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Chatbot Software 2021: Complete Guide

Learn how Chatbot help your business and how to choose the right Chatbot software

Last updated: Feb 23, 2021

Chatbot Software 2021: Complete Guide

What is a Chatbot?

Historically, for businesses, mass marketing and communication with individual customers were two clearly separated things. The former was exclusively one-way and determined popular brand perception. The latter was largely an isolated, negligible phenomenon. Then came the internet, digital marketing, and social media, dissolving this divide and shifting power rapidly from the marketer to the consumer. Today’s consumers are quite demanding. They expect personalized communication, 24/7 availability, and exceptional customer experience.

Fortunately, digital technology enables a new level of customer service through bots, chatbots, and other automated solutions. Indeed, there are so many of these solutions available today that it can be confusing. Let us start this article by addressing the difference between a bot and a chatbot.

The term ‘bot’ is a diminutive of ‘robot’. Bots, like robots, are autonomous software tools designed to automate repetitive activities that otherwise would take up significant human time and energy. Chatbots, like regular bots, are automated tools designed to complete specific software-based tasks, but unlike regular bots, they can simulate a conversation or interaction with a real person. The human side of the conversation provides data that the chatbot processes along with contextual data available to it from elsewhere, and the chatbot’s part of the conversation is its deliverable.

Chatbots help businesses to communicate with customers in a personal way without incurring the expense of human representatives.

What is Chatbot Software?

A Chatbot itself is a piece of software. It is a highly capable and viable option to streamline communication between humans and machines. It is a software that can simulate user interaction in natural language via websites, social media channels, mobile apps, text messages, or phone calls. Chatbots are used in different facets of business interactions, such as improving customer experience, enriching the customer engagement process, increasing operational efficiency, and reducing cost. For example, a retail store may want a chatbot to help customers make purchases, while a telecom provider may develop a chatbot to answer customer support questions.

Chatbots can be divided into two broad categories, depending on the way they are programmed: Simple chatbots and Smart chatbots.

Simple Chatbots are rule-based chatbots, with pre-written keywords. Conversations are mapped out for the chatbots, like a flowchart. Each command is scripted by the developer using regular expressions or other forms of string analysis. These chatbots can respond to questions only within the defined rules, and operate within the use cases that they have been programmed for. Users are provided with explicit options in different forms, text, button options, voice, etc. In scenarios where conversations don’t follow the flow or the keyword list, simple chatbots are programmed to respond with messages like “sorry, I did not understand that” or “our customer support agent will contact you soon.”

Smart Chatbots use Artificial Intelligence and Machine Learning and use Natural Language Processing (NLP) to understand the context and purpose of a question before communicating any response. These chatbots come up with their own responses to given questions using NLP. The more one uses and coaches these chatbots, the more they learn and become effective while interacting with humans. This works especially well for businesses that deal with a lot of data.

Of course, human discretion is crucial to decide which chatbot solution is right for the business. With different frameworks, platforms, and enterprise solutions available to develop, it is essential to have human involvement in designing, training, and augmenting the chatbot application, depending on the business use case to address.

Key Benefits of Using Chatbot Software

Chatbot applications are growing, evolving, and impacting businesses in many ways. Companies are integrating chatbots into their daily operations, customer communications, and sales processes. It is noticeable in almost every facet of the way businesses communicate with people. Chatbots offer many benefits to companies, including increasing sales and conversion rates, and reducing operating costs. To name a few key benefits:

  • With the automation of repetitive tasks due to chatbots, the human workforce can focus on more complex and strategic tasks
  • Chatbots, by design, enable 24/7 support and services to employees and customers, thus resulting in enhanced engagement and experience round the clock
  • With access to various functions and information, chatbots provide prompt, accurate, consistent, and patient responses to all end-user interactions.
  • Chatbots can be used to improve the service offered by human agents, by providing quick response options or relevant information
  • The use of chatbots allows for systematic storage and access of customer information, which can be used for distilling insights and recommendations, and personalized context-based interactions

Industries that use Chatbot

There are different types of chatbots being used by different businesses. Chatbot software can be integrated into company systems to harness a range of capabilities from simple introductory greetings to handling payments, or to give advice. Such a range of capabilities makes chatbots flexible enough to be used across different industries. Yet, certain industries are better positioned to take the maximum advantage of Chatbot technology. Here is a list:

Travel and Hospitality

The success of the Travel and Hospitality industry heavily relies on excellent customer service. A happy customer results in increased customer loyalty and reference business. In our technology-driven times, chatbots play a sizable role in speeding up processes and making customers comfortable during service delivery. Businesses have various options to employ chatbots across tasks, from search assistance to making bookings for rooms/ restaurants/ excursions, to getting personalized service, including a number of concierge options to inquire about deals and discounts, and so on. The customer engagement and retention imperative of the business gets a big leg-up with the use of chatbot technology. This also frees up precious time for human concierges to address complex requests from customers.

Retail and E-Commerce

It is a common occurrence that customers lose focus while browsing through an extensive range of available products on corporate websites. Chatbots are known to guide customers with the right amount of details or directions to make purchase decisions. Chatbots also help in reminding the customer about their abandoned carts and nudge them to revisit and make the purchase. They also provide quick and reliable customer support, while sharing the timely delivery status of the purchases. Increasing customer engagement and eventually driving higher sales are the main reasons for retail and e-commerce deployments of chatbots.

Banking and Financial Services

This sector is so transactional in nature that chatbots are already deemed a necessity, and this is set to bring in bigger transformations. Chatbots are ideal for banks and financial institutions and can be used in different ways to service customers, such as to check account balance, transfer money, view transaction history, or locate the nearest ATM. Chatbots also help in marketing activities like communicating the benefits of fixed deposits, investments, money-saving goals, credit card convenience, and new service launches.

By 2022, banks can automate up to 90% of their customer interaction using chatbots


Lauren Foye

Juniper Research


Users seek out healthcare when they are already under stress, and trying to find the right specialty and available doctors can be unnerving. Chatbots can make the process easier by engaging the patient with a set of questions and then determining the relevant doctor and department. Healthcare institutions benefit in several ways by using chatbot solutions. A host of services may be supported, such as booking appointments with the right department, sharing medical information, refilling prescriptions, monitoring the health status of patients, and assisting patients with medication reminders. The round-the-clock feature of chatbots is especially appreciated in this sector.

Key Benefits of Using Chatbot Software

Real Estate

Almost every customer in this sector has a unique requirement. By using chatbot technology, Real Estate businesses can improve their ability to present the customer with near-exact information to fulfill their unique requirements. Chatbots can ask and store for reference some preliminary information that ascertains a customer’s specific requirement and then lead them to offer the right available property without delay. Using the contact details gathered during a preliminary chat, chatbots can make the follow-ups less bothersome. Chatbots can engage customers in real-time to help make quick and effective decisions, thus saving precious time and money for the businesses, while significantly upping the chances of deal closures.

Users of Chatbot Software

As we have seen above, chatbots make an impact on many business functions across industries, and hence, are being integrated with several software solutions used by various departments. Naturally, a range of user-profiles operate chatbots. Here are some examples of how users of different departments benefit from the chatbot technology.

Customer Service

Chatbots help human agents in answering FAQs, providing responses to simple queries on purchase and delivery dates, raising tickets, and capturing preliminary customer information.


Chatbots engage with customers at the right time with the right questions, point to relevant products/services, and make recommendations based on the ‘conversations’ with the customer, freeing up marketers’ time and resources for higher-level activities.


Chatbots can behave like sales assistants and notify the sales workforce of their assigned responsibilities and opportunities. They can ease up the creation and updating of the sales pipeline and its progress, and improve the conversion rate by providing on-time first mail/message response to any leads.


Chatbots can be integrated into systems to monitor employee satisfaction and productivity, help answer frequently asked common HR-related queries, assist employees in common transactional tasks such as maintaining data on days taken off, training, meetings, etc.

IT, Facilities, Support Services

Chatbots can ease the help desk task by creating, prioritizing, and assigning tasks, alerting users on the status of the cases, notifying users about system updates, and answering common IT-related questions.

Why Chatbot is Important

Chatbots address the need for human-like attention without having to place an actual human in that role. Chatbots have way higher view rates and response rates than any other marketing or customer service tool. Due to its interactive nature, customers can be steered through the journey that interests them the most.

Some of the major business problems solved by chatbots are:

24/7 On-Demand Support

With the blurring geographical lines of business, there is always a customer wide awake and demanding attention, and the expectation to receive attention 24/7 is increasing. Chatbots work very well as the frontline of sales inquiry or customer support. Also, chatbots can work non-stop without any break and handle multiple interactions at the same time. This is especially useful when businesses have limited staff and are global in nature.

Reducing Operational Costs

Chatbots may not be the full solution for all problems. But they free up time and effort capacity for human agents in different roles, which they can use to address more complex tasks. By automating some interaction-rich processes with chatbots, businesses can reduce the costs of hiring and training. Chatbots also reduce costs by being consistent and reducing arbitrary errors.

Lead Conversion

Customers who are attended to on time are more likely to convert. Chatbots can do that and also provide consistent answers, thus increasing sales.

Improved Customer Engagement

Smart chatbots can track customers’ interests, preferences, and needs. Based on those elements, they can recommend apt products or services delivered through personalized interactions in a conversational manner. All of this results in pleasing customer experience, boosting up customer delight, and so, increases loyalty.

Key Features of Chatbot Software

Chatbots are getting very popular. They are increasingly providing more customization features that fit the business needs. Even though there are wide differences between simple and smart chatbots, there are some common underlying features to all kinds of chatbot software.

Human-like Interface

A chatbot should have a personal touch while reflecting the company’s brand personality. The text or voice-based interactions should be well-defined so that customers are at ease while interacting with them.

Agent Hand-off

This feature is not just about quickly getting ready to chat by learning relevant information, but also by evolving triggers to handover conversations to human agents when the chat becomes too complex. The right collaboration between a chatbot and a human can generate more value than using one or the other alone.


Customers may access company information and pass on their own data through different channels. Chatbots should be able to capture information across all channels and provide support to relay cross-channel information.


Chatbots’ analytics modules should be able to capture information from every interaction and use that to make decisions such as product recommendations, context-based discounts, handover to a human agent, etc. The ability to label and classify is very important for any kind of analysis and decision-making feature.

Data Security

Data security is very important for any enterprise, especially while handling customers’ personal information within regulatory frameworks. It is essential that chatbot solutions match expected security conditions and legal requirements for businesses spread across multiple legal regimes.

AI in Chatbot Software

Most of the chatbots in operation today are not AI-based, however, since 2019, chatbot solutions are leaning more towards AI. The technology as currently applied to chatbots might still be in its infancy. In the 2019 Gartner CIO Survey, CIOs identified chatbots as the main AI-based application used in their enterprises.

The demand for AI-powered chatbots is increasing, given the promise held out by having customer insights available in real-time. It can be used by the enterprises to understand user behavior, purchasing habits, and preference over time, and respond with more personalized relevance. In addition, AI in chatbots can help to fill forms, book appointments, cross-sell and upsell, make recommendations, and integrate with backend software, such as ERP or CRM systems, to carry out further tasks after user interactions.

Advances in AI technology suggest that chatbots will become more sophisticated and better equipped to handle proactive engagements. For example, AI chatbots will not only assist users to raise tickets but be able to predict an incident based on past information and report a ticket. This will help in reducing costs and optimizing helpdesks, as future issues get resolved before they arise. Some enthusiasts even believe that AI in chatbots will not only be able to answer customer questions but be able to talk, think, and develop emotional relationships with customers.

By 2021, nearly one in six customer service interactions globally handled by AI



Buyer’s Guide: Guide to Choose Right Chatbot Software

Chatbot integration into the business is a step forward to offer better customer support and improved engagement. With so many available variants, one needs to be clear about the functions and tasks that the chatbot needs to address before any kind of evaluation takes place. Smart chatbots, powered by AI/ML, are advanced, equipped to examine vast datasets, and further build on existing knowledge. While smart chatbots are in the near future of most major industries, they are not necessary for all business functions. While assessing your chatbot solution needs, it is good to assess the organization’s technical capabilities as well. In the case of some smaller companies or ones with precisely defined goals, simple chatbots may be a more appropriate solution.

Buyers are recommended to consider peer reviews and expert opinions that are extensively available on Cuspera before making buying decisions. Cuspera’s AI based engine guides you through the requirement process to help you choose the right software.

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Here are a few things to consider while researching chatbot solutions:


Though much of the chatbots are generic in nature, if there are solutions available tailored to specific industries, it greatly helps in easy adoption. This removes barriers around domain context, language, terminology, and business context.

Platform vs Framework

Platforms have templates which can be used to build chatbots with no/low code, and easy drag and drop interfaces. Whereas, Frameworks provide elements like intent, context, conversation designs, etc. for developers to code while building chatbots. The choice between platform and framework is mainly dependent on the team’s technical ability, the need to customize, and the flexibility to publish in different publishing platforms.


Integration with existing applications of the company are a must requirement for chatbots. If chatbots are being used to gather insights, then the solution chosen should be the one that syncs up with the company’s ERP, CRM systems, and software for marketing software, email, etc.


Chatbots need to be necessarily customized for company branding, configuration, rule customization, etc before deployment. So chatbots should necessarily provide the customization capabilities.


AI-enabled chatbots offer many sophisticated capabilities and are a lot more dynamic and intuitive to customer interactions. Depending on the nature of your business and the use-case, you can decide whether AI-enabled chatbots will provide value. For example, a customer service chatbot or banking chat might have a very fixed number of responses as customers might be asking a predetermined number of questions, however, a product selection chat might require a lot more dynamic interaction.

Challenges in adopting Chatbot Software


The primary challenge is the restrictive nature of most chatbot technology due to which chatbots are not always able to comprehend the language of customers. Every business and its respective target user expresses in a different way. There are many factors that influence the way people speak, their accent, dialect, etc. That is why training a chatbot to process the inconsistencies in language and yet converse correctly is a big task. Chatbots’ inefficiency in this area can be a big barrier for international organizations. Also, most chatbots are not able to process and function multiple questions at the same time from the same person or guide the user back to subject/action when they go off-track.

Learning Curve

Chatbots depend on a large amount of conversational data to get efficiently trained. For businesses that don’t have access to a considerable amount of relevant and categorized data to use, the cost and time spent to build efficient chatbots can be prohibitive.

Data Security and Compliance

Data is key for smart chatbots, not just for engaging interactions but also to improve systems and share business insights. Many a time, however, significant data remains inaccessible due to regulations and legislation around the world. Regulations that restrict personal data flow are likely to increase in many countries, going forward. Just storing and retrieving information for export in a compliant manner is an operational challenge at times, as could be the task of deleting in a secure and auditable way. This means that businesses could lose a key benefit to implementing chatbots, as, without the customer data to access and analyze, they are effectively blind to customer choices and behavior.

59 Chatbot Software