Why chatbots could be hurting your business

With the increase in popularity with messenger platforms over the last few decades, it’s no surprise that we’re now seeing widespread use of online chats, chatbots and conversational platforms in business settings.

And with the birth of ChatGPT and other AI technology, people are beginning to envision a fully automated future for their customer experience.

But is this a good thing?

There are definitely some strong benefits of using automations for customer experience — and the statistics do show this — but what these numbers fail to show are the downsides.

And yes, there are some.

That being said, we’re not here to de-value chatbots or claim that they should never be used — far from it actually. We believe that automations do in fact, make a huge difference for growing businesses.

However, there are a lot of misconceptions on how chatbots and AI automations are supposed to be used to improve customer experience.

Breaking the “vending machine” mentality

We’re at an age where AI and chatbots are allowing businesses to have customers go through the entire customer journey without having to lift a finger.

If customers have issues or problems, they’ll be able to get most of their problems resolved through chatbots, before ever reaching a live agent.

And there are a lot of online businesses these days that love this idea of fully automating their customer experience.

At Channel.io, we call this the “vending machine” mentality.

As we’ve said before, there’s nothing wrong with automating parts of your business. But it’s benefits will vary case-by-case.

If you’re operating a drop-ship or running a business for passive income — it would make sense to automate your business.

But if you’re fully invested in your company, and looking for ways to scale, you should be aware of the limitations of relying too heavily on automations and AI.

To better explain, let’s take a look at some key differences between offline and online businesses.

(Tip: Channel.io also has chatbots, but we’ve designed them to be customizable for all different types of customer segments, to truly personalize customer experience. You can also run as many bots as you’d like.)

A difference in business maturity — business growth

The customer journey of many online businesses look something like the following:

• Customers come to the site and see the items displayed.
• They make a selection and pay for it.
• They wait for it to arrive in the mail.

Reminds you of a vending machine doesn’t it?

For offline businesses, the customer journey looks very different.

• Customers walk into the store.
• They’re greeted or recognized by the staff.
• Relationship and trust is built between the staff and customer.
• The staff makes recommendations based on the customer’s preferences
• Staff upsells the customer with add-on products to complement their main purchase.
• Customers are reminded of promotions, memberships, etc.
• And finally they make a purchase before walking out the door — satisfied with their purchase.

The difference between these two cases, comes down to business maturity.

Successful offline businesses have tried-and-true techniques that they’ve developed, over years of customer interactions, practice, and the process of trial and error — that work for their product, service or brand. And they take this experience seriously and with great value.

For online businesses that automate customer interactions from top to bottom — the opportunity to mature as a business just isn’t there.

But why is business maturity important?

“Look Ma! No hands!”… and no eyes? — limitations of automations

A mature business understands the importance of customer relationship management and the long-term benefits of interacting directly with customers. And they also place a lot of thought into the process.

In the customer journey example mentioned above, the staff’s behaviors are not just random reactions to how customers behave — they’re highly strategic. The reactions are planned and executed with purpose, and this is what sets them apart.

Automating the entire customer experience places limitations on future growth and visibility of their customers, as a whole.

Let’s look at an example.

Imagine actually owning a vending machine, and something goes wrong — your machine breaks.

Until a ‘Good Samaritan’ — or a disgruntled customer — takes time out of their day to reach out to you, to tell you about the broken machine, you’d be left in the dark about the state your machine is in.

Think about how much money you’d be losing — not to mention, the number of customers you’d be losing to a competitor’s machine.

It’s no different for online businesses.

If you’re not talking to your customers regularly, you won’t know what state your business is in, until you check yourself or someone takes time to tell you.

But at this point, it might already be too late.

If customers have already had a bad experience with your brand, it’s unlikely that they’ll return. Even worse, they could be telling others about their experience, without giving your brand a second chance.

And this could hurt your long-term growth potential.

(Tip: Channel.io’s chatbots allow you to collect feedback from customers, or see where customers are dropping off, to help you gain more visibility over the customer experience. You can also initiate conversations through pop-ups and reminders!)

Even if you manage to keep your business going with this ‘vending machine’ business model, there’s a high chance that you’ll lose your customers to a competitor selling the same items — if your competitor is making a conscious effort to speak to, and build real relationships with their customers.

Why?

Because consumers generally feel more inclined to make purchases from businesses they feel emotionally invested in, as opposed to those they feel no attachment to.

(Note: This is why customer loyalty or membership rewards programs are so effective for improving retention.)

Having the important conversations — recognize key customers

Automations can become a game-changer for growth-stage companies if used correctly.

Here are some situations where using automations would make sense:

• You get a lot of repeat and simple questions that can be answered with pre-set answers, and you want to filter the important questions before they reach an agent to free up resources.
• You’re planning to build your CX team, but inquiries are increasing and your company is currently understaffed.
• You’re on the road or away on vacation and don’t want to miss important inquiries or leave customers waiting with no answers.
• You’re providing products or services globally and you want someone at the front of your store at all times to receive inquiries and provide answers, or at least a response.

You’ll notice this about the situations mentioned above — there are two fundamental conditions that need to be met for automations to be a good idea for your business:

1. You want to allocate more time and effort towards key inquiries or regular customers.
2. You don’t want to keep customers waiting for a response.

With these conditions in mind, you’ll be able to decide whether automations for your business makes sense or not.

A stepping stone & safe haven — focusing resources

Focusing resources on every single customer that comes your way, may seem like a good idea — at first.

Why not, right? If you can make another sale or two.

But when the number of customers start increasing beyond what you’re capable of handling — you and your team are going to start feeling the burden of limited resources.

It’s just not practical.

In a previous blog on the Pareto Principle, we discuss how the top 20% of your customers account for 80% of your total revenue. The top 20% in this case, are your regular, returning customers — the ones most loyal to your brand.

It would make sense then, to focus your resources on expanding this top 20%, if you’re looking to make the most out of the resources you invest.

You’ll not only be increasing your overall revenue, but you’ll also be functioning more efficiently. At the same time, you’ll also be creating a following of regular customers that stay loyal to your business.

(Tip: Channel.io’s main focus is to help increase the number of regular customers and turn them into fans of your brand. You can check out all of our features through our free trial.)

And the best part of having this group of regular customers — that advocate your brand — is that they can act as a stepping stone for you to expand into bigger markets when business is good, or as a safe haven for you to retreat to during times of uncertainty.

Conclusion — finding a balance

For high-quality customer experience, nothing beats human-to-human conversations. Talking to customers gives you a chance to:

• build genuine relationships
• create regular customers for your brand
• make recommendations, sell and upsell your products
• gain insight on things to improve with your business (before it breaks)

Chatbots and AI automations should be used to help improve customer experience, but should never be used to replace human interactions.

By finding a balance between AI automations and human conversations, you’ll not only be able to run your business more efficiently, but you’ll also build a stable foundation for your business to grow on.

(Tip: To learn more about ways to improve the quality of your customer experience, click here and connect with a representative. We’d love to chat and see how we can be of help!)

Originally published at https://channel.io/en.