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Chatbots vs Conversational AI

Updated: Feb 3



Don’t mix up conversational AI and chatbots. There’s a big difference!

Do you know how AI conversational software and AI chatbots work, their differences, and how to use the power of conversational AI to drive sales, lower costs, improve productivity and improve your customer service?

That’s right. Conversational AI and chatbots are two very different things, and although both can be employed to engage with your customers, one is far more adept at customer engagements . So, which one is it? In what way are these two different? What is the most up-to-date? What are the advantages of one versus the other?

In this blog post, we are going to cover conversational marketing’s importance for businesses in 2021, what are conversational AI and chatbots, how they differ and how one is so much better than the other at helping your business improve engagement and relationships with your clients without them getting ‘fatigued’ at speaking to a bot machine thing. 2021 is all about moving to a new fresh approach “conversational AI,” and connecting with customers in a more humane way.

Before we start, It’s important to point out just how much conversational AI is growing. In Scott Brinker’s 2020 marketing technology landscape supergraphic, one of the areas of technology with the most solutions is social and relationships, and it’s the third fastest-growing. Within that category of solutions, conversational marketing and chat have seen a growth of over 70% over the last year.

Further research by ResearchAndMarket, the world’s largest market research store, estimates that the global Conversational AI market will grow from 4.8 billion USD in 2020 to 13.9 billion USD in 2025. This demonstrates the enormous momentum that Conversational AI has already gained and its importance in the future.

Stats that are worth thinking about, even if the pandemic and Covid-19 hadn’t hit: the data above was before Covid, so we can only imagine how much more growth this area has experienced. With national lockdowns in almost every country and customer relationships skipping to an entirely online platform, few are the businesses that won’t need, or won’t want, the help of intelligent machines to manage their customer’s online points of contact.

Using natural language and creating an open line of communication between the buyer and the brand, conversational marketing is the extra step many companies are taking to retain customers and create positive and lasting relationships. Although chatbots can indeed be used as part of the whole experience, “conversational marketing takes this small feature to the next level by making the messages more personable and a central part of the user experience”, says Shrusti Goswami over at the Purple Ducks Marketing.

How is this achieved?

The answer lies in Conversational AI. Conversational AI is the synthetic brainpower that makes machines capable of understanding, processing, and responding to human language.


Using sophisticated deep learning and natural language understanding (NLU), it can elevate a customer’s experience into something truly transformational. Your customers no longer have to feel the frustration of primitive chatbot solutions that often fall short due to narrow scope and limitations.

With conversational AI, you can go beyond just translating website content into simple chatbot responses. Instead, customers can block credit cards, file insurance claims, upgrade data plans, scan invoices, and much more - directly from the chat window.

Michael Wei, an entrepreneur who co-founded and CTO of Rayon AI, a conversational AI platform designed to give customers full control of automated customer engagements, says this: “we’re pioneering the next level of automated customer engagement with our proprietary NLU and conversational AI synthetic service agents, which offer an altogether different proposition and service experience to chatbot/virtual assistants!”.

What is the difference between Chatbots and Conversational AI?

There’s a big difference between a chatbot and a genuinely conversational experience, added Wei. First, there are two types of chatbots, rules-driven, and AI-driven. Rules-based chatbots follow a predefined workflow so rigid and unnatural, while AI-driven chatbots leverage NLP (natural language processing and in Rayon AI’s case this is proprietary patented technology he created after years at Samsung where he developed and managed the Bixby voice platform, so he knows a thing or two about conversational AI) and machine learning to understand what the user is asking or looking for. This second one is more conversational, and I suspect there would be many who would argue that it is true conversational AI.

The difference between chatbots (or virtual assistants) and a conversational experience lies in integrating back-end systems to provide information to users. When you take systems like your CRM, ERP, support ticketing, or banking system and ingest them with AI, you can then have direct transactional conversations with customers - without needing a person on the business side.

“Chat is simply words going back and forth”, said Wei. Conversational AI opens the door to all kinds of messaging and engagement opportunities.

Conversational AI is a wholly immersive experience

Conversational interfaces are immersive, transactional messaging experiences. Getting the balance on your credit card, booking a vacation, submitting an insurance claim, or checking the call usage balance on your mobile phone are all examples of experiences you can build with conversational AI as opposed to talking to someone. These are things you can do for yourself faster than if you had to go through a call center agent or a live chat.

Conversational experiences work by connecting back-end systems, even legacy solutions, with a conversational AI platform, automatically surfacing information and actions to the user. Rayon AI builds on these experiences with a range of interface features designed for industry specific verticals such as Banking & Finance, Insurance, Retail, Transportation & Logistics and Healthcare.

To ensure the type of experience that makes a customer feel like their needs are understood, it’s critical to understand the intent, tone, and sentiment of the customer (from what the user says or types, down to the kind of emojis they use) and this is the main difference between chatbots and conversational AI, taken at its very fundamental core.

What are the Benefits of Conversational AI?

Higher productivity. Automated support is available 24/7 and able to handle sales enquiries, customer requests, allowing customer service representatives (CSRs) to respond to queries more quickly and lowering overall resolution times. Synthetic Service Agents (SSAs) also improve employee productivity by enabling human agents to engage in multiple messaging conversations simultaneously and addressing simpler tasks and requests as they arise.

Lower cost of customer care. This is a high-impact benefit for businesses since customer care carries a high operating cost. Conversational AI can handle requests at a higher volume than humans, provide relevant and correct information faster, and increase accuracy and complexity over time.

Interactive brand messaging. Conversational AI as a brand messenger is woven into our daily lives in the form of Apple’s Siri, Microsoft’s Cortana, and Amazon’s Alexa. SSAs allow you to follow this lead, personify your brand, and meet your customers on their preferred channel, moving beyond static display ads, web copy or paid social to create a truly interactive experience.

Increased tNPS. With conversational AI messaging, brief tNPS surveys can be conducted at the end of a call or a chat, providing a quick and easy way to gauge the quality of your customer’s experience. Even if you choose to query your customers some other way, your tNPS score will improve based on the ease and productivity that virtual agent messaging provides.

Improved employee experience. By taking on simple requests such as resetting passwords and checking delivery status, SSAs allow human agents to focus on addressing more complex issues and using their people skills to build customer relationships.


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