Named ELIZA, the first computer chatbot was created in 1966 and was designed to simulate a psychotherapist who developed its responses based on the answers of its patient. While this technology led people to believe robots would be able to supplant human tasks, it fell short of meeting expectations and was abandoned behind the pursuit of other technology developments.

Fast forward 51 years, the chatbot is becoming a disruptive customer engagement tool that companies should consider investing in. By definition, a chatbot is a computer program that simulates natural conversation through voice commands, text chats, or both.

At the forefront of popular media, many may associate chatbots with Amazon’s Alexa or Google Assistant, which perform simple tasks such as scheduling an event overlaid with a natural language voice over. However, through significant investment into research and development, chatbots are quickly evolving from performing triggered tasks and simple conversations to performing machine learning-enabled complex tasks and interactive information access.

This means chatbots will have a deeper understanding of tasks, a stronger proficiency to execute these tasks, and an ability to learn from information communicated to them. This technology growth demands attention as these Artificial Intelligence (A.I.) chatbots are capable of enabling higher levels of user engagement and fill gaps within today’s customer experience model. As a result, companies from across different industries have already begun developing their own A.I. chatbots and deploying them to customers.

For example, startup insurer, Lemonade, recently released an A.I. chatbot called A.I. Jim. By automatically handling the review, cross-referencing, and algorithmic functions of a claim, A.I. Jim has set the record for settling a claim within three seconds. Through continuous learning from its previous claims, it is also capable of becoming more efficient through experience. 

What is driving this shift is not just an acceleration in technology advancement and innovation, but also a shift in demographics. Characterized by their independence and technology savviness, Generation Z and Millennials now make up over 50% of the U.S. population. These generations expect companies to be loyal to them, not the other way around. Having grown up with social media and the ability to access any information they want easily, they are anxiously ambitious and impatient. 

Due to this demographic shift, some companies are engaging differently by building personalized relationships through A.I. chatbots. Although these computer programs are functionally limited in replacing every human task, their responsiveness and flexible functionality make them powerful tools in engaging new generations and building a seamless customer experience. Whether it is a personalized digital shopping assistant or delivering real-time answers to patient’s specific health questions, A.I. chatbots will impact the way companies work with their customers.

Moreover, as investments toward the bot economy grow and industries pivot their attention, A.I. chatbots will increasingly widen in functionality and their ability for natural and intuitive language. Given changing generational behavior and innovative competition, firms should begin reassessing their digital customer experience model to see how A.I. chatbots can diversify their strategy.

The following three trends signal opportunities for companies to invest in A.I. chatbots

1) A.I. chatbots will help build a seamless customer experience

On the surface, A.I. chatbots may only seem like programmed systems that perform tasks. However, by looking into the intricacies of a customer experience model, companies will discover the potential for chatbots to become an indispensable tool within an omnichannel strategy, helping its marketers reach customers from multiple touchpoints while providing knowledgeable service at scale.

Gone are the days of junk-destined mass marketing emails as companies aim to deliver personalized experiences. Compared to the 22% open rate of emails, SMS-based promotions or offers have a 98% open rate. By embedding marketing within interactive text messaging, A.I. chatbots can provide convenience and knowledge through a seamless customer experience.

One example is MasterCard, a payment solutions company, which has developed an A.I. chatbot platform that enables customers to transact, manage finances, and shop within messaging platforms. Starting early 2017, customers will be able to ask the bot questions around topics like spending levels and seek assistance with financial literacy.

With research pointing to nearly $2 billion in online sales through mobile digital assistants by the end of 2016, MasterCard is embracing the concept of conversational commerce and taking the digital step towards engaging customers using natural language dialogue. Most importantly, they are able to bolster an interoperable solution that spans across multiple channels for the customer. By doing so, they deliver real-time, natural, and intuitive experiences without the heavy costs of organizational support.  

2) Messaging is present everywhere

Due to limitations in conveying tone and the dominance of voice-based conversation, messaging was initially just an afterthought and offered as a free tool within most mobile phone contracts. However over the last 15 years, messaging has experienced exponential growth, with a forecast of 1.1 billion new users to be added by 2018.

Looking at the U.S. market, the potential of messaging already looks impressive with users spending hours a day on their Facebook messenger app for personal communication. However, if you look at countries like China, messaging platforms such as Tencent’s WeChat have not only provided lots of dialogue between friends but have also replaced email as a business communication platform.

Practically everything can be performed seamlessly within WeChat, from making a wireless payment to hailing a cab using Didikuaidi’s integrated feature. With over 600 million monthly active users, WeChat has successfully become a ubiquitous tool in the lives of the Chinese and a sought-after platform for marketing.

The rapid growth of messaging as a way of communication points to the potential A.I. chatbots have within the customer experience business model. Through conversational commerce, companies can position their services within the platforms customers spend their time most and establish a more efficient and natural communication channel.

Most recently in January, Starbucks unveiled MyStarbucks Barista, a chatbot that allows customers to order and pay for their drinks or food through natural text or voice. Through this new channel, Starbucks is actively addressing its customer complaints of long lines in its stores, providing customers with a quicker solution to ordering so that they can pick up their items upon arrival.

3) A.I. chatbots are flexible in functionality

In tandem with the growing popularity of messaging, technology companies are moving fast to contribute to the bot ecosystem. With massive investment pooling into A.I., companies like Google and IBM are developing highly advanced technology that enables self-learning and multi-layered cognitive functions.

On March 9th, 2016, DeepMind, an artificial intelligence program developed by Google, defeated legendary Go player Lee Se-dol in Seoul, South Korea, marking a historic achievement that highlights the future potential of technology. With growing users on its Messenger device, Facebook also announced an A.I. chatbot called M to the public in April of 2016. What made this announcement of significance was not just the involvement of a major technology player in the chatbot industry, but also the ability for interested companies to access the API and easily create their own chatbot within the M platform.

From a growth standpoint, the chatbot platform has outpaced the app platform by 70% within its early stages. The number of bot developers in its sixth month of development is nearly three times the developers that apps had during its fourteenth month. This combination of A.I. and chatbot development is producing a continuing shift in the product landscape from static data chatbots to machine learning-enabled chatbots. Within the next few years, the business world will continue to see a widening in functionality for A.I. chatbots to deliver efficient services beyond the range of human capability. As a result, this growth in technology presents opportunity and flexibility for companies looking to enhance their customer experience business model.

From A.I. Jim to MyStarbucks Barista, it is clear that A.I. chatbots are already transforming the way companies of different industries are working with their customers. With investment firms pooling in capital and thousands of developers working on innovative A.I. chatbot prototypes, there is also a growing focus on addressing the new generations of today and delivering real-time service that is quick yet knowledgeable.

That being said, an A.I. chatbot is not in any form a replacement of humans in the customer experience business model. Although functionally adept, they are a means to an end and incapable of building the emotional relationship between customer and brand. Instead, A.I. chatbots serve as a complement to emotion-conveying customer experience and act as tools in reducing backend gaps across services.

Nonetheless, successfully incorporating A.I. chatbots into a customer experience business model is not a small feat. Before implementation, companies must seek to understand and internalize user expectations and interactions. Then, they should begin crafting the functionalities needed to fulfill these expectations.

Finally, they must determine the appropriate balance between A.I. chatbots and human representatives. If done correctly, these companies will strengthen their delivery of customer experience to new generations.