What is a chatbot? - A detailed guide

The evolution of chatbots over the past decade has been nothing short of remarkable.

Bots have progressed from a luxury only employed by forward-thinking, tech-savvy businesses to an absolute standard in customer engagement for companies of all sizes. Much of the developed world now interacts with chatbots or virtual assistants daily without even considering it, while 74% of users now prefer bots over live agents when seeking answers to routine questions.

Utilizing their advanced machine learning (ML) capabilities to continually learn from interactions, chatbots project continued growth in both utilization and functionality. If your organization hasn’t already hopped aboard the chatbot train, now is the time to grab your ticket.

Today, we’ll dive into what chatbots are, how they work, and some best practices you can incorporate to maximize your investment.

What is a chatbot?

A chatbot is a computer program that simulates a conversation with human users, typically through text or voice interfaces. It utilizes natural language processing (NLP) and machine learning algorithms to respond to user inputs conversationally. Bots can range from simple rule-based systems that follow predefined scripts to more sophisticated AI-powered models capable of understanding context.

Why are chatbots important?

Chatbots are vital for businesses because they offer 24/7 customer support, significantly improving customer service without the need for additional human agents. With chatbots, companies can provide instant responses to customer inquiries, reduce wait times, and handle multiple interactions simultaneously. These abilities serve to increase customer satisfaction and help retain clients by delivering fast and reliable support.

Moreover, chatbots can enhance the user experience (UX) by personalizing interactions. With the help of artificial intelligence (AI) and ML, bots are able to understand customer preferences and provide tailored responses accordingly. This level of personalization serves to increase customer engagement, drive sales, and more.

Benefits of chatbots in 2025

As organizations strive to maintain a competitive edge, the integration of chatbots has become an increasingly essential component of engagement strategies. From enhancing lead generation to delivering tailored recommendations, bots play a crucial role in optimizing customer interactions.

Here are some of the key ways in which utilizing a chatbot can benefit your company:

Enhance customer engagement

By leveraging AI, NLP, and ML, chatbots can understand user queries, preferences, and behaviors, providing personalized responses and recommendations. This tailored approach fosters a deeper connection with customers, encouraging them to stay on the platform longer and explore additional offerings.

Additionally, chatbots enable businesses to maintain real-time, two-way communication with customers, driving higher engagement rates. By using chatbots to send proactive messages—such as reminders, special offers, or follow-up inquiries—companies can keep individuals engaged even when they’re not actively seeking assistance. This dynamic interaction creates a sense of attentiveness and care, helping to build stronger customer relationships.

Increased customer satisfaction and loyalty

In today’s fast-paced digital world, customers expect quick responses, and chatbots meet this demand by reducing wait times and delivering immediate assistance. This ability to offer real-time solutions to common issues, such as product inquiries, order tracking, or troubleshooting, helps to create a smooth and frustration-free customer experience (CX).

Moreover, many individuals prefer to solve problems on their own without the need to contact a human representative. Bots can guide customers through complex processes like returns, exchanges, or account management, providing step-by-step instructions. Over time, users who find these self-service options helpful are more likely to stay loyal to a brand that empowers them to solve problems independently.

Better ROI

Chatbots’ ability to automate repetitive tasks and tackle a large volume of inquiries without the need for additional staff enables companies to save significantly on labor costs. Bots can handle tasks like answering FAQs, processing orders, or assisting with troubleshooting, which would typically require a live agent. This frees up human resources to focus on more complex tasks that drive higher value for the business.

Over time, chatbots can also boost ROI by improving conversion rates and driving sales. Bots are capable of engaging potential customers through proactive outreach, recommending products, and guiding users through the purchase process. This typically helps reduce cart abandonment and encourage more conversions.

Optimize lead generation and management

When potential customers land on a website or interact with a brand via social media, a chatbot can greet them, ask relevant questions, and gather important information like contact details and product interests. By automating this initial interaction, bots can efficiently filter out unqualified leads, allowing the sales team to focus on only high-potential prospects. 

In terms of lead management, chatbots streamline the follow-up process by automating tasks like sending reminders, scheduling meetings, or delivering personalized content based on user engagement. This constant interaction keeps potential customers engaged and reduces the risk of losing leads due to a lack of follow-up.

How do chatbots work?

To start, best practices dictate providing chatbots with a robust repository of information from which to pull. From here, they’ll employ machine learning to refine functionality and dynamically adjust over time.

Here’s a basic breakdown of how bots operate:

Step 1: Train for relevant topics

Training a chatbot on pertinent business topics involves employing a knowledge base it can leverage to answer customer queries. Your base should include FAQs, details on your offerings, company policies, and any other information users might inquire about. Be sure to organize this information in a structured format that the bot can easily understand, such as a database or a knowledge graph.

Step 2: Learn from multi-channels

By analyzing data from various channels such as messaging apps, websites, and social media platforms, chatbots can adapt their approaches over time. These interactions provide valuable insights into user preferences and needs, which can then be used to refine the bot's algorithms and enhance its ability to respond to user queries effectively.

Step 3: Predict the next step

Many chatbots can integrate real-time predictive analytics to dynamically adjust their interactions based on changing circumstances. Continuously monitoring user behavior and environmental factors allows bots to adapt their responses on the go to better meet user needs and preferences. This proactive approach not only promotes increased satisfaction but also enhances efficiency by preemptively addressing potential concerns before they arise. 

Choosing the right chatbot platform in 2025

When determining which chatbot software is best for your business, you’ll first need to identify your primary goals for implementing the bot, whether it’s improving customer service, generating leads, or enhancing user engagement. Understanding your target audience is also crucial; shortlisted platforms should be capable of meeting the unique needs and preferences of the intended users. Evaluating these elements will help you narrow down your options to solutions that align with your operational goals and user expectations.

It’s also essential to consider scalability and support when selecting chatbot software. As your organization grows and evolves, your bot needs may change, necessitating a solution that can adapt to new requirements. Look for systems that offer flexible scaling options and can handle an increasing volume of interactions without compromising performance. 

By prioritizing these factors—alignment with business goals, user needs, and scalability—you can be sure that you choose a suitable chatbot platform that will enhance your operations and customer interactions effectively.

Chatbot best practices for 2025

As businesses increasingly adopt chatbot technology to enhance customer interactions, understanding best practices for implementation becomes essential. These bots have the potential to revolutionize customer service and overall user engagement, but their effectiveness largely depends on how well they’re designed and deployed. 

By following these established guidelines, companies can ensure that their chatbots provide value to both the business and its customers:

Be transparent with customers when they are engaging with chatbots

Transparency is crucial when utilizing chatbots, as it fosters trust and sets clear expectations for users. This can be achieved by using introductory messages or prompts that state, “You are chatting with a virtual assistant,” or similar phrases. By being upfront about the bot's nature, customers can approach the interaction with the understanding that they’re engaging with an automated system.

This honesty not only helps manage expectations regarding response time and the complexity of issues that can be addressed but also reduces frustration if the chatbot is unable to resolve a specific concern.

Offer easy access to live agents

Offering straightforward access to a human agent is essential for enhancing customer satisfaction when utilizing chatbot software. One effective way to go about this is by implementing clear and prominent options within the bot’s interface that allow users to escalate their inquiries. This is often as simple as including a button or command, such as “Talk to a human” or “Speak with an agent,” at various points during the conversation.

Furthermore, companies should establish seamless integration between the chatbot and human support channels to minimize friction during the handoff process. This can involve automatically transferring the conversation history from the bot to the live rep, allowing them to quickly understand the customer's context without requiring them to repeat information.

Match the chatbot to the brand persona

To begin this process, businesses should clearly define their brand persona, which includes key attributes such as voice, tone, and target audience. For example, a tech company that prides itself on being forward-thinking might opt for a bot that uses a casual and friendly tone while incorporating industry jargon and contemporary language as well. By establishing these characteristics beforehand, organizations can create a chatbot that reflects their brand identity and resonates with their target customers.

Once the brand persona is clearly defined, the next step is to ensure that the bot’s responses and interactions consistently embody it throughout user conversations. This requires crafting conversation scripts that align with the brand’s values, whether that’s being humorous, empathetic, or straightforward.

Continually gather customer feedback and learn from interactions

To ensure that a chatbot continually gathers customer feedback and learns from interactions, businesses can implement built-in feedback mechanisms that prompt users for their opinions after specific interactions. This might include short surveys or rating systems, such as asking users to rate their experience on a scale of 1 to 5 or providing comments on the bot's performance. By making this process straightforward and unobtrusive, customers are more likely to share their insights.

Leveraging analytics tools is crucial for understanding user behavior as well. By examining the data collected from conversations, companies can identify common pain points, FAQs, or areas where the chatbot falls short. This information can then be used to refine the bot's responses and improve its functionality over time.

Use data to improve chatbots

Tracking metrics such as conversation length, drop-off rates, and common user queries enables organizations to gain valuable insights into how their chatbot is functioning. For instance, if data shows that users frequently abandon conversations after asking specific questions, it may indicate that the bot's responses are inadequate or unclear. Analyzing these metrics helps businesses pinpoint areas for improvement, enabling them to enhance the chatbot’s ability to assist users effectively.

In addition, companies can create dashboards that visualize key performance indicators (KPIs), such as response times, resolution rates, and user engagement levels. This data-driven approach allows for real-time monitoring, making it easier to identify anomalies or shifts in user behavior. With this information at their fingertips, companies can proactively adjust their bot's algorithms, update its knowledge base, and optimize its overall functionality.

Why use the chatbot feature from Freshchat?

Our clients love Freshchat due to its wealth of features, omnichannel potential, and polyglot capacity. 

Tools like journeys serve to send targeted, proactive messages to users, tailored to wherever they’re at in the sales funnel, while small-talk capabilities can humanize interactions, rather than simply providing cookie-cutter responses. Additionally, if our bots can’t sufficiently resolve an issue, conversations can easily be transferred to a live agent with all context retained.

Businesses can also meet their customers wherever they are and in whichever language they speak, as Freshchat easily connects with platforms like web, mobile, WhatsApp, Facebook Messenger, Apple Business Chat, and more, while it’s capable of interacting in 33+ dialects as well. 

Freshchat is simply a must for organizations that want the whole package and nothing less; sign up for a free trial to experience the Freshchat advantage for yourself today!

Challenges that can come with using chatbots

As with any system, some difficulties may present themselves throughout your use of chatbot software. The good news is that most of these issues can be remedied with some extra attention and maintenance.

Here are a few of the challenges you may experience and how you can overcome them:

Lack of human touch

While chatbots offer numerous benefits in terms of efficiency, their interactions can sometimes lack the warmth associated with human communication. This absence of a human touch and a real-world agent can lead to impersonal interactions, which may leave users dissatisfied.

To combat this problem, businesses can design bots with personality traits and conversational styles that align with their brand's tone and values. By injecting humor and/or empathy into their responses, chatbots can create a more engaging and relatable experience for users. 

Security concerns

Security concerns can arise with chatbots, particularly regarding protecting sensitive user data and guarding against malicious activities.

Companies should enact robust safeguarding measures throughout the development, deployment, and operation phases to sufficiently address these concerns. This typically includes encryption of data, implementing access controls, and regularly monitoring bot interactions for signs of suspicious activity. 

Glitches

Glitches may manifest as technical errors, such as system crashes, unresponsive interfaces, or incorrect responses, which can undermine the reliability of the chatbot. They can also occur due to limitations in the bot's NLP capabilities, resulting in misinterpretations of user inputs.

To reduce these occurrences, organizations should prioritize quality assurance (QA) throughout the development lifecycle. This includes conducting extensive functional testing to identify technical issues and user acceptance testing to evaluate the chatbot's ability to understand a wide range of inputs.

Traditional chatbots vs. AI-powered chatbots

There are two main types of chatbots: rule-based and AI-based. 

Rule-based, or traditional, bots are typically more fit for environments where inquiries are limited and well-defined, while AI-driven bots may be better suited for businesses seeking greater flexibility, scalability, and adaptability.

A rule-based chatbot operates on a set of predefined rules, which determine how they respond to user prompts. These rules usually involve matching keywords in the user's message to specified responses stored in a knowledge base. If the input doesn't match the prespecified criteria, the bot will prompt the user for more information or offer a default response indicating it doesn't understand the query.

Conversely, AI-based chatbots are more sophisticated, as they’re powered by NLP and machine learning. Unlike rule-based bots, AI-driven chatbots are capable of interpreting user input in a more human-like manner. They’re able to analyze context, semantics, and user intent, enabling them to generate more contextually relevant responses.

Chatbots vs live chat

Although chatbots and live chat are often used synergistically, they refer to different concepts and are leveraged to address different user needs.

Chatbots are designed to handle routine inquiries, such as answering FAQs, guiding customers through simple processes, or assisting with product recommendations. They operate 24/7, allowing businesses to provide round-the-clock support without needing human agents.

With this in mind, a key functionality of chatbots is their capacity to transfer more complex inquiries to a human agent, who often takes over through live chat. Live chat offers a real-time, personalized experience, as real-world representatives can understand complex issues, provide nuanced responses, and adapt to the emotional tone of the conversation. This method of communication is ideal for handling more intricate customer issues that require empathy or decision-making.

Both of these communication methods offer similar satisfaction rates, with 73% of users reporting they were happy with live chat interactions and 69% saying they were satisfied with chatbots. 

Chatbots vs virtual assistants

Chatbots and virtual assistants are both AI technologies designed to interact with users and assist them with various tasks, but they differ in scope, functionality, and level of sophistication. 

Chatbot

Chatbots are typically focused on particular tasks and are often deployed within specific channels, such as messaging apps or websites. They’re programmed to respond to user inputs conversationally, answering user questions or executing predefined actions. Bots rely on rule-based logic or machine learning algorithms to process user queries, but they may lack certain advanced capabilities.

Virtual assistant

Virtual assistants, on the other hand, are more comprehensive and versatile. These solutions, such as Siri, Alexa, and Google Assistant, are capable of interpreting user intent and executing complex commands. They can be integrated into various devices, including smartphones, smart speakers, and IoT devices, allowing users to access them seamlessly across different environments.

Must-have chatbot features

While you’ll need to evaluate your unique organizational needs and find chatbot software that offers functionalities that align with them, certain features should be viewed as non-negotiable. Core components such as omnichannel capacity, intelligent capabilities, and continuous improvement are vital in ensuring that your bot can respond to a wide range of inquiries and improve its performance over time.

#1. Omnichannel

Chatbots enable companies to extend their presence to new touchpoints, as they’re able to meet customers wherever they are. For example, brands can deploy bots on messaging apps like Facebook Messenger or WhatsApp to engage with users in real-time conversations. Similarly, integration with voice assistants like Amazon Alexa or Google Assistant empowers businesses to offer voice-enabled interactions, providing hands-free assistance for on-the-go users.

90% of today’s consumers expect consistent communication across all platforms, making an omnichannel approach more important than ever before.

#2. No code

No-code chatbots generally offer greater flexibility and customization, allowing companies to tailor the bot to align with their unique requirements. With intuitive visual interfaces and drag-and-drop tools, businesses can easily design conversational flows, incorporate multimedia content, and integrate with third-party services without writing a single line of code.

#3. Affordable

Be sure to seek out scalable pricing models that allow your organization to pay only for the services it needs, whether based on usage, number of interactions, or specific features. This flexibility enables companies to start small and scale up as their needs grow, avoiding upfront investments that may not align with changing budget restrictions or business objectives.

#4. Teachable

Chatbot software typically features intuitive interfaces and user-friendly documentation that enable even non-technical users to customize the bot's behavior effectively. This democratization of chatbot development allows organizations to quickly adjust strategies without relying on specialized developers or data scientists.

#5. Artificial intelligence

AI-powered chatbots leverage advanced technologies such as NLP, machine learning, and deep learning to interpret user queries and generate contextually relevant responses. This helps bots engage users in more natural conversations, leading to higher levels of satisfaction.

#6. Sentiment analysis

Sentiment analysis enables chatbots to understand the emotional tone of user messages, promoting more empathetic interactions. This capability assists bots in gauging whether users are expressing positive, negative, or neutral sentiments, allowing them to tailor their responses accordingly. Sentiment analysis is particularly important in support scenarios where delicately addressing user emotions can significantly impact the overall experience.

How to add a chatbot to your website

Integrating a chatbot into your website involves several steps to ensure seamless functionality and a well-rounded UX. The process begins with selecting software that meshes well with your existing operations and ends with the publishing of your bot and continuous performance monitoring.

1. Select a chatbot that works best for your business

First, assess the compatibility of potential chatbot solutions with your web platform. Look for bots that offer straightforward integration options, such as plugins or embeddable widgets, that can be easily connected with your site's existing infrastructure. Ensure that the solution supports the technology stack and content management system (CMS) used by your website to avoid synergy issues. 

2. Design conversations that deliver results

Make sure to structure your bot’s conversation flows logically to guide users through interactions more efficiently. Branching logic and conditional responses can be incorporated to accommodate different user inputs, ensuring that the chatbot can handle a wide range of interactions. Multimedia content, such as images or videos, can also be leveraged to enhance engagement and convey information more effectively.

3. Test and publish your chatbot

Start here by thoroughly testing your chatbot's functionality across various devices and browsers. Conduct usability testing to identify any bugs or inconsistencies in the conversation flows or user interface (UI).

After thorough testing, publish the chatbot on your website and monitor its performance closely. Remember to communicate the availability of the bot through prominent placement and clear calls to action (CTAs) on your website. You’ll also want to continually monitor KPIs such as response times, resolution rates, and user satisfaction scores to identify areas for improvement.

Common & creative chatbot use cases

Chatbots offer a wide range of applications across various departments and industries. They’re most commonly utilized to assist with efforts such as customer service, lead generation, content delivery, and similar initiatives.

Customer support: Bots are often used to provide instant customer service, such as answering FAQs or troubleshooting IT issues. Their round-the-clock availability and capacity to handle an infinite amount of interactions simultaneously free up human agents to focus on more complex tasks.

Lead generation: Chatbots can be employed to qualify leads by collecting contact information and guiding users through the sales funnel. By asking qualifying questions and offering relevant resources, bots can identify potential prospects and nurture them toward conversion.

Content delivery: Personalized content, news updates, or educational resources can also be delivered via chatbots. They can recommend content, answer questions, and engage users in interactive customer experiences to keep them informed and entertained.

Many bots also offer the flexibility to be employed in more creative ways, providing benefits for niche markets or specialized engagement efforts.

Possible uses include:

Travel planning: Chatbots can offer tailored travel suggestions based on users' interests, travel dates, and budget constraints. They might also be used to facilitate bookings, reservations, and ticket purchases to promote a more convenient travel planning experience.

Gamification: Interactive storytelling and gamified interactions are often employed through bots to entertain, educate, and promote brand awareness. Chatbots can lead users through choose-your-own-adventure narratives, quizzes, and trivia games, offering rewards and incentives along the way. They might also be leveraged to lead product demos or virtual scavenger hunts.

Virtual event concierge: Many organizations utilize bots to enhance the attendee experience at virtual events, such as conferences, webinars, or trade shows, by acting as event concierges. They can provide event information, agenda updates, and session reminders, as well as answer attendee questions and assist with networking activities.

Leverage Freshworks to optimize your business’s chatbots today!

Freshchat acts as the market’s most comprehensive customer engagement platform, combining the help desk capacity of Freshdesk with the communication prowess of Freshchat.

Freshchat merges chatbot capabilities with robust live chat functionality, ensuring that all types of user inquiries can be addressed in an individual’s preferred manner. Freshworks bots are powered by Freddy, our state-of-the-art AI technology, which leverages NLP, ML, and intent recognition to engage with customers in a natural, human-like fashion at any time of day or night. When a bot can’t sufficiently resolve an issue, it will leverage our handy IntelliAssign tool to transfer the conversation to a relevant live agent with all context retained.

Even more, you’ll never have to worry about robotic, impersonal conversations with Freshchat. The platform offers a plethora of personalization tools such as machine learning, which allows bots to get to know customers better the more they interact, and journey, which enables teams to send targeted messages and proactively reach out to visitors based on wherever they’re currently at.