The What and Why of Chat Bots in Customer Experience

Modern customer service is becoming more complex. Companies now have more technologies and sophisticated processes available to enhance the customer experience, including delivering consistent, personalized, and omnichannel interactions across all channels. To this point, chat bots have been one of the buzz words in the customer experience space over the past year. Unfortunately, despite the wealth of conversations on the topic, not many firms understand what this technology has to offer or how to successfully leverage it to complement existing customer experience technologies.

First, Aberdeen's "Chat Bots in Customer Experience" study defines chat bots as technology tools serving as digital employees that help firms handle a variety of customer needs, from helping generate a quote for a new product on the company website to responding to client inquiries for services, such as password resets or checking account balances. Chat bot conversations can use voice and text. As such, they might take place through the web, mobile applications, social media (Facebook Messenger), text messaging, and connected devices, such as Google Home or Amazon Echo.

TheAberdeen study found that 23 percent of companies currently use chat bots as part of their customer experience technology mix. The figure below shows the annual performance results reported by these firms in comparison to those not using chat bots (non-users).

Figure 1: Companies Using Chat Bots Have Happy Customers and Deliver Value to Shareholders

Companies using chat bots achieve reduced the number of customer complaints by 92 percent. This means that companies are addressing client needs in a timely and effective fashion, decreasing the overall customer effort. In fact, chat bot users decreased customer effort by 2.3 times.

Firms using chat bots report 2.5 times greater year-over-year revenue growth compared to non-users. They also improve customer profit margins by 2.3 times more year over year compared to non-users. Profit margins are influenced by total customer spend versus the cost to generate and sustain that spend. The latter includes the cost to serve, including contact center agent labor costs, telephony costs, etc. Therefore, chat bot users enjoy greater results in profit margin improvements. Using this technology not only helps drive revenue growth but also decreases support costs for the business while improving customer experiences.

While the performance gains above provide a compelling case for using chat bots, it's important to note that chat bots shouldn't be used to manage all customer interactions. Bots are designed to take customer input by text or voice and use this prompt to seek the right answer based on how they're programmed. Companies can change the programming of these bots to handle evolving issues. However, due to technical limitations, these bots generally work in helping customers address simple issues (e.g., checking account balances or checking in for upcoming flights) instead of complex issues, such as refinancing mortgages or transferring airline miles to other family members.

It's important to note that chat bots are not currently suited to handle complex customer issues. While they can provide customers with quick answers on simple issues, such as a password resets or account balance inquiries, companies using chat bots might observe poor performance in measures like handle times when handling complex issues, like replacing parts of a copier. That's because these issues might involve more complexity than the pre-programmed guidance chat bots can provide. Customers can explain their issue to the bot but not receive the answers necessary for resolution, requiring them to contact live agents. This is frustrating for clients.

It's also important for chat bot users to identify the nature of the customer issue early on and direct customers to live agents if the issue is more complex than what can be addressed by the bot. Doing so will help reduce customer contact abandonment rates, a measurement where chat bot users enjoy 27 times greater annual improvement (decrease) compared to non-users.

Deploying a chat bot is only the beginning. To make the performance gains long-lasting, companies must also establish the right processes and supporting technologies. In Aberdeen's study, there are five key processes and nine technologies highlighted as factors helping firms maximize their results through chat bots. Please read the Chat Bots in Customer Experience study to learn those factors.

Omer Minkara is vice president and principal analyst covering contact center and customer experience management at Aberdeen Group.

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Posted March 02, 2018