Which is a Better Option: AI-Powered or Rule-Based Chatbots? (2023 Version)

Straight off the bat, here are a few key differences between rule-based chatbots versus AI-powered solutions:

Rule-based chatbots:

• Follows pre-defined rules
• Limited context understanding
• Can't learn over time
• Handles known scenarios

AI-powered chatbots:

• Uses Natural Language Processing
• Learns from past interactions
• Provides personalized responses
• Handles complex queries
• Requires lots of data

Navigate to your favorite online domain, and you most likely can see conversational interfaces that are either an AI-Powered or Rule-Based Chatbot.  These conversational interfaces are crushing it online. Companies are eagerly adopting these tools to improve customer engagement and personalization. Their increased usage is changing customer expectations.

Here are some interesting facts about chatbots.

• By 2020, 85% of interactions with customers are expected to be performed without human agents.
• There are over 300,000 chatbots on Facebook Messenger.
• 54% of consumers prefer chatbots to human shopping assistants if it saves them time.
• About 40% of millennials say they chat with Chatbots on a daily basis.
• 56% of people would rather message than call customer service.
• According to HubSpot, about 71% of people use Chatbots for a faster solution to their problems

Why listen to me? I have been in the conversational AI space since 2015, with our last company getting acquired within that space. My day to day consists of speaking to operators of all sizes to understand their automation needs and wants, and see how to best help them get there. I currently am in charge of swivl's go to market strategy and am a co-host of the Self Storage Lab podcast.

Rule-Based Chatbot: Dealing With Customer Service Overload

It wasn’t long ago when our only option to find answers was to reach out to customer service centers via calls and emails. The high number of calls and emails stretched customer service teams.  Over-taxed teams were unable to address all customer needs on a timely basis. Churn levels soared.

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What Are Chatbots?

According to Wikipedia: A chatbot (also known as a conversational bot, chatterbot, interactive agent, conversational interface, conversational AI, talk bot or artificial spy entity) is a computer program or an Artificial Intelligence which conducts a conversation via auditory or textual methods.

The type of chatbot you need depends on the problem you are looking to solve. In short, chatbots are defined as Intelligent Agents (IA). They are designed for businesses to interact conversationally with their customers via text or voice. Chatbots are now making it easy for brands to personalize engagement with customers, easily respond to FAQs, and interact with customers where they are.  We are seeing a new generation of customers that view chatbots as their personal assistants.

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How Do Rule-Based Chatbots Work?

The first and perhaps the most simple bots are rule-based chatbots, also known as decision-tree bots. These bots are the most common, and many of us have likely interacted with one either through Live Chat features, on e-commerce sites, or via social media.

Rule-based chatbots are able to hold basic conversations based on “if/then” logic.  These chatbots do not understand context or intents. Human agents map out conversations via a flowchart, anticipating what a customer might ask, and program how the chatbot should respond.  We use logical next steps and clear call-to-action buttons to build rule-based chatbots conversations.  Companies design rule-based chatbots to answer simple questions and often bring web visitors to a live agent to further the conversation. They are not designed to learn and become smarter over time.  We can build a rule-based chatbot with very simple or more complicated rules. They can’t, however, answer any questions outside of the defined rules. Rule-based chatbots do not learn through interactions and only perform and work within scenarios for which they are trained for.

There are several types of chatbots. A chatbot is either based on pre-programmed responses (Rule-Based) or Artificial Intelligence (AI) to answer a user’s questions without the need for a human agent.

How Do AI-Powered Chatbots Work?

AI chatbots are more complex programmed bots based on Natural Language Processing (NLP) and Machine Learning (ML) algorithms. Unlike rule-based chatbots, AI-powered chatbots learn as they go.  Human agents train chatbots  to decipher free form conversations based on “Intents” and “Entities.” “Brains” in turn rule Intents and Entities. Entities identify a subject: People, place, or things. Intents are a bit harder to grasp.  Here is  a description of “intents” from Hoover – our Intelligent Agent:

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Human-In-The-Loop Interface

Some AI-Powered chatbots have an interface that allows a Human Agent to take over the conversation.  We call that Human-in-the-Loop (HITL).

HITL interfaces allow Human Agents to step into the conversation when the bot fails or does not have enough confidence to understand a question.  For example, in the case of the swivl platform, a Human Agent is notified if the algorithm has less than a 70% confidence level. The HITL can step in to answer via Slack, Skype, SMS, WhatsApp, or the medium of choice. Companies can also trigger HITL  if the conversation has reached a pre-determined touchpoint. Such touch points might be when a company wants to bring in a Human Agent because a high-value potential sale is imminent.

Rule-Based Chatbot Vs AI-Powered: Which Is Better?

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What type of chatbot best suits your business needs? The answer depends on your goals. If you just want a simple functionality, then simple chatbots work well as development costs are cheaper than AI-powered bots. But, if you want advanced real-time analytics and efficient decision-making (based on customer data), then you should invest in AI chatbots instead.

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According to our friends at Chatbot Magazine in an article by Nilima Shah,

“Most of the companies that we have interacted with in the last few months want a bot deployed quickly, so their preference is for a rule-based bot. But this means they are leaving out AI-capabilities for their bot in the rush to be the first-to-market in their field.”

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AI-based bots clearly win over simple chatbots to personalize user experience.  AI-powered chatbots can decipher a user’s query and understand the intent of a conversation and context.  This helps companies personalize a conversation based on their history of interaction with a company. In short – with enough training,  users can type free-form, and the AI-powered chatbot is able to decipher the intent and provide responses.  AI-Bots are the more sophisticated cousins of chatbots. They are essential for companies that have a lot of customer data. Although they will initially take longer to train, AI chatbots will be the right choice in the long run.

The swivl platform allows companies to dip their toe into the Black Box of AI.  Users can program swivl Live Chat initially as a rule-based Chatbot.  When companies are ready and their needs warrant, additional AI-powered features can be activated, seamlessly transforming the chatbot into a robust AI-Powered platform, capable of letting users free form questions and answers.

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We invite you to meet Hoover, our AI-Powered Chatbot,  to learn more about swivl, how we can help you implement AI to increase competitiveness while keeping Humans-in-the-Loop.

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This blog post has been updated - 06.2023