Chatbots 101: The Evolution of Customer Retention's Latest Trend

I have a special sickness. I love shedding light on startup-related buzzwords and trends. After publishing so many articles on growth hacking long before it was cool, I moved to covering anything big data or machine learning related.

And now? Well, you guessed it. Far from new in the world of innovation, chatbots are about to take over the world of client interaction and customer retention. Here's what you need to know about the budding phenomenon.

Related: Top 10 Best Chatbot Platform Tools to Build Chatbots for Your Business

Chatbots through the ages.

Chatbots are essentially digital personal assistants. Programmed to simulate human conversation, these platforms interact with users via auditory or textual chat interface providing a virtual "talking" partner to communicate with. Though typically used in dialog systems for functional purposes, like customer service or information acquisition, chatbots can be programmed to provide a helping hand with practically anything, whether it be checking the weather, scheduling a meeting or suggesting what to eat for lunch.

Chatbots have undergone quite an evolution since their inception. ELIZA, the original chatbot, was created by MIT professor Joseph Weizenbaum in the mid 1960s. Using programmed scripts, ELIZA conversed by blurting out canned lines in response to certain keywords. While Weizenbaum intended to prove the superficiality of communication between people and computers, ELIZA demonstrated quite the opposite.

Surprisingly, many users began to attribute human-like feelings to ELIZA and even developed an affinity towards her despite knowing that the program simply followed a script and was devoid of actual knowledge. "I had not realized that extremely short exposures to a relatively simple computer program could induce powerful delusional thinking in quite normal people," he later wrote of the emotional connections people formed with ELIZA.

Since then, chatbots have advanced beyond simple scripts and rules and now commonly make use of artificial intelligence (AI), invoking a heightened sense of realism. As people use chatbots, the programs take note of shared dialogue content and effectively learn from one conversation to the next.

Through this learning curve, chatbots become outstandingly personal, encouraging a human-like connection with users, much like ELIZA, yet on a more profound level. A perfect case study of the potential for psychological connections to these programs is Microsoft's Xiaoice, a chatbot friend to more than 40 million followers in China. Advanced programming that enables Xiaoice to mine the internet for information and provides the bot with deep learning techniques made the bot an overnight sensation, capturing the hearts of thousands.

Beyond the potential for psychological connections, modern technology allows the programs to collect vital information on a grand scale. As chatbots learn from conversing with people, data is stored that can later be referenced and analyzed to identify user interests and trends. As such, the bots effectively create a two-way street between users and companies, making them key to optimal user relations.

Related: Enterprise Chatbots Platforms and the Future of Work

Putting chatbots to use.

Xiaoice is certainly not the only chatbot out there. Nowadays many of the leading tech companies are harnessing the promising potential of chatbots like never before. Perhaps the most famous bots are Apple's Siri and Amazon's Alexa, but Facebook is quietly stepping into the chatbot world as well.

Still under the radar, Facebook's "M" is promising to offer an AI chatbot even more advanced than existing platforms, using deep learning memory networks through which dialogues are contextualized to better enable apt responses to future instances.

Most chatbots, though, are not built to be general personal assistants, but rather specialized digital attendants. ReplyYes offers a chatbot to talk to customers throughout the day enabling them to make purchases. Poncho's specialty is the weather, offering a witty forecast through text whenever prompted. Chatbots can be programmed to talk about anything, creating endless possibilities for all sorts of niches.

Related: Enterprise Chatbots and the Conversational Commerce Revolutionizing Business

Your clients' new friend.

Possessing unbelievable potential when it comes to interactive conversation on multiple axes, chatbots are undoubtedly poised to be the next big thing when it comes to customer satisfaction and client retention.

When it comes to accessing customers, chatbots are in the perfect position to connect. For the first time ever, messenger and chat apps are currently being used more than social media. Chatbots by virtue live in these dialogue platforms, allowing them maximum exposure to customers for whatever needs they may have. This beneficial arrangement enables customers to get the assistance they need instantly, 24/7.

With chatbots incorporated in messenger platforms, clients don't need to use a search bar or leave their page to get help or talk to a representative. All the data they need is located one easily accessible source -- the chatbot.

Related: Top 10 Practices for Making a Great Chatbot

Through AI and advanced technological learning abilities, chatbots have practically become digital friends that encourage client trust and loyalty, similar to ELIZA connecting with her users, just on a more realistic level. According to chatbot service Bonobo.ai's CEO Efrat Rapoport, "personalized engagement is critical when it comes to customer retention." Interactions with businesses used to be personal, he said. "There was a person who knew us and had a relationship with us, but at some point he was replaced by buttons and grey web pages. In many ways, we are going back to the era of personal engagement, only at scale. A chatbot can make you feel special and unique, and in parallel help 2 million other people feel exactly the same."