serve to provide information to visitors about the company, its products and services, and to enhance the website’s functionality. A well-designed website with clear and useful information and an easy-to-navigate interface is crucial for providing the best user experience. According to global research conducted in 2020, 43% of chatbots are implemented on business websites, and this trend is expected to continue, leading to an increase in this percentage at the expense of social media chatbots.
Implementing a chatbot on a business website can significantly enhance the user experience, allowing visitors to easily find information about the company, its products, and services, while also receiving prompt and accurate responses to their queries.
One example of a chatbot implemented on a business website is the AI chatbot Miss Fiore, used by the 5-star hotel Casa di Fiore SPA & Medical. Miss Fiore provides information about the hotel’s services, assists guests with booking rooms, helps them take advantage of special offers, and provides answers to any questions they may have about the hotel and its facilities. In 2022, Miss Fiore had over 83,000 users and received over 540,000 interactions, with a peak of over 4,000 customer interactions on its busiest day.
Social Media Chatbots
Businesses use social media chatbots to interact with customers on various social media platforms. These chatbots can provide customer support, answer questions, or even promote products and services. Facebook Messenger, Slack, Telegram, WhatsApp, and Viber are the most popular chat platforms where businesses use to deploy chatbots. While it is easy to direct customers to social media platforms, chatbots on these platforms can distract customers from the business site, where actual sales and conversions happen. Therefore, companies should carefully consider their main goals and needs when choosing the right platform for their chatbots.
Chatbots for Mobile Apps
Some businesses create their own mobile apps for their products and services and provide chatbot assistance for customer service and support within the app. However, these solutions are more expensive and time-consuming to create and implement compared to chatbots on websites or social media platforms. Additionally, users already have many mobile apps on their phones, and adding another one could be overwhelming for them. Therefore, companies should carefully evaluate the value and potential impact of their chatbot before investing in a mobile app.
Although, there are various alternatives to chatbots, for sure chatbots have more impact on user experience, better customer service and support, and are more flexible and interactive for marketing and sales.
Which chatbot type to choose for your business?
There isn’t a one-size-fits-all solution to determine the right chatbot for your business since the success of a chatbot depends on various factors such as the business’s specific goals, industry, and the team developing it. When choosing the right chatbot for your business, it’s important to also consider your target audience and their preferences. Therefore, it’s essential to understand the different types of chatbots available, evaluate their advantages and disadvantages, and then choose the most suitable one for your company. Chatbots are becoming increasingly popular in various industries due to their different types and functionalities and their ability to improve customer experience, save time and money, and increase efficiency in marketing and sales and overall business processes.
Since each chatbot has its own set of advantages and limitations, it’s crucial to select the one that aligns with your specific requirements and objectives. However, regardless of the type of business, there is always a chatbot that can help it to grow and further prosper.