How AI Will Transform Your Business in 2025: 12 Benefits

AI chatbots have been a hot topic for quite some time now. It has unleashed online debates and gotten business owners talking about its usefulness. Not everyone believes they need it, but Gen Z and Millennials are pretty much converted. And using an AI chatbot for customer service is a rising trend that is not going away anytime soon.

But what is a chatbot, and how does it optimize customer service? A chatbot is a computer program that can converse with humans without always needing a support team.

Using artificial intelligence machine learning and natural language understanding (NLU) or natural language processing (NLP), chatbots can do anything from answering questions, providing support, and even assisting with sales.

Customer service AI is fantastic for automating routine tasks, like simple customer queries. These chatbot examples include automatic reservations, food orders, and booking taxis. Several companies use free AI chatbots to build an AI chatbot customer service. However, paid chatbot options offer far more functionality using a complex knowledge base.

Understanding AI Chatbots

If you want to implement an AI chatbot in your business, you need to understand what a chatbot is, how it works, and how it will benefit you.

Explanation of Artificial Intelligence (AI) In Chatbots

Firstly, AI chatbots are like regular chatbots but they work with artificial intelligence. And, at the same time, not all chatbots are AI chatbots. For instance, an AI-based call center would use an AI chatbot to respond to online customer questions. It simulates human conversations to help contact center agents complete tasks and improves customer interactions. On the other hand, a general chatbot is more focused on automatic different tasks.

Types of AI Chatbots: Rule-based vs. AI-powered

So, what are chatbots used for and what are the different types of bots? Generally, chatbots are either rule-based or AI-powered.

Rule-based chatbots work according to human-coded rules that lead to a pre-defined outcome. AI-powered chatbots use machine learning to create their own set of rules. This is based on accessible data and doesn’t need human intervention. AI chatbots use probabilities to provide the best results.

The problem with rule-based chatbots is that they are rigid and can only perform pre-programmed functions. You cannot use them for scalability and will find it challenging to change their structure. But this makes rule-based chatbots perfect for projects that require simple customer data.

As for AI-powered bots, even though they are excellent customer service tools, they cannot comprehend emotions. This means many businesses must be careful about employing them because customers view them as impersonal. On the other hand, AI chatbots work incredibly well on large projects and can handle scalability. The more data an AI chatbot system receives, the better it performs.

How To Use An AI Chatbot For Customer Service

An AI chatbot can help you grow your business by providing AI customer service on behalf of your company. The following are just some of the benefits that come with using AI technology in your customer service strategy:

1. Provide 24/7 Service in Multiple Languages

Chatbots don’t “sleep.” You don’t need to employ a night-shift worker to handle inquiries. AI chatbots are available 24/7, allowing you to respond to customers whenever they reach out. This helps you automate customer service even if there is no one in the office. Some AI chatbots can use multiple languages to provide the answers customers need. Offering different language options will help your business appeal to a larger target market.

2. Convert Deals, Upsell, and Retain Customers

AI bots also collect information on and identify shopping patterns, customer preferences, and interests. It can identify upsell opportunities and present potential add-on purchases to customers. Using an AI customer service chatbot, you can gain and retain customers by answering questions instantly and guiding them toward the information they need.

3. Chatbots Offer Real-Time Resolutions

Some chatbots offer a relevant answer before a customer can finish typing their question. It uses source material based on your products and services to do this effectively. AI FAQ (frequently asked questions) chatbots can help you answer common questions while your human staff members work on more complex tasks, saving time and effort.

4. Chatbots Can Provide Technical Advice

Chatbots often provide real-time support by answering ‘how to’ questions. For instance, if you sell software, your customers may need more information on how to install it on a specific computer. An AI chatbot can guide them through the process or workflow.

5. Find and Present Products

A chatbot platform can even replace your website’s search function. An online shopper provides a prompt or two, and the bot will find and present the product they want to buy. Chatbots can even use the concept of a CTA to close sales without human intervention.

6 Best AI Chatbot Solutions for Customer Service

Despite ongoing apprehension, hundreds of AI chatbot success stories exist, some emanating from well-known brands. Consider the following case studies:

1. Podium

Podium’s AI Employee is a powerful chatbot that offers much more. It responds instantly to leads and handles customer service duties like answering questions and scheduling appointments. It goes beyond the typical chatbot by offering personalized recommendations, streamlining your workflow, and can even help make sales on your behalf. Watch a demo today.

2. Kik

The Kik chatbot, used by H&M, is a groundbreaking solution for the company. It gives fashion advice and offers fashion-related recommendations. H&M made the bot available on the Kik messenger app, which has more than 15 million active users.

Investing in a chatbot has resulted in increased engagement, a better customer experience, and higher conversion rates for H&M.

3. Insomnobot

Casper had a bright flashbulb moment that paid off big-time when they introduced the Insomnobot. Casper sells mattresses and sleep accessories, and their chatbot helps customers choose a mattress based on their sleep preferences. Incredibly, the bot also sends messages to customers who struggle to sleep, keeping them company, so to speak.

Not only does the Insomnobot save Casper money because it reduces the need for a customer service team, it’s also increasing its sales by a steep margin.

4. KAI

Mastercard introduced its KAI chatbot in 2019. This clever bot brings conversation to e-commerce and provides personalized financial advice. It offers instant assistance with activations and inquiries using AI and NLP technology. KAI has increased Mastercard’s reputation in the financial market while helping educate clients on financial topics.

5. DEWBot

Mountain Dew is a worldwide favorite. The company’s instantly recognizable yellow soda is particularly popular with Millennials and Gen Z customers. And, its marketing chatbot, DEWBot, is helping to gain more customers using engagement. Mountain Dew introduced this unique bot during the popular Rig Up campaign, which they live-streamed on Twitch. It helped them win a Shorty Award after their engagement rate increased by 550%.

6. BlueBot

BlueBot, owned by KLM, is a conversational bot integrated with the company’s customer support system. This integration allows customers to use Facebook Messenger to book flight tickets without the help of a human agent or support agent. BlueBot checks flight status and ticket pricing and offers travel recommendations.

Customers can use the bot on Facebook and WhatsApp, and possibly other messaging apps, to cut down on wait times and for convenience. The bot continues to save KLM money and provides an exceptional customer experience.

Benefits of Implementing AI Chatbots in Customer Service

In addition to all the functionality AI chatbots can bring to your business, there are even more benefits attached to them. These include:

Cost-effectiveness and Efficiency in Handling Inquiries

An AI chatbot cuts down on the need for a full-time employee. It means less expenditure on salaries and overtime and higher responsiveness. While saving you money, your chatbot will respond to customers, handle subscriptions, and even process refunds where applicable.

Reduction in Response Time and Resolution of Issues

That said, a chatbot will also reduce the time it takes to sort out customer complaints. It offers self-service solutions for simple questions and, unlike some human agents, will not retaliate against a rude or aggravated client. This functionality helps de-escalate situations and may even negate the need for live agent intervention.

Increased Customer Satisfaction and Retention

AI chatbots offer proactive and consistent customer support. They ‘get to know’ customers, greet them by name, and make product suggestions. It creates a memorable customer experience, which increases satisfaction and retention. Chatbots also sense when they can no longer be of assistance and will then connect a customer with a sales rep.

Handling Routine Queries, Allowing Human Agents to Focus on Complex Issues

AI chatbots are perfect for handling routine queries. This means your customer service agents are free to work on more complex tasks and help grow your business.

Providing Insights and Analytics

Chatbots analyze massive amounts of data every day. This data is what allows a chatbot to perform at its best. Generative AI bots can provide metrics on trends and highlights and even point out concerns. This process can help you establish where you may be going wrong, allowing you to fix it fast.

Offering Omnichannel Communication

Your customers don’t only contact you via email or telephone. You probably receive website form inquiries, social media comments, WhatsApp, and Facebook messages. A bot can help you answer questions on any one of these platforms. This omnichannel approach will help you respond to all queries and prevent dissatisfaction.

Increasing Customer Engagement

By making the online customer service experience more interactive, a conversational AI chatbot can help increase customer engagement. Instead of customers searching endlessly for different information, a bot can provide bite-sized data to personalize the process.

How To Choose the Right Customer Service Bot

The right AI chatbot can boost customer engagement through more personalized assistance and is capable of handling large volumes of queries at once. Here are a few other features the best chatbots for customer service should have:

Designed for Customer Service

Not all chatbots are designed with customer service needs in mind, and others may offer additional workflow automations or features that aren’t useful for your operations. Choosing an AI chatbot for customer service will give you the best results.

Omnichannel Deployment

You want to assist your customers where help is needed, whether through your website, on social media platforms, or through text. When choosing a bot, make sure it can deploy across your customers’ most-used channels.

Intelligent Routing

While AI chatbot software can handle most customer requests, you may still need to hand off more complex issues to human service representatives. A smart routing feature enables your chatbot to direct customers to the most relevant service rep, so customers can have their problems solved quickly.

Integrations

Look for chatbots that integrate with the platforms and channels you use most, such as your CRM tool and sales or marketing platform. This helps your chatbot better understand your customers and tailor responses to individual needs.

3 Examples of AI in Customer Service

See how companies are using AI chatbot solutions to provide 24/7 support to customers:

1. Media Hosting Website

Subscription-based websites use chatbots to provide customer service and support around the clock, so users get assistance even when human agents aren’t available.

2. Auto Body and Glass Repair Shop

Chatbots transformed outdated customer communications, making it easier for customers to get in touch and have queries resolved.

3. Moving and Storage Company for College Students

This business uses AI chatbots to help handle the high volume of questions and requests it receives around campus move-ins and outs. The chatbots answer FAQs and guide customers to the right resources.

Challenges and Limitations of AI Chatbots

If you want to implement an AI chatbot in your business, it is crucial to consider both sides of the coin. A chatbot can bring never-before-experienced efficiency and assistance to your business.

However, because this technology also has its challenges and limitations, it may not be able to provide 100% of the services you require.

Handling Complex Issues and Understanding Context

In the strictest sense of the word, a chatbot is just a bot. It can answer questions and resolve simple problems based on the information they receive. However, it cannot handle complex issues or understand context.

This is because chatbots can only work with the information they are programmed with. If a customer request presents a problem the bot has not encountered within its database, the bot cannot help. It may try to offer a solution, but it will likely be inaccurate or irrelevant.

Furthermore, chatbots don’t function like the human brain. It doesn’t have critical thinking skills. It cannot consider different perspectives or formulate alternative solutions. It can only give what it gets. This is why many chat-based bots, like ChatGPT, supply incorrect responses to complex prompts. And, at the same time, a bot is not creative and cannot solve problems. Yes, it can provide solutions to website visitors based on its internal knowledge, but it cannot operate outside of its boundaries.

Lack of Human Touch and Empathy

More importantly, a bot doesn’t comprehend or display emotions like empathy. It is because of this that most customers, 60% of them, prefer to wait for an agent instead of trying to interact with a bot. This statistic could pose a massive problem for your business, especially if it focuses on customer relationships. For example, if you sell insurance and have customers who need to claim, a lack of empathy will put them off. You may even lose their business because of the impact on the customer journey.

The human touch is invaluable in customer service processes. While customer support chatbots can help customers speed along simple processes, they cannot provide the human support that customers need. It also cannot display empathy. A lack of empathy creates a gap in customer service because customers cannot connect to your brand. This gap could lead to frustration and a loss of revenue for your business.

You can explore ways to overcome this, like giving your chatbot a personality and using the right technology for your business. But ultimately, you will need human assistance to take over from the bot when your customers need empathy, understanding, and reassurance.