A woman with red hair is seated on a couch. The image features a close-up of her face. She is holding a smartphone in front of her and is looking at something on the phone screen.
Before implementing an AI chatbot into your operation, analyze your reasons for using one and what your customers' needs and preferences are likely to be for using a chatbot. — Getty Images/Guido Mieth

Have you ever visited a website and received a pop-up message from an "employee" offering help? That likely wasn't a real person at the other end — it was a chatbot.

The increased adoption of chatbots for customer service reflects a broader trend toward using generative artificial intelligence (AI) to optimize business processes. In fact, 85% of surveyed executives anticipate generative AI will directly engage with customers within the next couple of years.

While chatbots can be a helpful addition to your business, they must be strategically implemented to be effective. Here's an overview of how chatbots work and tips to consider when using them for your small business.

[Read more: How AI Can Help You Serve Your Customers Better]

How do chatbots for business work?

Chatbots are software applications designed to engage with users, mimicking humanlike interactions and dialogue. While chatbots can operate without AI, the integration of conversational AI techniques, such as natural language processing, has become increasingly common. This feature enables chatbots to better understand customers and evolve as they learn through interactions.

Moving beyond the capabilities of traditional chatbot models, certain chatbots take it a step further by leveraging generative AI technology. These advanced options provide an improved solution for handling complex queries, differentiated from other chatbots by outputting new content rather than just generating responses.

Chatbots can handle tasks ranging from answering customers' questions to identifying strong sales leads to automating engagement responses and approving reports — without human oversight. For small businesses, automation can translate into improved efficiency, allowing limited resources to be used more effectively toward growth-focused activities.

While chatbots can offer your business many advantages when used right, they also come with some potential challenges.

Benefits and challenges of chatbots for business

Chatbots are a great way to boost your business's customer service offerings and streamline productivity across your company. For businesses that operate round-the-clock, chatbots can improve the customer experience by offering 24/7 service.

From answering FAQ-related questions to providing multilingual support, chatbots can assist customers without extra staffing, leading to a better customer experience and reduced requests requiring human assistance. Plus, employees benefit from streamlined workflows, thanks to task automation, leading to decreased employee churn, improved sales, and greater insights into customers' needs.

Chatbots also provide a convenience factor to customers who would prefer the DIY approach, allowing them to reach out using their preferred communication method. This can lead to more engaged, happier customers.

While chatbots can offer your business many advantages when used right, they also come with some potential challenges. Customers may grow frustrated when a chatbot is unable to assist with their needs, which may make them feel unsupported or as though you've taken the "human" out of your business. Additionally, developing and maintaining advanced AI-powered solutions necessary for handling complex interactions may be beyond many small business's budgets.

To determine whether or not your small business can benefit from employing chatbots, consider the specific needs of your company and customers. If your services are too complex or you have a tight budget, a chatbot that adequately suits your customers' needs can be a costly challenge.

[Read more: How Artificial Intelligence (AI) Is Changing How Marketers Sell Everything From Food to Fashion]

How to get started with a chatbot for your business

Ready to enlist a chatbot to help your small business? Start by identifying your company’s purpose for using it and determine what tasks it will perform. Keep the end user’s experience in mind by assessing your customers' needs and preferences to determine the most valuable chatbot features for your audience.

Then look at the communication channels used most by your audience and ensure the solution can be easily integrated into them. Understanding where and how your customers will interact with the chatbot is essential.

Once you've found the right solution for your business, the next step is to implement it. Get users excited about this new feature by introducing your chatbot to customers. Explain to them what it is capable of and provide predesigned buttons to help guide users through different scenarios effortlessly.

As you build your chatbot, don't forget to add some personality, such as an avatar or a name, to better reflect your business's tone and brand identity. However, don't go overboard or pretend like the chatbot is human, because this can feel inauthentic and make the bot harder for users to understand.

[Read more: 6 Customer Service Strategies That Will Boost Sales]

CO— aims to bring you inspiration from leading respected experts. However, before making any business decision, you should consult a professional who can advise you based on your individual situation.

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