Chatbots Are About to Change Everything

Why do people like talking to Alexa, Siri, and other virtual presences? Why are children, for example, so drawn to conversations with disembodied voices? Because the voices never get tired, and they never judge you for walking away or not following the right path. The service and support industry carries a legacy of negative thinking about self-service because of decades of frustration with interactive voice response (IVR) technology. But look around: AI-inflected chatbots are about to create richly detailed, never-ending conversations with customers. And customers are going to like it a lot better.

The customer interaction of the future is going to be different from that to which we've grown accustomed. People won't be asked to identify themselves; that will be handled automatically, separately, and invisibly. Technology won't waste time asking customers why they are calling; instead it will surface the most likely reason for the connection and offer that option first. It will cost less to operate and generate more loyalty, revenue, and satisfaction. 451 Research data from our M&A Outlook 2017: Application Software report shows that 55 percent of survey respondents prefer self-service tools to avoid talking to customer service agents.

Within a very short time the use of AI to interact with customers and prospects will render much of our agent/customer paradigm obsolete. In the process, businesses will be able to shape relationships more precisely, providing contextually relevant information and insight in real time. Chatbots are the future of customer interaction, and they are already here.

Chatbots are already being used in industries like food service and retail to provide information to customers in contexts where human interaction is not available, or as an introductory step before humans step into the interaction.

If done right, chatbots can be company allies in gently guiding customers through a thicket of possible options, supplying relevant information, and gathering contextual information. Bots have applications across the customer journey. To maximize their utility, companies need to design them carefully, maintain them for accuracy, and make dealing with them appealing to customers—all while keeping development and deployment costs low.

According to 451 Research survey data from August, 15 percent of companies say that chatbots are among their top digital commerce initiatives during the next year (up from 10 percent when asked six months earlier). Additionally, 25 percent of respondents anticipated that digital assistants and virtual agents will have a transformational impact on their investments in customer-experience technology during the next 12 months.

These are signs of a wave coming that businesses will be forced to confront. It will change the way resources are allocated for technology purchases and put a premium on the design of smarter, more fluid interactions that guide customers to desired outcomes across multiple channels. It will put more of the burden on marketers to orchestrate experiences that incorporate richer sources of data about customer intent, location, behavior and value—all sources that are usually hidden away in separate silos within enterprises. Prying them out and integrating them will be a major challenge, as will be creating central repositories for customer profiles and identity information.

Creating chat-based conversations that never end will be a heavy lift for a lot of companies. But as more take on the challenges of digital transformation, many are going to look at the success of platforms like Facebook or Alexa that are extendable and ubiquitous and decide to incorporate them into their customer contact infrastructures. Marry them with Big Data analytics for personalization and cloud processing for real time updates and the ability of a chatbot to provide high-end service can actually surpass that of live agents. The underlying technologies required to make chatbots the dominant mode of customer interaction are already in place; what holds them back are investments in existing agent-based infrastructure and uncertainty that AI is precise and flexible enough to hold up its end of the conversation.

Those who will win out in this scenario are companies that use the next year or two to examine their technology stacks and business processes to understand where they have dangling data threads that can be unsiloed and integrated. In other words, those that are already transforming digitally. To make a chatbot a fundamental component (and not a weird curiosity) requires a solid customer data repository and a commitment to put both marketing and service resources behind experience orchestration. Vendors that encourage de-siloing and process integration will win customers.

Those who will not fare so well are businesses that retain a single-channel approach to customer contact; those that view chatbots and self-service through the prism of branching IVR trees; and those that resist using data to proactively respond to customers. Proactive response might sound like an oxymoron, but it simply means being available to customers any time, for any reason, pre-armed with the essential information needed to provide service or offers in a variety of likely contexts. We've talked for a long time about having a 360-degree view of customers, being omnichannel, and providing exceptional experiences; what's been missing are the data and processing resources to make them happen. Those elements are now in place; conversations are about to get very automated, very quickly.

Keith Dawson is a principal analyst in 451 Research's Customer Experience & Commerce practice, primarily covering marketing technology.