Since the inception of digital innovations in everyday business activities, the use of AI-powered chatbots can be predominantly witnessed. AI chatbots have become an integral part of both the internal and external communication strategies of business enterprises.

An AI chatbot is a program that is being used as an alternative to humans for resolving entry-level queries on websites and apps. AI chatbots can do it all – whether it’s helping employees with HR solutions, helping customers to make a purchase or guiding users through a complex B2B sales process.

The primary idea behind AI chatbots is to empower customers to engage and communicate with businesses using comfortable everyday language. As this is an era of rapidly evolving customer engagement, AI chatbots understand the customers, provide them with solutions and bridge relationships between businesses and their customers.

This article will discuss what an AI-powered chatbot is, its benefits and challenges, and take a look at how important it is for a business to implement an AI chatbot.

Fundamentals of Chatbots

What is a Chatbot?

Chatbots are software programs that simulate human conversation through text input, voice commands or sometimes even both. Chatbots act as a tool that automates responses to the users’ queries and provides them with needed information in real-time. Chatbots work without (or at times) human intervention.

A chatbot can support various internal and external communication needs by implementing a conversational self-service experience at a scale. It can be integrated with many common digital communication channels such as messaging apps (example – WhatsApp, Messenger, Instagram), mobile apps (example – eCommerce apps like amazon), and websites.

Types of Chatbots

There are three types of broadly categorised chatbots based on technical aspects:

Scripted chatbots

The scripted chatbot responds via pre-written keywords in a conversation flow when the user puts in a query. It supports only text input. Scripted chatbots are suitable for handling frequently asked questions.

Rule-based chatbots

Rule-based chatbots use a decision tree flow method to guide users by asking follow-up questions and answers to provide information. The structure of interaction, keywords, follow-up questions and answers all are pre-defined.

AI chatbots

AI chatbots are the most advanced chatbot technology available today. AI-powered chatbots respond intelligently to user inquiries by identifying words, emotions, and sentences and then formulate an intelligent response or follow-up actions in real-time. It utilizes advanced technologies like natural language processing, artificial intelligence and machine learning.

More about AI Chatbots

As AI chatbots use natural language processing, they have the ability to interpret human language as written by the user. Unlike scripted chatbots and rule-based chatbots, AI chatbots can understand language outside the pre-written commands. They keep learning from ingesting volumes of customer data, applying the algorithm and using results to create a response.

The more the AI chatbot interacts, the more data it gathers and smarter it becomes. AI chatbots use predictive intelligence and analytics to personalise interactions. It helps to understand the users’ intent and provides more natural and accurate information required by the users.

In most cases, users are convinced that they are interacting with humans at the backend, and then they get to know that they are communicative with an AI bot. An AI-powered chatbot basically attempts to recreate a human, as they have many characteristics that make them more human-like

  • Trainable - Like humans can be trained to do a specific job, AI chatbots can also be trained to complete tasks. And with every interaction, the AI chatbot becomes smarter and more efficient.
  • Dependable - AI chatbots work 24/7 in every time zone and every language, supporting users who interact without missing any incoming input.
  • Scalable - AI chatbot can support various use cases, from explaining products/services a business provides on their website/app and to guide users through the buyer journey. Internally, they can automate the communication between management, employees and clients.
  • On-brand - AI chatbot can be trained and aligned with the brand guidelines, tone and voice. As an AI chatbot can be the primary conversation medium between the customers and brand, the chatbot will talk exactly how a certain brand will talk.

How does an AI chatbot work?

An AI chatbot will be fed with tons of data which interests the users’ queries and translates it into a relevant output. When users access a website, and they have any doubts, they can ask their questions directly to the chatbot.

An AI chatbot will analyse the intent of the question, gather the keywords, tone, sentiment and other factors and then attempt to deliver the best possible solution. If it can’t reach the solution, it will post the follow-up questions to deliver the relevant answer.

When an AI chatbot is built, it will undergo a training period where the programmer teaches it how to understand the content of the users’ words. This helps the AI chatbot to provide the best relatable solution, even to complex queries, more naturally and conversationally.

AI chatbot challenges and benefits


AI Chatbots have become an indispensable tool to promote and enhance customer experience. It is a cost-efficient and scalable solution that can be integrated with various communication channels allowing businesses to be available for their users/customers 24/7. They come with many benefits, such as:

  • Boosting customer engagement leading to customer loyalty
  • Reducing customer churn
  • Facilitating seamless live communication
  • Humanising the brand and adding human value
  • Offering a smoother customer journey
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AI Chatbots are still in their nascent stage and the technology is evolving each day. So building the right AI chatbot solution, training and deploying it can be laborious. It is a tech-based task and involve finances and other resources.

Even after deployment, AI chatbots need ongoing maintenance, which must be continually improved to provide the most accurate information to the users. Some of the other challenges are

  • It requires AI, NLP and machine learning technical knowledge to build an AI chatbot.
  • A bot can prove near human/human-like experience but never an actual humanly experience. So they can’t completely take over humans.
  • Though chatbots support language input, it becomes hard for them to understand the various dialects, accents and regional slang inside every language.

AI chatbots’ benefits surpass their complexity and challenges, making them a much-needed tool for business. Customer communication and experience have become the core components for the success of every business. And AI chatbots have become the most preferred tool by many businesses to deliver seamless live engagement with the customers.

By partnering with the best AI chatbot-building experts, businesses can easily overcome the challenges in building their AI chatbot systems. With experts on board, they can support businesses with defining the purpose of the chatbot, selecting the suitable chatbot platform, conceptualising and creating the chatbot, and training and deploying it.

Get in Touch with Experts

How can DMG support businesses in building AI-powered chatbot systems?

DMG has years of experience building AI-based chatbots and voice bots solutions. We have supported businesses across various industries by reforming their customer service with enhanced chatbot solutions. DMG holds expertise in analysing, conceptualisation and creating a chatbot.

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We also extend our support in the post-deployment phase in tracking, monitoring and auditing the chatbot’s performance. We also provide consulting services to initially check on the need/requirement of chatbots with regards to business operations of businesses.

Are you ready to enhance your customer experience with AI chatbots?

As said, AI chatbots are reforming the contours of user experience and customer communication.  From guiding the website/app users in navigating through the website to taking the users through the stages of buyers’ journey, the scope of chatbots is reaching highs. It also brings in additional advantages of generating leads, understanding customer behaviours, interest insights and customer support scalability.

At DMG, we first understand the areas of concern and core necessity of the AI chatbot system in a business and then develop the solution. Once the solution is deployed, chatbots will help businesses gain a competitive advantage.

Get in touch with us to build a powerful AI chatbot and start providing the best customer experience!

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