Conversational AI or Chatbots: Which One Is Right for Your Business?

Customer service has come a long way from the early days of clunky, scripted bots that could only answer ‘What are your hours?’ Today’s intelligent virtual assistants can troubleshoot issues, offer product recommendations, and even crack a joke (well, sometimes). 

But how do you pick the right one for your business? Maybe you’re struggling to handle customer questions quickly, or your team feels overwhelmed.

Let’s examine the differences between chatbots and conversational AI so you can determine which is best for improving your customer experience.

Table of Contents

• What Are Chatbots and Conversational AI?
• Key Differences Between Conversational AI and Chatbots
• Benefits of Conversational AI and Chatbots
• Use Cases: Conversational AI vs. Chatbots
• Factors to Consider When Choosing the Right Solution
• Combining Conversational AI and Chatbots
• Frequently Asked Questions (FAQs)
• Making the Right Choice for Your Business

What Are Chatbots and Conversational AI?

Chatbots are software applications that automate user conversations through predefined rules and scripts. 

Chatbots, on the other hand, are designed for practicality. They excel at handling straightforward tasks such as answering FAQs, providing essential customer support, or collecting user information. 

Since they rely on scripted responses they are ideal for managing simple, repetitive queries, freeing human resources for more complex tasks.

For example, a chatbot on a retail website can respond to questions like, “What are your shipping rates?” or “What is your return policy?”

Conversational AI, on the other hand, is a more advanced technology that uses machine learning (ML) and natural language processing (NLP) to understand and respond to human language contextually. 

It can handle complex conversations, understand intent, and learn from past interactions to improve over time. Its adaptability and intelligence make it a powerful tool for businesses dealing with complex customer interactions. 

For instance, a banking assistant powered by conversational AI can help users find investment options based on their financial history and goals.

Key Differences Between Conversational AI and Chatbots

While chatbots and conversational AI are often used interchangeably, they are distinct technologies with unique capabilities. To provide a clearer understanding, let’s delve into their differences:

1. Technology

Chatbots operate on predefined rules and scripts, making them practical for structured tasks with fixed responses. Conversational AI, powered by ML and NLP, understands context and offers dynamic interactions.

Example: A food delivery chatbot may confirm an order, while conversational AI could suggest dishes based on past orders.

2. Complexity

Chatbots manage basic tasks like answering simple questions or collecting information. Conversational AI handles complex, multi-step interactions, maintaining context throughout the conversation.

Example: A hotel booking chatbot may only collect check-in and check-out dates, while a travel AI assistant can suggest destinations, compare prices, and book a full itinerary in one interaction.

3. Personalization

Chatbots provide standard, one-size-fits-all replies with minimal personalization. Conversational AI adapts responses based on user preferences, behavior, and past interactions.

Example: A conversational AI music app can recommend playlists based on the user’s listening history.

4. Cost and Scalability

Chatbots are budget-friendly and easy to deploy for basic automation. Conversational AI involves higher upfront costs but offers greater scalability and efficiency for advanced needs.

A Reddit thread noted:

5. Learning and Improvement

Chatbots stick to their initial scripts and don’t evolve. Conversational AI continuously improves by learning from past interactions and user feedback.

6. Use Case Fit

Chatbots work best for simple tasks like handling FAQs and fundamental customer interactions. Conversational AI excels in complex scenarios requiring deeper context and personalized responses.

Benefits of Conversational AI and Chatbots

Both conversational AI and chatbots offer unique advantages that can improve customer support and business efficiency. Here’s how each can add value:

Benefits of Chatbots:

• Quick to Set Up and Cost-Effective: Chatbots can be implemented quickly without extensive development time or resources. This makes them an excellent choice for small businesses looking for an affordable solution and don’t want to make a mojor investment yet.
• Automates Repetitive Tasks: Chatbots are great at handling simple tasks like answering business-hours questions, booking appointments, or tracking orders. They use pre-set responses to quickly handle these inquiries, allowing staff to focus on more complex issues.
• Reduces Workload: By automating routine tasks, chatbots reduce the burden on customer service teams, enabling them to focus on higher-priority issues that require human insight. For example, when chatbots handle appointment scheduling or shipping updates, staff can focus on fixing technical problems or handling urgent concerns.
• Improves Response Time: Chatbots deliver real-time, 24/7 responses to customers, drastically reducing waiting times. Since chatbots can instantly answer queries, customers get immediate feedback, which keeps them happy and reduces frustration from delays.

Benefits of Conversational AI:

• Handles Complex Queries: It manages tasks like troubleshooting and multi-step processes (e.g., booking a trip) by analyzing and understanding the context of conversations.
• Human-Like Interactions: Using machine learning and NLP, it grasps the nuances of user queries, providing relevant, context-aware responses for a natural conversational flow.
• Personalized Customer Experience: Adapts to user preferences, history, and behavior for tailored interactions, much like Netflix suggesting shows based on your viewing habits.
• Self-Improving: Learns from past interactions and feedback, refining its responses to better predict and meet user needs over time.
• Consistent Across Platforms: Works seamlessly across platforms like websites, apps, and social media, providing a consistent user experience everywhere.
• Stronger Customer Relationships: Personalized and efficient service builds stronger customer relationships, making them feel valued and increasing loyalty.

Use Cases: Conversational AI vs. Chatbots

Understanding when to use chatbots versus conversational AI can help businesses maximize efficiency and improve customer service. Here’s a breakdown with clear examples:

When to Choose Chatbots

Chatbots work best for businesses automating basic, repetitive tasks with minimal decision-making. They’re perfect for handling FAQs, simple lead collection, and appointment scheduling without a significant investment.

For instance, Hiver has a chatbot named Coco to guide website visitors. When a user types “Just browsing,” Coco responds with predefined options like:

• Hiver’s features
• Some case studies maybe
• Resources on customer service software

This chatbot simplifies user navigation, helps answer common queries, and reduces the need for live support in routine cases.

Best For:

• Small businesses with limited budgets.
• Automating simple tasks like FAQs and lead collection.
• Reducing staff workload with basic query handling.

When to Choose Conversational AI

Conversational AI excels when businesses require advanced interactions that involve open-ended questions, multi-language support, or personalized responses. It adapts to complex customer needs and learns from previous interactions.

Conversational AI can process complex queries like, “Why is my internet slow?” A tool like IBM WatsonX.AI engages users by asking clarifying questions such as:

• “Have you tried restarting your router?”
• “Is the issue affecting all devices?”

The AI can analyze patterns, run diagnostics, suggest upgrades, or seamlessly escalate to a human agent with a detailed conversation summary. This blend of automation and human-like understanding ensures better resolutions for technical support.

Unlike basic chatbots, a conversational AI tool can adapt dynamically. For instance, when asked, “What is your latest update?” IBM’s conversational AI responded with relevant suggestions or links, even if it didn’t have a direct answer. 

This flexibility mimics a more natural conversation, keeping users engaged.

Best For:

• Large enterprises managing technical or multi-layered customer queries.
• Providing tailored customer experiences across channels.
• Multi-channel support (website, apps, social media).

Factors to Consider When Choosing the Right Solution

Selecting between chatbots and conversational AI requires thoughtful consideration of your business needs and long-term goals. Here are key factors to help you make the right choice:

1. Understand Your Business Goals

Ask yourself: Are you aiming for basic task automation, or do you need a more sophisticated system capable of handling complex, multi-step interactions?

A chatbot may be sufficient if you need simple, repetitive task management, like answering FAQs or booking appointments.

For instance, Hiver’s chatbot provides easy automation for tasks such as managing email support tickets, assisting with customer inquiries, and handling basic interactions without overwhelming your team.

• If you want to deliver a more personalized customer experience or provide support for complex queries, conversational AI is the better choice.

Action Tip: List your top five customer service objectives and match them against the strengths of both technologies.

2. Budget and Resource Allocation

Consider both the initial investment and long-term maintenance costs.

• Chatbots: Lower upfront cost, ideal for small businesses with limited budgets.
• Conversational AI: Higher initial investment but provides greater long-term value with scalability and advanced features.

Action Tip: Calculate your estimated return on investment (ROI) by comparing automation benefits to the cost of each tool.

3. Understand Customer Expectations

Think about the complexity and frequency of customer queries you receive.

• Chatbots: Work best for straightforward, repetitive questions like order tracking or return policies.
• Conversational AI: Ideal for businesses where users expect personalized recommendations or require detailed assistance.

Action Tip: Review your customer support data and identify the most common types of queries to determine the right fit.

4. Scalability for Future Growth

Your choice should align with your growth plans.

• Chatbots: Suitable for businesses with consistent, simple customer service needs.
• Conversational AI: Perfect for rapidly expanding businesses with evolving support requirements.

Action Tip: Map out your projected customer base growth over the next 2-3 years to ensure your solution can scale accordingly.

5. Integration with Existing Systems

Ensure the solution can easily integrate with your current CRM, helpdesk, and communication platforms.

• Chatbots: Typically easier to integrate but may have limited compatibility.
• Conversational AI: Offers advanced integration options, supporting omnichannel strategies.

Action Tip: Create a checklist of your current tools and verify compatibility with both solutions.

6. Customization and Personalization Needs

Determine how much flexibility you need to offer personalized experiences.

• Chatbots: Limited customization, mostly rule-based.
• Conversational AI: Highly customizable, capable of personalizing responses based on user behavior and past interactions.

Action Tip: Map out your personalization goals and evaluate whether your current system can support them.

7. Long-Term Maintenance and Improvement

Consider whether you have the resources to manage ongoing updates and improvements.

• Chatbots: Minimal maintenance since they don’t learn over time.
• Conversational AI: Requires regular updates and data training to stay effective.

Action tip: Set up a plan for periodic reviews and training to ensure the system evolves and stays effective over time.

Combining Conversational AI and Chatbots

Hybrid models can use the best of both worlds by combining the strengths of chatbots for simple tasks and conversational AI for more complex, personalized interactions.

Hybrid Models for Maximum Efficiency

You can use both: chatbots for simple queries and conversational AI for complex ones. 

For example, the Hey Plum chatbot uses a basic chatbot interface to provide users with recipe suggestions based on ingredients they send in, whether it’s a single item or an entire dish. 

But when users need more personalized ideas, like recipes that meet specific dietary requirements (e.g., gluten-free or vegan),the conversational AI kicks in to offer customized suggestions. 

This combination makes it easy for users to explore new recipes while getting results that match their preferences.

Seamless Transition Between Bots and Agents

For example, KLM uses a service bot called BlueBot (BB) on Messenger to help customers book tickets conversationally, handling inquiries without human intervention. However, when BB reaches a point where it cannot assist, it smoothly transitions customers to a human service colleague. 

In a retail store, a chatbot could handle order tracking, while conversational AI can assist with personalized product recommendations, just like BB seamlessly integrates into KLM’s system to offer efficient, human-like support.

Frequently Asked Questions (FAQs)

1. Which is better: chatbots or conversational AI?
It depends on your business needs. Chatbots work well for basic tasks, while conversational AI handles complex queries better.

2. Can conversational AI replace chatbots?
Not entirely. Both have their strengths and can work together effectively.

3. What industries benefit from conversational AI?
E-commerce, healthcare, finance, and customer support industries benefit the most.

4. Are chatbots cost-effective for small businesses?
Yes, chatbots are a budget-friendly option for basic automation needs.

5. Can conversational AI improve customer retention?
Yes, by offering personalized support, proactive engagement, and faster issue resolution, conversational AI can enhance customer satisfaction and retention.

6. Do chatbots require coding skills to set up?
Not always. Many chatbot platforms offer no-code or low-code options, making it easy for businesses to set up without technical expertise.

Making the Right Choice for Your Business

Chatbots and conversational AI can both improve your customer service when used the right way. Chatbots are great for simple tasks like answering common questions or scheduling appointments. Conversational AI, on the other hand, handles more complicated interactions, providing personalized support and better engagement.

For instance, Hiver’s chatbot simplifies task automation by managing customer queries and support tickets efficiently, making it a great choice for businesses seeking streamlined operations without compromising service quality.

Ultimately, the right choice depends on your business goals, budget, and the level of support your customers expect.

Explore Hiver’s chatbot to see how it can simplify your customer support operations!