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The Bots are Learning: How to Personalize Customer Experience with Today’s Chatbots


August 29, 2023


August 29, 2023

We’ve all suffered through the frustration of trying to use automated customer service tools and getting the dreaded “Sorry, I don’t understand that,” response from a bad robo-representative. But thanks to huge improvements in technology (turbo-charged by the influx of AI systems), clunky, generic platforms are largely becoming a thing of the past. And chatbots are quickly becoming a go-to way to personalize customer experience.

Delivering personalized customer experiences is an absolute must for the growth and long-term success of your brand. And when used correctly, today’s chatbots offer a valuable tool for creating those connections. In this article, we’ll cover what you need to know to ensure your bot-based interactions are offering the best customer experience at scale, including the current state of chatbots, optimization tips, common mistakes, and how to use these tools to drive customer relationships.

A Growing Desire for Tailored Interactions

Customers have greater access to more information than ever before, and that, combined with a never-ending sea of options to choose from, has raised the bar for what consumers expect when interacting with brands. Bland mass communication just doesn’t cut it anymore. Customers want more than just the product or service they’re shopping for—they want the brand they’re buying from to be personally tailored to their needs and feel aligned with their lifestyle and values. Plus, they want two-way interactions with the brand available 24/7 (Instagram ads never close, unlike brick and mortar). Having the opportunity to meaningfully connect with a brand on-demand is often crucial for making the sale.

People now (rightfully) demand personalized customer experiences that resonate with their distinct preferences, needs, and behaviors. And although that hasn’t always been the case, especially in the ecommerce and digital marketing world, the sentiment looks like it’s here to stay, forcing businesses to explore innovative ways to enhance customer interactions.

Thankfully, advancements in data analytics and tracking have given brands and marketers deeper insight into the minds of their customers. So if we already know what customers want, the challenge only lies in figuring out how to deliver what they need in a user-friendly way.

Using Chatbots to Personalize Customer Experience

Chatbots are programs designed to automatically engage with customers, offering solutions to questions or problems in a conversational manner. They’re used across SMS, website/app chat windows, and social messaging, and fall into two main categories of functionality:

  • Rule-based, or traditional, chatbots are programmed with communication pathways that prompt them to respond to messages in a standardized way based on certain keywords.
  • AI-powered chatbots use natural language processing and advanced algorithms that aim to understand the root intent of a message and produce highly tailored responses in a conversational manner.
There are two types of chatbots used to personalize customer experience; rule-based and AI-powered.

Whether it’s a rule-based or AI-powered chatbot, the basic functionality of the system is to identify a customer’s need, translate that into a request, and respond with an answer or solution.

From their primitive beginnings as tools for only the most basic customer support, chatbots have evolved into innovative pathways for personalized engagement that consumers are embracing in record numbers. In fact, it’s estimated that global consumer retail spend via chatbots will reach $142 billion by 2024—up from just $2.8 billion in 2019.

And with the widespread incorporation of AI, these automatic assistants can analyze customer data in real-time and serve up tailored responses that feel personal and almost human. This not only streamlines your customer engagement operations, but also leads to improved customer experiences and enhanced brand loyalty. It also helps users avoid the increasingly unpopular task of making an actual phone call, which 63% of people prefer to ditch in favor of chat messaging.

The power of AI also allows chatbots to quickly understand customers’ preferences based on their behavior to provide tailored product recommendations and upsells and boost your conversion rate.

Finding the right chatbot program

The number of chatbot programs on the market today can seem overwhelming—especially when you consider the importance of choosing the right one. Each platform has its own capabilities, features, and pricing, so how do you know what to pick? Ask yourself the following questions to narrow down what’s best for your brand:

  • What are your goals? Do you want help automating simple requests or FAQs? Or do you need a platform that can handle sophisticated customer engagements and uniquely personalized responses?
  • What is your technical capacity? If you need advanced customizations or a complex system, you’ll likely need someone on your team, or an outside developer, with experience setting up and maintaining similar platforms.
  • How much human support do you plan to have as a backup? Consider how the chatbot will function alongside your human customer service team, and whether it will require new integration hookups or processes.

Once you’ve determined what you need, you can choose from a wide range of chatbot options with endless possibilities. Here are a few commonly used platforms:

  • Drift helps answer customer questions and serve up customized website experiences based on user behavior.
  • Fin is powered by OpenAI, the makers of ChatGPT, and gives you real-time monitoring insights. It also has a convenient custom answers feature that lets you override AI responses with pre-written answers from your team.
  • Infobip has a simple drag-and-drop builder with options for both rules-based and intent-based chatbots.
    Kommunicate provides a hybrid platform with both human and chatbot support across several channels.
  • Lyro offers super fast responses and only pulls from the data you provide it with to avoid hallucinations or false answers.

Data is key for personalized chatbot experiences

Like most aspects of marketing, data is fundamentally crucial for setting up an engaging, efficient chatbot experience. Compiling and analyzing customer data unlocks your understanding of individual preferences, pain points, and likely behaviors. When you feed this to your chatbot, it can then generate and sustain conversations that feel natural and relevant to the customers’ needs.

Basic touches, like addressing the customer by name, are the bare minimum for providing a personalized experience. Beyond that, you should also incorporate information gleaned from:

  • Previous chats
  • Past purchases and coupon use
  • Account details (like location, cart items, favorites, etc.)
  • Browsing history
Customer data, including previous chats, past purchases, account details, and browsing history can be used to personalize chatbot experiences.

These insights can be used to generate relevant product or service recommendations, as well as special offers, making the customer feel understood and valued by your brand.

However, as you utilize this data, remember that it’s critically important to protect the privacy of your users. Customer trust is based, in part, on transparent data collection and usage practices. And complying with applicable data protection regulations is not only legally required, but also reinforces the credibility of your brand.

Humans and bots, working together

Despite the common fear that bots are going to take over, your human representatives and lifecycle marketing team are not going to be out of the job anytime soon. Chatbots should be integrated into your customer engagement strategy as a way to enhance human efforts, not replace them.

By using chatbots to automate things like shipping information, order statuses, returns, and product availability, your team is freed up to handle things that require a human touch. 

And even if you’re using an AI chat tool for more complex interactions, there should still be easy pathways for users to jump over to talk to a human via phone, chat, or email to ensure a seamless and satisfying experience. No one likes being stuck in a loop with a system that doesn’t understand the problem.

Improving Chatbot Customer Experiences with AI

As we mentioned, AI is playing a key role in driving the next generation of personalized chatbot capabilities. Today’s chat technology can be trained to recognize patterns and use predictive language in conversations. But it’s not always a turnkey process. A typical path for training a chat platform might include:

  • Starting with a set of predefined answers to common questions
  • Asking customers for more information when a response can’t be generated or there isn’t a relevant one programmed
  • Using that information to better understand what the user is asking for and then generating the appropriate answer
  • Relying on back-up human customer service representatives who can, first, offer a solution to the user, and second, note the fail point for the chat system and identify information needed to solve it

The more AI learns about the way people interact with your brand, the faster and more accurately it can generate useful responses, leading to greater customer satisfaction.

Best Practices for Chatbot Success

There are countless examples of brands that are successfully using chatbots to level up their connections—just look at the Whole Foods bot that generates recipes, Sephora’s AI-powered personal assistant, and the Domino’s pizza-ordering chat feature. 

Before you dive into using chatbots to personalize customer experience for your brand, familiarize yourself with current best practices. The following tips will help you avoid negative user interactions and ensure a more efficient integration into your current customer journey:

  • Understand your goals. Know what you want your chatbot to accomplish and be realistic about its limitations.
  • Start small. It’s better to offer limited chat functionality at first and then gradually increase its capabilities once you’re confident in the system’s ability to accurately serve customers.
  • Get the humans on board. Integrate your chatbot with your existing CRM and customer service team to build seamless pathways for exchanging information and handing off conversations and inquiries.
  • Have a consistent voice. Your chatbot should match the tone and attitude of your other channels so customers feel like they’re talking to the same brand.
  • Monitor and optimize. Chatbot success is an iterative process. Set up good tracking, analyze your data regularly, and adjust accordingly.
  • Beware of the uncanny valley. Never misrepresent who your customer is talking to. If it’s a chatbot, say that right at the start.

If you pay attention to those guidelines, you’ll establish a powerful channel for connecting with your customers and building their relationship with your brand.

Measuring chatbot performance

A successful chatbot system takes time to optimize and reach its full potential. Track your KPIs, like response time, conversation duration, customer satisfaction ratings, and, of course, conversion rates, to ensure your chatbot is operating properly. If something looks off, adjust your system and see if that improves your metrics. Be sure to also track qualitative data to take the temperature on how your customers are feeling during and after their interactions with your chat system.

And remember, customer preferences and chat technology are continually evolving, which means your approach should be regularly optimized to keep up. Look for opportunities to expand your chatbot’s knowledge base through updated data sources and new language processing tools.

Chatbot Challenges and the Fear of AI

One of the biggest barriers to successfully incorporating chatbots to personalize customer experience is user skepticism—55% of people using traditional (non-AI) chatbots don’t trust the bots to solve their problems. However, incorporating AI can help change that sentiment, when done correctly. That’s why it’s so important to start slow and only expand when you’re ready.

Another challenge is the risk of over-automation. People are beginning to embrace AI chatbots, but you don’t want to completely remove the human touch from the experience. Customers want to have a personal connection with your brand, so it’s smart to strike a happy balance between automated efficiencies and human interaction.

Customers are also often wary of how the information they type into a chat is being stored and used. This can easily be countered by being transparent about what you do with their data. Information about your data collection policies should be readily available via chatbot, human representative, and on your website.

The Future Using Chatbots to Personalize Customer Experience

As AI continues to advance, chatbots that incorporate the technology will become more useful and efficient at providing personalized customer experiences. Voice-based personalization still lags behind text chat interactions, but with the droves of voice data being captured by giants like Amazon, Google, and Apple, the technology is quickly catching up. 

In the future, chatbots are likely to better understand human emotions, preferences, and requests, resulting in text and voice interactions that drive deep engagements with brands. We won’t be that surprised if using chatbots to personalize customer experience becomes the go-to tool for building brand loyalty and revenue growth.

Could your approach to customer experience be improved through the use of chatbots? Talk to one of Right Side Up’s (human) experts to learn how to serve up customer interactions that drive growth. Send us a message at growth@rightsideup.co.

Jes Parker is a writer and content marketer with experience creating B2B and consumer-facing assets that build brands and make complex concepts more human. She has worked with companies and nonprofits like Highstead Foundation, Trust for Public Land, Harvard University, the Museum of the City of New York, and Times Square Alliance to craft accessible and engaging content strategies.

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