Chatbots - the next big thing in conversational commerce

While chatbot development is still in its infancy relative to other digital communication, this cutting-edge software is believed to be the next big thing in conversational commerce (i.e. the use of messaging apps, chat or voice technology to interact with consumers and sell products). Chatbots aren’t new though. One of the earliest chatbots, ELIZA, was published in 1966. This pioneering chatbot would toss sentences back and forth, often leading to dull or absurd conversations. Since then, chatbots have been revived. Drastic improvements in the field of Artificial Intelligence (AI) now allow chatbots to converse independently, making human intervention more and more obsolete. The implementation of chatbots within a business context can offer many benefits. As such, it can allow companies to be reachable 24/7 and help build a new type of relationship with their customers.

Whilst everybody is chatting about chatbots, you may be wondering what these bots are exactly and what they do. Are they a new fun way to interact online, or a scary technology that is putting people out of jobs? A convenient tool, or rather a poor substitute for a real living human being?

Miss Piggy Imperson

What are chatbots?

A chatbot is a computer program that uses deep learning to simulate conversation and automates certain tasks. Think of a virtual assistant – such as Siri or Alexa. Need to know what the weather is like in Paris? Ask your chatbot. Will your flight to Paris depart on time? Ask your chatbot. Will the package you ordered be delivered while you are in Paris? You know the drill. The technology could forever change the way humans interact with the digital world. Instead of opening a search engine, clicking a weather site and looking up your location, a well-designed chatbot would answer your simple verbal or textual query with an instant, geographically accurate update. Chatbots will make internet searches or mobile apps redundant.

Chatbots are not only useful to automate processes for individuals. These tools can also prove useful to companies.

According to Forbes, “their tasks can be programmed to retrieve data, respond to specific keywords, know when to offer an additional product to a consumer, increase interactions ratings, and improve overall consumer experience for increased sales.”

They can become a key part of customer service. Major players in the chatbot arena include Facebook chatbots, Google chatbots, Kik, WeChat, and Microsoft. Other brands such as Uber, KLM and Duolingo also adopted chatbots for marketing purposes. Another – be it sillier – example worth mentioning is the Miss Piggy chatbot on Facebook Messenger. To promote the new Muppet Show, viewers could chat with the characterful pig. When asked how Kermit is doing, she responds rather snappily: “I wish everyone would stop asking me about Kermit… I have moved on.” This shows that there is no limit in creativity. Other original examples include conversations with comic hero Iron Man or weather bot Poncho.

Uncanny valley graph

What do these chatbots all have in common? First, bots exist within pre-existing messaging platforms, making them easily accessible. They are available anytime and – unlike humans – can answer questions 24 hours a day without becoming tired or irritated. Second, bots can mimic human interaction by communicating in a conversationally manner with a natural, fun and engaging tone of voice, just like a real person would. Third, personalization is key. On the one hand, personal data of the collocutor (e.g., their first name, previous purchasing behavior, browsing history, etc.) is used to tailor the conversation. On the other hand, chatbots are developed with human-like personalities by providing the avatar with all kinds of character traits (e.g., snappy Miss Piggy). Thanks to these funny quirks, developers can avoid the uncanny valley in which people create an aversion for the humanoid robot when resembling a human more.

An important side note which has to be exclaimed: consumers still value a human touch in their interactions with retailers. Chatbots and human contact should complement rather than replace each other. A study by ORC International concluded that one out of five people believes chatbots provide a better service than humans do.

Millennials and chatbots, a match made in heaven

Millennials and chatbots appear to be the perfect match. These digital natives grew up with the internet, smartphones and online chat.

“Nearly 75% of the world’s internet users already uses messaging services, and Millennials make up the most dominant segment”, says Alex Campbell, co-founder of Vibes.

Millennials spend more time messaging than on any other form of communication. To be successful, companies must fish where the fish are! Rather than investing in traditional marketing channels to engage Millennials, businesses must target this Generation Y through messaging services. Moreover, these tech-savvy people adapt easily to new technologies, which makes them very receptive to chatbots. An automated interface doesn’t seem to intimidate them.

Chatbots align directly with the next generations’ preferred method of communication, namely text-based communication (e.g., instant messaging, text messaging, etc.). Most Millennials despise picking up the phone (as a Millennial, I can vouch for that), let alone type a whole e-mail. A survey by [24] confirms that chat (28.9%) has surpassed phone (28.7%) and e-mail (27%) as the most popular way for consumers to interact with retailers.

Chatbots allow Millennials to be lazy – or more efficient if you ask me. Where Millennials used to look for their information via search engines, company websites or apps, they can now get their answers rapidly, easily and effortlessly by asking a chatbot. Using a company’s website or app for all your transactions – ordering a Domino’s pizza, calling an Uber or purchasing clothes at Zara, etc. – will be a thing of the past.

However, there is a difference between industries. For brands selling simple impulsive products, chatbots make sense, as according to an ORC International study 74% of Millennials is willing to use a chatbot when buying food and 56% when buying clothes. For brands selling complex customized products, chatbots aren’t always suited, as only 29% of Millennials is willing to use a chatbot when buying medical services and 34% when buying financial services like insurances.

But why should companies focus on reaching Millennials? First, they remain the least-engaged generation of consumers, which makes room for a lot of opportunities. Second, they possess an immense collective buying power estimated at approximately $200 billion. Businesses that embrace messaging and chatbots to drive conversational commerce will enjoy a significant competitive advantage.

Chatbots: futuristic sci-fi or current reality?

In the not-so-distant future, companies will be able to communicate directly with their customers through chatbots in Facebook Messenger, WhatsApp, etc., and no one will blink an eye about it. It may seem a little odd now, but it will be the most common thing to have companies like Pizza Hut, NMBS and Zara in your contacts list. Our Eastern neighbors are already accustomed to transferring money, ordering a taxi or making a dinner reservation through a chat window on WeChat, Line or Kik. Millennials play a significant role in this trend by leading the pack when it comes to embracing chatbots.

This generation in particular supports this new way of connecting people to brands. When asked to weigh which retail technology would most improve their shopping experience, 21% of respondents said the use of chatbots, outranking other trends such as virtual reality, drone delivery and mobile wallets. As such, conversational commerce seems to be the future of online shopping!

Want to explore how your brand can connect with the next generations, and with Gen Z in particular? Discover what our research toolbox and expert power can do for your brand!

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Gen Z are the digitally native generation: social-media-literate, always-on and hyper-informed. With many Gen Zers coming of age during the pandemic, the past two years put a mark on their lives and outlook on the future. In this report, we shed a light on what makes Gen Z different from the generations before them and what they expect from brands.

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