What is Conversational AI: Learn its Meaning, Benefits, and Uses

Providing excellent customer service is one of the top priorities for organizations. According to Gartner, conversational user interfaces and generative Artificial Intelligence (AI) will reshape customer service by 2028. In fact, by 2025, 80% of customer support organizations are expected to leverage generative AI to improve customer experience. That’s why conversational AI is gaining popularity. This article explains what is conversational AI and how it helps organizations improve their customer service. 

What is Conversational AI, and How Does it Differ From Traditional AI?

First, let’s understand what is conversational AI. It is a modern AI technology through which computers can understand human language and interact with people in a human-like tone. Virtual assistants and chatbots are perfect examples of conversational AI. They can understand customer queries and respond to them in a manner any human customer agent would do. 

Conversational AI tools use machine learning and Natural Language Processing (NLP) techniques to understand human speech patterns and imitate human conversations. This technology allows organizations to process customers’ requests in real time, increase operational efficiency, and reduce costs.

Now that you know what is conversational AI, let’s see how it is different from traditional AI technology.

• Conversational AI uses NLP to imitate human conversation style, whereas traditional AI chatbots focus on keyword recognition 
• While traditional AI chatbots need to be specifically trained, conversation AI models learn from interactions with users
• Traditional AI chatbots often provide limited interaction and services but conversational AI chatbots understand user intent and enable a wide range of services

How is Conversational AI Being Used in Different Industries?

Now that the gist of what is conversational AI is clear, it is also evident that this tech has human-machine interaction as its core. This, in turn, can be leveraged by various industries in the following ways:

1. Banking and Finance 

The banking and finance industry is using conversational AI technology to provide quick voice, message, and chat support to its customers. Chatbots and virtual assistants allow customers to monitor their transactions, apply for loans and mortgages, and receive payment reminder messages. Therefore, conversational AI helps companies automate customer service.

2. Health Care 

Chatbots can answer immediate queries of patients, help individuals diagnose their health condition by analyzing symptoms, and provide medicine and check-up reminders to users. Moreover, this technology can also provide mental health support and counseling services to patients. Therefore, conversational AI enables organizations to provide personalized health care, building patient trust.

3. Sales and Marketing

Conversational AI has also been widely adopted in the sales and marketing industry because it can analyze customers’ input to understand their engagement level. Therefore, it can help organizations with qualified lead generation, thus boosting business revenue.

4. Retail and E-commerce 

Conversational AI technology is also transforming the retail and e-commerce industry. It provides personalized shopping recommendations, order processing automation, repeat order automation, tracking order history, and real-time support over social channels. Therefore, it enhances the shopping experience for customers.

5. Travel and Hospitality

In the travel and hospitality industry, conversational AI tools help customers with itinerary planning, flight and cab bookings, and hotel bookings.

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What are the Benefits of Implementing Conversational AI in Businesses?

After learning what is conversational AI vis-à-vis industry use cases, let’s see its overall benefits for organizations across different industries.

1. Cost Efficiency 

Modern customers prefer real-time query-solving and prompt responses. However, hiring several customer support employees involves high costs. With conversational AI tools enabling human-machine interaction, organizations can provide 24/7 customer support at low costs. Moreover, they can process more requests in a shorter time span, thus increasing overall efficiency.

2. Enhanced Customer Satisfaction 

As already emphasized while discussing what is conversational AI, customer satisfaction is the best use of this technology. It helps organizations provide personalized customer services, resolve queries in real time, and automate customer processes. Therefore, conversational AI enhances customer satisfaction and boosts sales.

3. Competitive Advantage 

Due to increasing market competition, gaining customer loyalty is one of the biggest challenges for businesses. Conversational AI helps companies resolve this challenge by offering real-time services. It analyzes customer interactions and provides detailed insights into customer preferences and pain points. Organizations can leverage this data to customize their services or innovate new products.

4. Enhanced Scalability 

Human employees can only manage a specific amount of the organization’s customer service workload. On the other hand, conversational AI tools can process large numbers of transactions in real time. They can be trained or modified to handle large workloads. It thus facilitates scalability, especially when organizations want to expand their businesses to new markets.

What are the Challenges of Developing Conversational AI Systems?

What is conversational AI technology’s benefits is clear. However, it also poses the following challenges for companies:

1. Data Security and Privacy 

This is the most significant concern for both organizations and individuals using co-conversational AI. To provide personalized services, chatbots get access to users’ sensitive personal data, such as financial information and health and insurance information. Due to the rising cybersecurity threats and stringent compliances, organizations have to take extra data security measures.

2. Native Language Complexity 

Human speech and tone are often complex and can have multiple meanings. Therefore, it becomes challenging for conversational AI to successfully understand a customer’s request or provide insights. Moreover, chatbots often cannot understand regional language, jargon, background noise, and incomplete sentences. Hence, they cannot offer sufficient customer support, impacting customer experience.

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What is the Future Outlook for Conversational AI Technology?

Another Gartner report states that chatbots will become the primary channel for customer service by 2027. Moreover, the conversational AI market is expected to increase by 24% from 2024 to 2033. These figures indicate that global enterprise Investment in conversational AI technology will increase.

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Offering personalized and real-time customer service has become essential for organizations to gain customer loyalty. An increasing number of organizations are either investing in an in-house conversational AI model or integrating such models into their customer service infrastructure. Therefore, the demand for skilled AI and machine learning professionals is increasing to build, train, or integrate conversational AI models. Explore Emeritus’ artificial intelligence courses and machine learning courses to understand what is conversational AI, and gain relevant artificial intelligence and natural language processing skills.

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