How Chatbots Can Improve the Customer Journey · The Future of Chatbots Report How Chatbots Can Improve ... being was born in the realm of science fiction, ... behavioural shift in

The Future of Chatbots Report

How Chatbots Can Improve the Customer Journey

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Table of Contents

3 Introduction

4 Market Catalysts in the Chatbot Revolution

6 TheIncreasingUsage ofChatbots

8 The Technology Landscape

10 Challenges with Chatbots

11 Quotes from Respondents

12 Conclusion

© 2017 SAP SE or an SAP affiliate company. All rights reserved.

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salespeople, to focus on more complex client interactions.

WHAT COMES NEXT? It won’t be long before machines will be able to interpret emotions too, understanding not only explicit actions, but also implicit signals that come from customers. It’s tremendously exciting to be working with this technology now, where businesses are making bold visions into reality.

The most fertile soil for a winning innovation is when you use focused tech to deliver a great experience. You can use AI-powered chatbots to drive conversion in a number of ways, from personalized communications and contextual ecommerce in-the-moment to shorter delivery times or seamless processes. But these will only work if you are also listening to and addressing your customers’ needs.

Ultimately the objective is – as it always was – about creating meaningful, personal interactions for consumers.

HOW CHATBOTS CAN IMPROVE THE CUSTOMER JOURNEY The customer journey is more complex now than ever. Consumers move fluidly between channels and devices, online and offline. Engaging with them in the right time and the right way is no small feat.

Enter the chatbot, which can be deployed to improve the omni-channel customer journey through a combination of machine learning and intelligence. Driven in part by the rapidly progressing maturity of natural language processing and the pervasiveness of mobile devices, it’s no surprise that chatbots are on an upward curve.

Add machine learning, and chatbots are able to handle increasingly complex tasks – whilst also making interactions that are more credibly ‘human’. With the right solutions, businesses are able to bring in contextual data to create these highly-personalized experiences at scale in real-time. And automating simple, transactional tasks allows front-line representatives, such as

Introduction

Mark de Bruijn,Head of Marketing EMEA & MEE

SAP Hybris

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ADVANCEMENTS IN AIThe concept of AI predates modern computing. The notion that a machine might be able to perform reasoning on par with that of a human being was born in the realm of science fiction, but over the past 70 years, has become a tangible reality thanks to advances in computer science, as well as parallel disciplines such as neurology, information theory and cybernetics.

In 1997, IBM’s Deep Blue beat reigning world champion, Garry Kasparov, in a game of chess and put the capabilities of AI firmly in the global spotlight.

Since then, AI has evolved at an exponential rate. Today’s chatbots draw on these advancements, using a combination of Natural Language Processing (NLP) and Machine Learning to not only analyse human input but also generate complex responses.

THE CONTINUED GROWTH OF MESSAGINGThe second market catalyst driving the adoption of chatbots is a behavioural shift, rather than a technological one. In 1992, the first SMS was sent over the Global System for Mobile Communication (GSM). The message was sent by Vodafone engineer Neil Papworth to colleague Richard Jarvis and simply read ‘Merry Christmas’.

Market Catalysts in the Chatbot Revolution

Like most disruptive technologies, there are several external influences that have contributed to the rise of chatbots in recent years. The first is the ongoing developments within the field of Artificial Intelligence (AI) and the second is a behavioural shift in how we use technology to communicate.


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By today’s standards, the SMS is a relatively primitive form of digital communication. It is therefore ironic that the technology has evolved to become one of the most dominant channels in existence today. Text messages remain the most used feature on mobile devices; an incredible feat when one considers the wealth of applications and communication channels available. More than 22 billion SMS messages sent each day worldwide.

While text messages remain a hugely popular communication channel, messaging has evolved well beyond the humble SMS. Applications such as iMessage, Facebook Messenger, WhatsApp and WeChat have become a preferred means of communication, not just on mobile devices, but across the entire digital ecosystem.

Messaging systems are so deeply engrained in our social fabric, that they have now made the leap to the business world and have become one of most popular channels for B2C interactions.

A recent study commissioned in by One Reach found that 64% of consumers preferred to use text over voice as a customer service channel. Analysts at Mobilesquared found that the growth rate of mobile messaging systems outperformed all other communication channels amongst businesses between 2013 and 2017, with a CAGR of 20%.

The appetite for messaging becomes even more pronounced when broken down demographically. The same report from Mobilesquared found that nearly 90% of students prefer messaging over any other channel for customer service-related tasks. With the digital generation having embraced text as their preferred communication channel, it only takes a small leap to understand the role that chatbots are likely to play in coming years.


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The Increasing Usage of Chatbots

The tentative uptake figures are mirrored in external data. Just 9% of Fortune 500 companies currently work with bots, according to Forrester Research.

While usage is still in its infancy, interest levels are growing, with a significant number of deployments in the pipeline. In fact, nearly 77% of respondents in the survey said they had near-term deployment plans or were seriously considering the benefits of chatbot technology.

WHY IS INTEREST SO HIGH?Chatbot technology is an increasingly attractive proposition to businesses for many reasons. Even the simplest rule-based chatbot offers enticing benefits, such as the automation of repetitive tasks, increased availability, more efficient use of resources and reduced operating costs.

Sophisticated chatbots that draw on NLP and deep learning, are capable of providing rich and immersive experiences, resulting in increased customer satisfaction, brand loyalty and even sales conversions.

The perceived benefits of chatbot technology were reflected in the SAP Hybris survey.

Improved efficiency and increased customer satisfaction were seen as the two top benefits of chatbot technology, with 60% of respondents rating these factors as either ‘important’ of ‘very important’.

These were followed closely by increases in conversions (55%), cost effectiveness (53%) and better use of human resources (45%).

95% of respondents in the SAP Hybris survey felt that their usage of chatbots would grow in the coming years. However real world uptake remains relatively slow with only 19% of the respondents in the SAP Hybris survey said they were currently using chatbot technology.

are currently using chatbots

are seriously considering deploying

chatbot technology

believe their use of chatbots will grow in

the coming years

19% 77% 95%


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WHICH DEPARTMENTS WILL BENEFIT FROM CHATBOTS?

While nearly three quarters (72%) of respondents felt that their customer service department would benefit from the use of chatbot, sales, marketing and social media were also seen as departments likely to profit from chatbot deployments.

A BLEND OF HUMAN AND CHATBOT INTERACTIONSWhile the benefits to the business are clear, respondents felt that striking a balance between human services and chatbot interactions remained critical to the success of chatbot deployments. Nearly half of all respondents said that they felt that their customers would prefer to use humans for the majority of interactions, with the help of chatbots for simple tasks.

Just over a third of the professionals surveyed said that their customers would be happy to use chatbots for the majority of interactions, so long as there was easy access to human employees if needed.

Only 14% of participants felt that their customers would prefer to interact exclusively with humans, highlighting just how quickly customer perceptions are changing.

MOST USED CHATBOT APPLICATIONS

Amongst respondents with existing chatbot deployments, Slack was the most utilised application. The collaboration platform was followed closely by both Facebook Messenger and LINE.

The SAP Hybris survey found that existing deployments were split 50/50 across integrated and standalone applications.

72% Customer service

33% Social media

39% Slack

28% Facebook Messenger

28% Line

17% WeChat

11% WhatsApp

45% Sales

42% Marketing


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The Technology Landscape

THE COMPANIES ARE ARRANGED IN CONCENTRIC CIRCLES WHICH REPRESENT (FROM INSIDE-OUT):

Platforms: The messaging platforms that enable the existence of bots through robust send-and- receive APIs, frameworks, and ecosystems.

Brands: Companies that have launched and experimented with bots in that quadrant (for example, Managed x Support).

Providers:Companies that have the capabilities to deliver exceptional work in that quadrant.

Tools: The supporting tools used by providers, brands, or developers to deliver bot experiences.

SAP Hybris Conversational Commerce chatbot called Charly helps you find products, make recommendations, manage your shopping cart and check out. You can even search for products by entering emojis. Come and have a chat with Charly the Chatbot and discover “conversational commerce” at TFM and e-commerce Expo on stand E342. Both events take place from 27-28 September 2017 at London Olympia. Register for your free ticket today.

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It is impossible to address chatbots without looking at the technology stack that powers them. There are a number of disparate technologies that make up the AI landscape today, each with varying levels of maturity and influence. Facebook’s 2016 announcement that the Messenger platform would support the use of bots was a landmark moment in the evolution of chatbots.

While chatbot development was already vigorous, Facebook’s platform announcement acted as a springboard for businesses looking to leverage the capabilities of the technology.

With circa 2 billion active users and 65 million active businesses, Facebook is primed to become a significant operator in the space. While the platform is open to third party tools, Facebook is investing significant resources into its own AI capabilities. There are already more than 100,000 active bots on the Messenger Platform, up 233% year over year.

Looking at the AI platforms specifically, IBM Watson is perhaps the best-known technology on the market today. IBM’s question answering system shot to fame on the US TV program – Jeopardy – when it defeated two of the show’s most successful contestants. Watson has since been successfully commercialised with the Watson Conversation Service API offering

developer’s access to the platform’s cognitive and Natural Language Understanding (NLU) capabilities.

In 2016, Microsoft announced Bot Builder. The framework provides open-source SDKs for the development of chatbots, primarily for use in Microsoft’s ecosystem of apps and services.Microsoft has also developed the Azure Bot Service, which provides an integrated environment, enabling developers to build, test and deploy chatbots in a serverless environment.

Despite AI technologies being readily available, this fractured ecosystem of tools, micro-services and frameworks introduces obvious challenges for developers and organisations looking to build sophisticated chatbots. Many of these competing services lack out-of-the-box interoperability, making it difficult to develop well-integrated solutions with the deep functionality and cross-channel deployment capabilities needed.

This has led to the rise of ‘Platform as a Service’ providers such as Kore.ai, which offers an end-to-end platform for building, deploying, and using chatbots in a fully managed environment. PaaS providers such as Kore are likely to play an increasingly integral role in the development arena, by packaging all of the tools and components needed to build, test and deploy complex chatbots.


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Challenges with Chatbots

It could be argued that many of the challenges that chatbots face can be traced back to limitations of artificial intelligence. In 1950, Alan Turing proposed a procedure to test a machine’s ability to exhibit intelligent behaviour indistinguishable from that of a human. Although some systems have come close, not a single machine has passed the Turing Test in any meaningful sense.

For many in the development community, the Holy Grail of chatbot technology is to be able to provide customers with an equivalent level of ser-vice to that of a human. While great strides are being made in the area of AI, expectations must be managed if the value of chatbots is to be fully recognised.

A lack of human finesse was the single largest barrier to entry amongst survey respondents, with 66% of the professionals polled stating that

making chatbots more human posed a significant challenge. Other top challenges and concerns included development and maintenance (35%), finding the right balance between human-based and chatbot-based interactions (33%) and cyber security (9%).

There are also challenges when it comes to utilising chatbots beyond simple interactions. For example, it is expected that chatbots will play a central role in ecommerce in the years to come, but without integrated payment functionality, the use cases for chatbots as a sales tool remains limited.

By recognising the capabilities and limitations of chatbot technology, and working with them, it is possible to overcome most – if not all – of these challenges and fully recognise the value that chatbots provide.

Making bots more human

Development and maintenance

Finding the right balance between human and chatbot interactions

Cyber security

66% 35%

33%

GREATEST CHALLENGES WITH CHATBOTS

9%


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Quotes from Respondents

One respondent described it as “inevitable” that they will become a standard feature of all digital platforms.”

The comments reveal interest in the efficiency gains that chatbots offer as virtual employees who “can work 24/7” and there was interest in the data that chatbot interactions can provide to “inform and shape products and services going forward”.

A number of respondents focused on the need for both human and chatbot interactions in order not to “lose credibility” with customers. For example:

“We need to remember that sales and customerservicechannelsshouldbetheretosupportourcustomers.Likemanyprevioustechnologicalimprovementschatbotscanhelpus do this - but we should not force our customers to use them, and should always provideapathtoalivehumanbeing.”

“Chatbotsshouldprovideassistancewitheasytasks.However,atsomepoint,usersmaypreferengaginganotherhumanbeing.”

A number of comments revealed some healthy cynicism about inflated expectations for the technology and questions about the value that the current generation of chatbots delivers.

“Chatbotswillbethevoiceand‘face’ofyourbusiness within a decade, but today the tech hasfartogobeforeitwillreallyaddvalue.ConversationalUIsworkgreatinsomecontextsbutareinefficientformanytasks,sobotswillnotreplaceonlinestoresandvisualinterfacesforalongtime,ifever.”

“Chatbotssuppliersshouldfindawaytoletclients know what they are really capable of, and what kind of input they can process, in ordertoavoidoverexpectation.”

What do you think?

Respondents to the survey were invited to provide a quote about their views on how chatbots will impact business. Many agreed that chatbots will be a “game changer” if they become the “primary touchpoint between customers and organisations”.


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According to Gartner, chatbots will power 85% of all customer service interactions by the year 2020.

Nearly 95% of respondents in the SAP Hybris survey felt that their usage of chatbots would grow in the coming years. Fuelled by advances in artificial intelligence, evolving customer expectations and a paradigm shift in digital communication, there is no denying that we have firmly entered the age of the chatbot.

From marketing and sales to customer service and after-sales support, this new era of communication will force business models to evolve.

The survey highlights challenges that have yet to be overcome. Despite the many advancements made in fields of AI and machine learning, chatbots still lack the ability to interact on a truly human level. While this is a technical limitation, it would be a mistake to assume that chatbots lack business value simply because they are unable to achieve a human-levels of intelligence (yet).

It’s important to remember that chatbots are nothing more than a means to an end. Your real objective should be to ensure that your customers’ needs are met and their expectations are exceeded each time they interact with your business.

If a chatbot can often fulfil those needs effectively, then the issue of ‘not human enough’ becomes a moot point. How will you be using them in the years ahead?

Conclusion



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