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How do AI-Based Chatbots Function?

AI-Based Chatbots

Do you know why businesses are increasingly investing in AI chatbots?

That’s because AI-based chatbots are known to reduce customer service costs and meet customer expectations by balancing automation with a human touch. According to a recent Business Insider study, the chatbot market is anticipated to grow by $9.4 billion by 2024.

Let’s learn more about AI chatbots and how they are helping businesses.

What are AI Chatbots?

AI-based chatbots are designed to have a conversation with the user to understand their issues and concerns. They are far more competent at performing tasks such as making appointments, filling out forms, and so on.

These are virtual assistants that offer human-like interaction as well as quick actions and solutions. With the advancement of technology, artificial intelligence is becoming more intelligent. We will see chatbots commuting like humans sooner or later, and it will be difficult to tell the difference between humans and machines.

Functions of AI Chatbots

We discussed AI chatbots as a technology that communicates with humans and tries to solve their problems. But the main question is how do they work?

Chatbots mainly extract relevant things to analyze and give the most appropriate solution. Chatbots use two methods to analyze what the user is saying:

Natural Language Understanding (NLU)

A chatbot converts the user’s input into structured data, allowing the machine to understand them. Understanding human language consists of entity and purpose recognition.

Natural Language Processing (NLP)

The structured data is subsequently converted into text via natural language processing so that humans can understand what the machine is saying. Emotions, normalization, and entity recognition are all part of it.

Top Features of AI-based Chatbots to Consider

  • 01. Personalization:
    The best thing about a chatbot is that it gives a human-like conversational experience to the user by understanding their issues, queries, and emotions, and giving them the most relevant information, solutions, or recommendations with the help of artificial intelligence. A chatbot should have a unique set of personalization features so it can increase customer engagement.

  • 02. Security of data:
    AI chatbots should meet all the security requirements and legalities to protect customer data. Ensuring that all security measures are being taken and the data is being protected can be beneficial for businesses to protect themselves and gain customer trust.

  • 03. Hybrid model:
    Companies implement hybrid solutions combining AI and chatbots so that the bot can understand and learn the conversation between an agent and a customer. When the chatbot is unable to understand the query, it directs the conversation to the available agent and then gives a solution according to the data. The AI-based chatbot optimizes its input itself with real data and automatically learns for better personalization.

  • 04. Conversational:
    The chatbot should be designed in such a way that it provides engaging human-like interaction. As a result of this, customers become more involved. Understanding human words and emotions, as well as responding promptly, will aid in determining client wants.
  • 05. Data analytics:
    The conversational AI chatbot analyzes large amounts of data input and personal information and queries. The essential role of a chatbot is to analyze data in the most useful way possible. Hence, companies use technology and tools that make the interaction between the chatbot and the customer understandable and engaging. Therefore, efficient chatbot development with data analytics capabilities can add value to your business.

Benefits of AI-based chatbots

  • 01. Aid personalization:
    Their conversational AI features help to learn, provide, and automate new ways of interacting with customers. They also help the agent to tell if the customer has tried to solve the problem himself and to see the sites the customer has visited.

  • 02. Work on multiple channels:
    Different customers use different channels to communicate their problems. Hence, customer service has now become omnichannel. Since AI-based chatbots are omnichannel, they can solve customer issues across various channels.
  • AI chatbots with multichannel capabilities are useful in all industries, for instance, reserving food and placing orders. Hence, various e-commerce companies are adopting AI chatbots to make the task easier and more cost-effective.

  • 03. Offer quick solutions:
    AI chatbot helps customers solve problems themselves by giving the right direction or link to the solution. Chatbots can solve the problems of many customers simultaneously, unlike customer service agents, who can handle only one customer at a time. In a survey,  some customers were asked about the benefits of chatbots and they replied with round-the-clock and fast responses.

  • 04. Reduce customer service costs:
    The hiring of customer service professionals can cost a company billions of dollars. To solve the problem, a large number of customers will require a large number of customer service agents, which can be costly to a company on an annual basis. To address this problem, businesses are turning to AI-based chatbots. A chatbot can answer multiple inquiries at once, reducing the requirement for live customer service representatives.

  • 05. Reduce errors:
    Customer care agents can sometimes misunderstand what the customer wants but the chatbot can not make such errors or mistakes. The AI chatbots are built in a way that they always provide the right answers or solutions to the customer’s problems by learning through the conversations.


The power of an AI-based chatbot is endless, it is always evolving and learning new ways to give the best customer experience to people. It not only satisfies the customer’s needs but also makes the task easier for enterprises in selling their products or services.

At Jellyfish Technologies we always try to evolve with the changing environment and technology, and our expert engineers are developing chatbot models in the most intelligent way possible.

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