Drive to Reimagine

What are Chatbots? How do Chatbots work? Top 10 applications

Engati Team
Nov 29
10-12 mins

Table of contents

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What are Chatbots?

If you’ve ever landed on a website, you’re probably familiar with that icon at the bottom corner of your screen. Sometimes it flashes, sometimes it dings. However, if you were to return to the website, you can always rely on it to greet you with a “How can I help you today?” This greeting is the catalyst of many customer-brand relationships, thanks to the website chatbot. But you’ve probably had a very vague understanding of chatbots, which might have left you wondering - “what exactly are chatbots?”

Chatbots are one of the most powerful tools a business can use. When used well, it creates connections and helps customers out.

We hope you enjoy this guide to chatbots!

What are Chatbots?

“A chatbot is a type of software that can help customers by automating conversations and interact with them through messaging platforms.”

A chatbot is a software program that can hold a conversation with a human user. They essentially automate one-to-one conversations. But don’t be fooled into thinking that all they do is talk. They can do everything from turning your lights on to advising you on what investments you should be making.

Also known as Artificial Conversational Entities (ACEs) or conversational agents, chatbots are quickly changing the way business is being conducted. The automation of basic, mechanical processes through conversational agents allows businesses to concentrate their valuable resources on tasks that actually matter.

With chatbots evolving and growing more powerful in their capabilities, they’re gradually becoming an integral part of our daily lives. And no, we’re not just talking about our virtual assistants like Siri and Alexa. We now have bots of various types, being utilized in almost every way imaginable. Here’s a quick tour of the marvelous world of chatbots. 

For example, you’re on WhatsApp, making plans with a friend, and you remembered that you needed to purchase something from IKEA. While you could open your browser to look up its opening hours, wouldn’t it be easier if you could find out without switching tabs? 

That’s why IKEA decided to deploy a WhatsApp chatbot

Bots can communicate through different platforms, including Facebook Messenger, Twitter, Slack, chat windows on your website, mobile applications, or even messaging apps, such as WhatsApp, Telegram, and many others. 

We know that you may have queries like - Where do chatbots come from? Does chatbot software use AI? Do chatbots use NLP? Are chatbots the future? Hold up! We will answer them all in due time. Keep reading ahead to uncover all these mysteries.

Now that we’ve covered the basics, let’s further break down the mechanisms and workings of chatbots to guide you toward building the best chatbot for your business!

How do chatbots work?

Chatbot acts as an intermediary that imitates human conversations by initiating chats instantaneously and responding tirelessly to the user queries at any point in time. Chatbots correspond to the backend system, retrieve required data from data storage and knowledge base in real-time, and answer back to the raised queries after processing the data through NLP algorithms. 

All the working chatbots today are mainly based on this model:

How chatbots work

Knowledge Base/CMS

The knowledge base provides a real-time, personalized customer experience to engage and retain customers.

NLP Layer

The Natural language processing (NLP) layer consists of two systems; Natural Language Understanding (NLU), and Natural Language Generation (NLG). The NLU system analyzes the different aspects of the language. While the NLG system maps the given input in natural language into a useful representation.

Data Store

To train your chatbot effectively, it needs data and AI. Chatbots use artificial intelligence to learn from the queries and text that is provided. Training a chatbot is an ongoing process, so the data needs to be kept in a store for the chatbot to continue automated learning.

What are the purpose and advantages of Chatbots?

Source: AI Multiple

Chatbots allow you to pinpoint their queries and deliver relevant answers rather than scrolls and click-to-find the information customers and decision-makers are looking for. Gartner predicts that chatbots will handle over 85% of questions in 2021.

Of course, bots eliminate the need for traditional call channels, inconsistent customer service, and wait and drop times. You can integrate these chatbots on your company websites or any other social media platform to be present wherever your customers and employees are. 

56% of people prefer to message than speaking to customer service.
- Microsoft report on future of chatbots

1. They provide customers with personalized experiences

They use machine learning to know people better. They are therefore able to offer a personalized experience to customers based on the information that they gather.

2. They're faster and more accurate

They respond to customers’ demands faster than human agents can. Due to the way they’re programmed, their precision provides customers with the information they need. It accelerates communication which leads to an increase in the number of purchases made, your service delivery is faster, and this enhances the customer experience.  

3. They work round the clock

Since they are machines, they don’t need breaks as humans do. They are alert 24/7 and are always working. Another advantage that the bots have is handling multiple requests and chats simultaneously without making a mistake.

5. They're economical

Although it is impossible to replace humans with chatbots in customer service, some reports already show that they reduce the amount you spend on customer service by as much as 29%. It is also easier to develop than it is to create an app.

6. They provide a better experience for customers

Customer support Chatbots can work round the clock to provide quick and relevant responses to the customer’s queries. They tend to be able to solve a user’s problem much faster than an agent can. In a survey carried out in November 2017, 64% of 1000 US adults preferred getting help from a chatbot at any time of the day. 43% of them claimed that they resolved the complaints faster. 

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What are the different types of Chatbots? 

They can be classified either based on the deployment platform or capability.

Based on the deployment platform, we have 3 types:

  • Those built into messengers
  • Those that use standalone applications
  • Those deployed over a website.

There are 6 other ‍chatbots based on their capabilities;

1. Rules-based chatbots

Rules-based chatbots (or linguistic-based) are an excellent tool for automating customer service for specific situations. The conversation is driven by the use of particular keywords or through suggested responses.

They use a basic form of Natural Language Processing. They create conversation flows using an if/then logic. It’s very much a black-and-white approach to conversing, so interactions are very structured, unlike the conversation you may have when you call Spectrum.

How Rules based chatbots work

2. Menu-based chatbots

Menu/button-based chatbots are the most basic type of chatbots currently implemented in the market today. In most cases, these chatbots are glorified decision tree hierarchies presented to the user in the form of buttons. Similar to the automated phone menus, we all interact with on almost a daily basis, these chatbots require the user to make several selections to dig deeper towards the ultimate answer.

3. Keyword recognition-based chatbots

Unlike menu-based chatbots, keyword recognition-based chatbots can listen to what users type and respond appropriately. These chatbots utilize customizable keywords and an AI application - Natural Language Processing (NLP), to determine how to serve an appropriate response to the user.

These types of chatbots fall short when they have to answer a lot of similar questions. The NLP chatbots will start to slip when there are keyword redundancies between several related questions.

4. Machine Learning chatbots

A contextual chatbot is far more advanced than the three bots discussed previously. These types of chatbots utilize Machine Learning(ML) and Artificial Intelligence (AI) to remember conversations with specific users to learn and grow over time. Unlike, keyword recognition-based bots, chatbots that have contextual awareness are smart enough to self-improve based on what users are asking for and how they are asking it.

For example, a contextual chatbot that allows users to order food; will store the data from each conversation and learn what the user likes to order. 

5. The hybrid model

Businesses love the sophistication of AI-chatbots, but don’t always have the talents or the large volumes of data to support them. So, they opt for the hybrid model. The hybrid chatbot model offers the best of both worlds- the simplicity of the rules-based chatbots, with the complexity of the AI-bots. 

6. Voice bots

To make conversational interfaces even more vernacular, businesses are now beginning to use voice-based chatbots or voice bots. Voice bots have been on the rise for the last couple of years, with virtual assistants like Apple’s Siri, to Amazon’s Alexa, and why? Because of the convenience they bring. It’s much easier for a customer to speak rather than type. A voice-activated chatbot brings frictionless experiences directly to the end customer.

How can businesses benefit from chatbots? And, What are the applications of Chatbots? 

Industries that need staff for performing repetitive processes are the best ones to utilize the benefits of a chatbot. Chatbots can benefit industries like marketing, sales, eCommerce, customer support, human resources, etc. In all practical ways, this allows a reduction in overhead expenses and increased efficiency.

Industries that will benefit the most from chatbots
Who benefits from chatbots the most?

The latest technology is changing the landscape and dynamic of the business world and eradicating the distance between business and consumers. With conversational chatbots, customers can connect and engage with their favorite brands at their fingertips. Following are the ways Let's discuss how chatbots can benefit businesses across different functions and processes. 

1. Handle multiple customers at the same time

2. Personalize conversations with your customers

3. Collect data and customer insight

4. Make brand/ business available 24/7

5. Reduce average resolution time

6. Proactive support and educating customers

7. Automate processes like marketing, human resources, and promotions

8. Broadcast communication, offers, and updates

9. Connect with an international audience with multiple languages

10. Easy deployment on websites and apps

11. Integrate software and business tools

Chatbots are used across industries and businesses to automate different functions and processes, allowing concerned teams to focus on the core elements of their businesses. Chatbots can do more than mere engagements, from generating leads to updating customers about their orders, raising tickets, booking appointments, and much more.

Here are some chatbot uses and applications across a range of domains:

Sales & Marketing

Many organizations use chatbot technologies as a catalyst for brand communication, lead generation, and nurturing warm leads.

Here are the key areas that chatbots can automate:

Engage and qualify leads - Use your chatbots to show website visitors a simple prompt – like “Let us know if you have any questions” – or even a welcome video to open up the door for conversation. Bots can then ask further questions to collect basic qualification details like email and company size.

Send high-intent leads directly to sales - Visitors who spend minutes on your pricing page or click the “Get more info” button likely show interest in your product. Use your chatbot to qualify instantly and schedule a call with your sales team.

Nurture and upsell users - If you offer free trials, bots can help users who haven’t completed their setup and check in with people whose trials are about to end. For customers, let them know about new features and connect them to the Sales reps if they’re interested in upgrading.


We need to integrate healthcare chatbots with e-health records to start with the basic patient data. With time, they can use the data to provide patient information. Determining basic symptoms and matching them with known ailments is also something that the bots will become good at, with time.

Availability round-the-clock - Healthcare Chatbots are available 24/7 and are dedicated to assisting patients through their recovery. This chatbot can help you in tasks such as reminding you about your medicines, providing medical information, giving you tips, and monitoring your overall well-being.

Builds a rapport with the patients and provides assistance - Imagine one of your patients has fallen ill but can’t describe what they’re feeling. What would they do? They’d start by looking up their symptoms online, and you know how that turns out. They would most likely land on a page that scares them further and stresses them out even more. 

Schedule appointments - Chatbots can help patients book appointments directly from your website chatbot. Not just that, they can also assign a relevant doctor to your patient, send the doctor an email with patient information and create a slot in both the patient as well as the doctor's calendar.


Customers expect lightning-fast responses and want the purchase process to be quick and seamless. Moreover, the surge in mobile eCommerce has raised the bar as organizations need to accommodate higher volumes of traffic. Chatbots allow businesses to attract clients one-on-one too in a personalized manner.

Provides personalized suggestions - AI chatbots remember the past interactions of the users and use them further to customize future conversations. Moreover, bots can keep the focus on customers while promoting the products or services.

Records real-time interactions - AI chatbots enable e-commerce businesses to get hands-on real-time user interaction. They can analyze information to improve the services as per the user input. The instant access to critical data reduces the operation cost and maximizes a business’s efficiency and functioning.

Eases customer executives - As chatbots can handle 80% of the repeated queries of the customer, they can help customer care executives keep the locus of support to solve complex queries. By addressing complex queries with priority, you can win more customers while reducing the operation cost.  Allows customers to browse and compare products with ease


Insurance companies have been able to uplift their services, communication, efficiency, and customer support by incorporating insurance chatbots into their workflows.

Process claims faster - As part of efforts to make claims smoother for policyholders, chatbots can help out in processing claims. The chatbot will then pass on that information to an agent for further processing.

Help in finding the right insurance policy - Chatbots assist clients in choosing the right insurance policy by collecting large amounts of data.

Manage claims and renewals - Healthcare or employee-initiated policyholders are always eager with their claims. With the help of chatbots, they can check their coverages, file for a claim, track status, and assist in the renewal process also. 

What are the must-have features for Chatbot? 

Following are the 10 must-have features that can change the mechanism of business functions and help increase customer success.

1. Customized customer interactions

Chatbots can collect user data and function as per customer needs and behavioral patterns with the help of AI, making the entire customer journey more personalized and customized.

2. Chatbots with emotional intelligence

With the help of sentiment analysis, chatbots can pick up the underlying emotions and intent of customers and respond to them most appropriately. 

3. Trainable intelligence to reduce resolution time

‍This is among the most exciting chatbot capabilities, wherein you can train the chatbot to perform complex reasoning on its own, without human interference, with the support of DocuSense.

4. Easy omnichannel deployment and messaging support

Engati made it easier through the OneView inbox, empowering conversations across 14+ channels and stitching them into a single inbox, providing an easy gateway for your customers to engage with your business. 

5. Extensible integrations with 3rd-party applications

Integrating with 3rd-party applications allows businesses to extract or workaround necessary data, analysis, and reports that are important to monitor trends and form business decisions. 

6. Rich contextual history 

This feature allows brands to keep the conversation more relevant and contextual every time the customer interacts with the chatbot.

7. Multilingual conversations for a global audience

Engati chatbots can converse in more than 37 international languages providing a wide array of languages to select from. 

8. Easy human-takeover for live support

Chatbots can handle around 80% of your customer queries without human intervention. And for the complex conversation, you can switch or direct the interactions to live agents to serve them better.

9. Robust API to enhance CX

Engati chatbots can send messages as texts, carousels, buttons, and more, keeping your chatbot users' customers engaged as they explore your brand.

10. Security and privacy for customer data

Engati chatbots provide a fully transparent policy regarding the data bots, such as what they collect and exactly what it is used for. 

Learn more in detail about the above features at 10 Must-Have Chatbot Features to Increase Customer Success

What are the use cases and examples of Chatbots? 

1. Tokio Marines Nichido Fire Insurance

The multichannel solution optimizes processes by providing insurance policy quotes, tracking claims, and renewing requests online. It also serves clients by answering FAQs round the clock, effectively working as a stream for lead generation. 

2. Cabinet UK

Cabinet UK wanted to encourage and engage students to take up STEM projects. They were able to create workflows in no time

and deployed it on their website for students and increased the engagement rate by 43.5%. 

3. Garasi

With the huge inflow of repetitive queries coming, it was difficult to scale and attend to these customers in real-time. With Engati’s

extensible integrations, the bot was able to fetch the contact

numbers from the database and reply to the customers, and achieved a 77% reduction in response time. 

4. Mall of Emirates

Enhancing customer engagement and retention rate was becoming increasingly difficult due to the high volume of incoming customer queries. After deploying the WhatsApp chatbot solution, they've increased customer retention and reduced response time. 

How to build a chatbot with Engati?

1. Understand your target market

It’s hard to define the end goal of your conversational flows without a target audience in mind. So ask yourself, who is going to use your chatbot? What kind of questions would they have for your chatbot? What tasks do they want to accomplish through the chatbot? 

2. Define your goals

What does it do for your customers? Does it assist them with their purchases, or is it the equivalent of a greeter? How much effort will it take? Will it regularly send reminders to users or pop up now and then to celebrate when they meet a goal? Determine its goals before moving to the next step.

3. Design your chatbot's personality

Step into your audience’s shoes and think about how you would converse with them. Write it down like it’s a script and implement your voice into your chatbot. 

Your persona will help you determine the tone, writing style, maturity, and politeness you’ll use in your writing.

4. Create a diagram

Write your script in fragments to stay organized and make brainstorming easier. An easy way to do this is by creating a conversation diagram.

You can also include visual elements such as carousels, GIFs, emojis, pictures, or videos.

Remember to keep your customer’s journey in mind when you map out your conversation elements and diagram. 

5. Writing

Depending on your bot’s purpose, you may have to create iterations for each situation.

The trick is to keep messages short — hence the nodes. First, step into your customer’s shoes and picture what they’d like to hear and what tasks they’d like to accomplish. Then step into your shoes and solve for how you’d like to help them.

Remember to keep the pacing in mind. ‍

6. Start iterating

Designing the actual conversation flows is a time-consuming process. After completing your first draft, start creating variations. Your customers don’t want to have deja-vu every time they talk to your chatbot. Make it more human with iterations.

Then observe. Note what you’ve missed, and find the dead-ends. If your customers get lost during a conversation, how do you get them back on track towards their goal?

7. Editing

Designing conversation flows can get intense quite quickly. 

As you write and rewrite your script, we recommend reading it out loud to yourself. Hearing your writing makes it easier to spot errors or awkward moments.

Now that you’ve designed your conversational flows, you’re ready to implement your plan. The best way to get started is by building your chatbot on Engati. You can register for free and get started in a couple of mins.

Once you’ve registered, you have to follow these simple steps-

Step 1: Select the Create a Bot button on the portal’s homepage.

Step 2: Give your chatbot a name, a description, and assign a category.

Step 3: Then you’ll be presented with a library of our templates. You can either browse through and select the one that suits your use case or click Skip and build the chatbot from scratch.

Step 4: Next is channel setup. Here, you can customize your chat window for web chat and select which channels you’d like to deploy the chatbot. Then click Next for the live chat menu.

Step 5: If you’d like to support your chatbot with live chat, enable it in this menu.

Step 6: The conversational intelligence step will allow for quick FAQ set up and customizing the welcome path for your bot.

Step 7: Finally, review all changes, and your bot is ready to be deployed!

You can also watch this complete step-by-step tutorial on getting started with Engati!

How do Engati integrations and deployment help? 

Engati chatbot deployment channels

Channels Engati supports

Customers are omnipresent. They interact, engage, and communicate with brands and seek instant answers to their queries. It is over the odds to lose out on customers across digital platforms who can bring potential value to a company. Engati provides easy deployment of chatbots across multiple digital platforms to stay connected with all your customers. 

We also support deployment for channels such as:

  • WhatsApp
  • Facebook
  • Telegram
  • WeChat
  • Website and native mobile applications
  • And more

All you have to do is select your channels from the channel deployment menu, and you’re set! 

And if you’ve already deployed your chatbot and would like to deploy it on additional channels, simply select Channels from the Configure menu and select your channel of choice.

‍The same Engati chatbot could serve as a social media chatbot, a website chatbot, and much more - create your bot once and deploy it across all your channels.

Engati Integrations for your chatbot

With a robust, flexible integration platform, you can easily integrate data flowing from multiple sources, whether it's on-premise or on the cloud. Engati provides easy integration with the following platforms. 

Google Calendar Integration‍
Google Sheets Integration
SMS Integration
Zapier Integration
Social Media Integration‍

Why Chatbots are the future?

Despite always being connected to the internet, GenZ is considered the loneliest generation yet. Keeping this in mind, it is highly likely that we will soon be seeing chatbots that have Emotional Intelligence. These bots could judge the user's emotion and respond in a way that is sensitive to the user's state of mind, performing sentiment analysis in the process.

AI is the future. We’re going to be seeing bots that sound more human as time passes. Someday, we may even get bots that are indistinguishable from humans, even though that’s a long time from now, but that’s where we’re headed!

‍Here’s a quick infographic that could help you understand why chatbots are the future:

Chatbots of the future


How much time does it take to build a chatbot?

The average time required to build a chatbot system could range from a few mins to maximum few hours. You can get started with pre-designed templates and customize them as per your requirements!

Are chatbots successful?

The success of chatbots is the impact it’s creating on customer experience. Chatbots help the business to provide overwhelming customer service which pushes more and more companies to try them.

How effective are Chatbots?

As per IBM's research, chatbots can successfully answer up to 80% of routine questions without human intervention. In addition, the capacity to manage multiple customers at once makes the chatbot a better choice when compared to a human. Chatbots can increase operational efficiency in your sales, marketing, and customer support teams.

Do Chatbots increase sales?

When used smartly, chatbots will improve your revenue significantly. They not only help in lead generation & sales but also play an important role in customer support and nurturing. They provide omnichannel support to your customers throughout the entire journey.

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Engati Team

At the forefront for digital customer experience, Engati helps you reimagine the customer journey through engagement-first solutions, spanning automation and live chat.

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