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  • Chatbot: An Ultimate Guide (UPDATED 2024)

Chatbot: An Ultimate Guide (UPDATED 2024)

Learn what is a chatbot, types, how it works, applications, benefits and how you can build a chatbot within few minutes.

  • Feb 27 2024


what is chatbot

In today’s landscape of digital interactions, chatbots have proven to be transformative agents, changing the way businesses engage with their audience. AI bots are a fusion of artificial intelligence and natural language processing; chatbots are virtual conversational agents that can understand, interpret, and respond to user queries in real time.

From streamlining customer support and automating routine tasks to delivering personalized interactions, chatbots enhance user experience across industries. In this era of instant connectivity, chatbots offer efficiency, accessibility, and a seamless bridge between users and businesses.

By 2027, Chatbots can become the primary customer support channel for a quarter of all the companies – Gartner

What is a Chatbot?

A chatbot is a software application or a conversational interface that simulates human-like conversations with users, often providing customer support. Chatbot can work with text or voice input and can be integrated into multiple customer channels like websites, Mobile Apps, Facebook Messenger, WhatsApp, Instagram, Telegram, Slack, and more. A chatbot helps businesses in automating customer support and engagement through workflows and artificial intelligence.

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An AI chatbot is capable of responding in text or voice, replicating human-like conversations; chatbots can be as simple as a computer program that responds to simple user queries or as flexible enough to respond to all kinds of complex user queries, extending its scope.

Types of chatbots

Workflow or rule-based chatbots – Workflow-based bots are built with only the workflows defined to provide responses for specific tasks or queries; they might not even allow users to enter queries and only guide users by clicking buttons.

Conversational AI-powered chatbots - Conversational AI bots are trained on specific intents and entities to let users get responses for certain queries defined. 

Generative AI-powered chatbots – Gen AI bots are integrated with LLM models and are best for providing the most contextual and personalized responses.

With the rise in Gen AI LLMs, there is a huge improvement in the contextual abilities of AI bots. Gen AI bots are considered to be smart and capable of understanding complex user queries.

How does the chatbot work?

Workflow-based chatbots work on predefined flows intended to perform specific tasks and might not involve any underlying AI to process the data. Whereas conversational chatbots work as below.

Working of Chatbots

  1. User input: Users interact with the chatbot by typing or speaking the queries or commands into the chat interface.

  2. Natural Language Processing: NLP enables bots to interpret and understand user input. It involves breaking down user messages into structured data that the bot can analyze.

  3. Intent recognition: Chatbots identify the user's intent by analyzing the input. They determine what the user is trying to achieve or the information they are seeking.

  4. Entity recognition: Entities are specific pieces of information within the user's input, such as dates, locations, product names, etc. Chatbots use entity recognition to extract these details and understand the context of the conversation.

  5. Response: The chatbot generates a response in a natural language format that is understandable to the user. This response is then presented in the chat interface.

There are a number of natural language processing-based algorithms used to train chatbots; here are a few popular ones

  1. Naïve Bayes Algorithm
  2. Support vector Machine
  3. Natural language processing (NLP)
  4. Recurrent neural networks (RNN)
  5. Long short-term memory (LSTM)
  6. Markov models for text generation
  7. Grammar and Parsing Algorithms

Algorithms help chatbots learn from the data it is trained on, and to create an effective chatbot, you should use a good well, trained AI model.

Benefits of implementing a chatbot

Customers nowadays demand instant query resolution and customized experiences across various platforms. To meet customer needs, it becomes important for businesses to leverage AI automation through bots.

67% increase in sales is brought by chatbots, according to business leaders - Outgrow

Here are a few of the benefits of implementing a chatbot that takes your customer experience to the next level

  1. 24/7 Availability – Chatbots are available 24/7 to respond to your customer queries.
  2. Instant response – With an agent live chat, customers need to wait for a support agent to respond, whereas that is not the case with a chatbot. Chatbot provides instant response to the user.
  3. Time and cost savings – Bots can save time for human agents. In addition to time, bots can also reduce support costs by up to 80%.
  4. Increased efficiency and productivity – It increases efficiency and productivity for support agents so that they can focus on more complex tasks.
  5. Personalization – Chatbots provide personalized responses based on user requirements.
  6. Enhanced user engagement – You can leverage chatbots to increase customer engagement and thereby increase CSAT scores.
  7. Omni-channel customer support and engagement – You can interact with the customers on their favorite channel, where they spend most of their time, be it WhatsApp, mobile app, or any other social media channels.
  8. Multi-lingual – Chatbots can support multiple languages. With chatbots, you can provide multi-lingual support.
  9. Seamless integration with existing systems – Bots can be easily integrated with any of the existing systems making it easy to deploy.
  10. Fallback to a human agent when required – Bots are capable of fallback to a human agent in case the user needs it or for any complex scenario.

How chatbots are deployed in real-world scenarios across industries

Chatbot applications are not limited to any use case or any industry. Chatbots can be deployed for numerous use cases across industries.

69% of consumers were satisfied with their last interaction with a chatbot - Tidio

Here are a few examples of how chatbots are used in real-world scenarios:

Customer Service in E-Commerce:
E-commerce platforms use chatbots to provide instant support for order tracking, product recommendations, and addressing customer inquiries. They enhance the shopping experience by offering real-time assistance.

Healthcare Consultation:
Healthcare chatbots assist users in scheduling appointments, providing basic medical advice, and offering information on medications. They can also help in triage, assessing symptoms, and directing users to appropriate medical resources.

Banking and Finance:
 Chatbots in the banking sector handle routine tasks such as balance inquiries, transaction history, and fund transfers. They can also provide information about financial products and assist in resolving common banking issues.

Travel Assistance:
 Travel companies deploy chatbots to assist customers with flight bookings, hotel reservations, and travel itineraries. Chatbots can also provide real-time updates on travel conditions and answer frequently asked questions.

Human Resources and Employee Support:
In the workplace, chatbots are used for HR-related tasks, such as answering employee queries about policies, leave requests, and benefits. They can also assist in onboarding processes and training.

Education and Training:
Educational institutions utilize chatbots for student inquiries, course information, and enrolment details. They can also facilitate interactive learning experiences, answer student queries, and provide study resources.

Automotive Sales and Support:
 Automotive companies deploy chatbots to assist customers in choosing the right vehicle, scheduling test drives, and providing information on maintenance services. They enhance the overall customer experience in the automotive industry.

Hospitality and Hotel Bookings:
 Chatbots are used in the hospitality sector for hotel reservations, check-in/check-out processes, and providing information about amenities. They can also assist guests with room service requests.

Legal Consultation:
Chatbots in the legal industry assist users with basic legal queries, help in generating legal documents, and provide information about legal procedures. They can guide users through initial consultations.

Insurance sector:
 Insurance companies deploy chatbots to assist customers in filing claims, checking policy details, and answering questions about coverage. Chatbots can streamline the claims process and provide updates on claim status.

Retail and Customer Engagement:
Retailers use chatbots for personalized product recommendations, order tracking, and handling customer inquiries. They can also assist in loyalty programs and promotional activities.

Government Services:
Governments deploy chatbots to provide information about public services, answer citizen queries, and assist in navigating bureaucratic processes. Chatbots can streamline interactions with government agencies.

Real Estate Sales and Inquiries:
Real estate companies use chatbots to provide property information, schedule property viewings, and answer common questions from potential buyers or tenants.

Food and Restaurant Services:
These examples showcase the versatility of chatbots and their ability to provide value in diverse industries by automating processes, improving customer service, and facilitating more efficient interactions.

How to easily build a Gen AI-powered chatbot within a few minutes

A no-code platform lets you build a Conversational AI bot easily without coding. This not only saves chatbot development time but also saves time for integrations with third-party tools or back-end systems. Floatbot comes pre-integrated with multiple platforms and various CCaaS, cPaaS, live chat, digital banking, and insurance platforms.

With Floatbot, you can build workflows, set AI or configure language, live chat, custom look and feel, and more. To set up Gen AI, you simply need to add OpenAI ChatGPT or any other LLM API key, and the bot is ready to handle all the queries through LLM.

Apart from no-code bot building and Gen AI integrations, Floatbot lets you configure an AI execution pipeline for multiple classification models over a user query, Gen AI-powered cognitive search, Agent M – building LLM agents for complex user queries, and Multi-Modal AI for agent assist.

Floatbot is a comprehensive platform that helps you with end-to-end AI automation. Sign up now and give it a try.


As the digital landscape evolves, bots continue to redefine customer experiences, streamline processes, and elevate efficiency across industries. It simplifies customer support, drives sales, or aids in information retrieval. Since technology is constantly evolving, chatbots have evolved too over time making it inevitable for businesses. We can surely conclude that the future of chatbots is bright!