Conversational AI: What It Is & How It Works

Today we’ll define what conversational AI is, how it works, and much more!

Daniel Ternyak
February 15, 2023

Customers have questions. They want to know all about your business. You need to be ready to answer them.

That is where a conversational AI is a must. It's a major asset you'll want to increase team efficiency and provide your clients with faster help.

Did you know that in the finance industry, AI-powered chatbots are projected to save banks $7.3 billion by 2023?

What is Conversational AI?

Conversational AI are technologies that are used to talk with clients and answer their questions.

What is Conversational AI?

Conversational AI combines natural language processing (NLP) with traditional software like chatbots, voice assistants, or an interactive voice recognition system to help customers through either a spoken or typed interface.

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Conversational AI combines natural language processing (NLP) with traditional software like chatbots, voice assistants, or an interactive voice recognition system to help customers through either a spoken or typed interface.

Conversational AI is a computer program. It is designed to combine the use of a concept known as natural language processing or NLP with lots of types of traditional software.

By traditional software we mean the use of what are known as chatbots and voice assistants. You have might used an interactive voice recognition system in the past. You've probably interacted with one if you've done any kind of online shopping or business to business marketing.

This system has been designed to help all new and existing customers work with your site. This can take the form of spoken or a typed user interface.

This technique relies on the use of what is known as machine learning. Machine learning is a field of computer science dedicated to building effective software. The overall goal this the creation of algorithms that can automatically improve themselves over time by learning from any kind of prior tasks.

Conversational AI applications are typically used in the field of modern customer service. You might see them on websites or when you go to buy something from online stores.

You'll also see them on different social media channels. This kind of technology can help speed up and streamline the process of answering and routing all of your customer inquiries.

How Does Conversational AI Work?

Conversational AI primarily is based on the use of two functions. The first is a process that is known as machine learning. Machines can be like people. Like people, machines can learn over time.

Conversational AI can collect types of information from how it interacts with the company's clients. As it gathers this information, it can use it to improve how it responds to the client's needs.

How Does Conversational AI Work?

That kind of learning is why so many users like it. They know it will continue to improve as they use it and as it interact with their client base.

That also makes this an amazing system. It will not only get better in a few weeks. It's going to get better in a few months. It will continue to get even better at serving the needs of your clients as it continues to work for you.

You can also bring this to a new area of business. The AI can transfer the skills it has mastered from the old system to the new one.

Another thing it does is make use of natural language processing, or NLP. This is how the artificial intelligence it users can be taught to understand human language.

As it learns to recognize varied kinds of words and phrases, the system can be taught to can move on to creating its own sentences and phrases. This is how it will learn to talk with your clients.

Should a client message you on any type of social media it can respond to those queries. For example the customer might ask for information about when you are going to ship their order.

Your conversational AI chatbot understands exactly how to respond to them. They will do this based on prior experience they have that comes from answering similar questions. The chatbot knows phrases are going to work best when they are responding to certain kinds of common shipping questions.

Conversational AI vs. Traditional Chatbots

Traditional chatbot companies tend to claim they can have conversational capabilities, but this is not true.

Conversational AI vs. Traditional Chatbots

It's important to keep in mind that humans work behind the chatbot in order to make the chatbot a success. The chatbot is given what it must say as a result of the use of specific keywords.

That triggers your response. A really good bot is one that can be precisely trained in order to respond to just about every imaginable scenario that might happen with your business.

AI chatbot conversations will require the use of finely crafted conversational AI with the help of experts. This is one that does not require the use of preprogrammed script. Instead, it is capable of teaching itself via the user of process known as reinforcement learning.

Your outcomes that you're going to get from this process are not scripted or awkward. This is one that can go beyond the ordinary and bring out the kind of insights that you're going to need to run your business well.

Benefits Of Conversational AI

As so many business owners have found out, there are a great many benefits you can get from the use of conversational AI.

Benefits Of Conversational AI

You can save time. In a perfect world, every single one of your customers gets that thorough customer service experience they want. The truth? Some customers have relatively simple concerns while others have more complicated issues. The chatbot takes the simple stuff off your hands while you concentrate on the more complex issues.

Shorter waiting times are better for everyone.

Increased accessibly is another benefit. You can't be at your business every single hour. You need to eat and sleep. That's where the chatbot is there. Customers always have someone on hand to handle their needs right now. Take a nap and let the chatbot do the rest.

Modern customers want and expect a personalized experience when they shop. Machine learning does that for them and for you. They'll even suggest items your customers might not have noticed before. They notice what's in the cart. If they see the person is buying a lot of items during the holiday season they might suggest some pretty gift wrap and wrapping supplies to go with it.

This kind of bot can also handle inquiries in many languages. If you want to reach out to clients in other parts of the world, you need to speak to them in their own language. The AI can do that for you.

Use Cases Of Conversational AI

Many businesses are making use of conversational AI rather than humans. Conversational AI can answer lots of your most frequently asked questions.

Use Cases Of Conversational AI

It can also offer personalized advice that is of high quality. Many tools of this kind provide a superb customer experience. That can lead to good world of mouth. It can also lead to increased repeat business and a loyal customer base.

Conversational AI in SaaS

Experts expect the SaaS industry to even more grow rapidly in the coming years. As an important sector of the economy, experts expect to see vastly increased use of conversational AI. That should allow for easier, smoother transactions that benefit the customer and this economic sector.

Conversational AI in Ecommerce

Over 6 in 10 of eCommerce shoppers tend to leave a site if they don't see what they want within a short time after logging in. Experts who study the field of eCommerce closely believe that by the end 2023, more than 7 in 10 of all chatbots will be used in the retail field. Retailers have discovered this kind of tool has lots of benefits.

Chatbots have been shown to increase the average order size. The use of live chat also has other benefits. This includes personalized service and providing a means for users to buy items more easily.

Many site owners have found AI allows them to greet existing customers with specific recommendations they're likely to enjoy. They have also found it lets them guide the user through the process of buying items online from start to finish.

That can help any online business grow and find success in any niche.

Conversational AI in Financial Services & FinTech

The use of digital methods have been particularly important in the world of finance and technology. The goal here is service that is personalized, engaging and caring.

Clients have found this kind of technology benefits their overall experience in many important ways. It leads to more self-service options. That lessens the need to spend time on hold waiting for a response. It also  means that clients get faster resolution of problems that might otherwise be costly and frustrating.

Financial service experts like conversational AI. It allows the AI to do the basic legwork for them. For example, if someone wants to take out a mortgage, the AI can gather the basic data the client must provide. The mortgage officer does not have to spend a lot of time going over details. Clients also have access to a written record they can see right in front of them.

This means a mortgage process that is shorter and easier to understand for the applicant. it also means that the lender has all the data they need in order to respond to the client's basic needs. They can then call them up and ask if they need further clarification as they put the process in motion.

Conversational AI in Telecommunications

Over 6 in 10 of all contemporary telecom companies report they have chosen to invest in some form of conversational AI. They also report that doing so has helped them meet the needs of their customers more efficiently. Bots can do many important things for their clients.

They have been shown to improve the productivity of their agents and help them offer much better customer service for all telecom clients. Agents also report that the use of this kind of AI has helped them simplify their workflows and reduced their feelings of stress.

In addition, agents also report having more data on hand with each use. That means a far more efficient way to examine what woks in this industry and what could use lots of improvement.

This is one industry that has reported very low customer service satisfaction rates. Improved measurement functions has long been a goal for those who work in the telecom field

The process of using Al has allowed for continuous feedback from agents and end users. This means that industry leaders can find it much easier to make data-driven decisions. They can figure how the use of language impacts their overall retention rates and their need for higher CSAT.

Many companies in this field are also finding that the use of this form of technology has made a real difference in their bottom line. Customers are reporting a higher level of satisfaction with this method. They're also seeing an improvement in their ability to respond to customer complaints more quickly. That has proven to be a good thing for these companies and their clients.

Customer satisfaction in the telecom industry has been improving on a consistent basis. Employees are happier with the use of this kind of technology. Much the same can be said of the feelings of the people who use telecom services.

Conversational AI in Airlines & Travel

People who work in the field of travel must be able to do a lot of things at once. As more and more people are using air travel, airlines and other travel related organizations have looked for ways to provide streamlined services. This is where the use of AI has been more important than ever. It can help with many things people want to do.

Companies have found this tool a very useful one in reducing their costs. They have also found it a useful means of routing people to where they need to be instead of having to make multiple calls to the same site.

This allows the airline to route their resources to where they are most needed. That means humans can step up and unravel problems while the AI does the more mundane tasks for their travel clients. Companies are saving money. Customers are also seeing less stress from travel arrangements and lots of savings as a result.