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What are chatbots and how do chatbots work?

Engati Team
min read
What are chatbots and how do chatbots work?

Organizations are constantly on the lookout for the best AI-powered gadget to automate tasks. And the tool that’s caught everyone’s eye is the chatbot. Nowadays, we hear about and use chatbots in our daily lives. In fact, according to a report released by Forbes, three in five millennials have used chatbots at least once in their lives. But to many, this technology still remains an alien concept. 

So, let’s start off this blog from the basics as we further break down into the mechanisms and workings of AI chatbots and guide you into building the best chatbot for your business!

What are chatbots?

A chatbot is a type of software that can automate conversations and interact with people through messaging platforms. It will use either pre-programmed responses that are scripted or artificial intelligence; in the latter case, it will be able to handle more complex conversations than the former chatbot.

They can communicate through different platforms including Facebook Messenger, chat windows on your website, or mobile applications, or even messaging platforms, like WhatsApp, for example. They have the potential to appear to be intelligent humans, almost on the verge of simulating true artificial intelligence. However, most chatbots haven't advanced to that level yet, but customers don’t mind. As long as the chatbot can complete their tasks, and work 24/7- that’s all that matters.

“There is so much potential here and they will keep improving with time, supporting businesses with marketing, customer service, lead generation, and even human resources assistance.”

Chatbots are everywhere!

We are much familiar with the meaning and definition of a chatbot but did you know that chatbots are everywhere? They let you use the channel preferred by your customers, employees, and stakeholders to communicate with you. The world has moved to a text-message era. Chatbots allow you to pinpoint your queries and get relevant answers rather than traditionally using scrolls and click-to-find the information you are looking for.

Image source: Statista

Of course, bots eliminate the need for traditional call channels, inconsistent customer service, and wait and drop times. You can integrate these chatbots on the website or any other platform to get your chatbot online!

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

How do chatbots work?

A 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.

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

How do chatbots work?

Knowledge Base/CMS

The knowledge base provides real-time, personalized customer experience to reach and retain customers. Check out this article to learn more on knowledge base.

NLP Layer

The NLP layer consists of two systems- NLU, or Natural Language Understanding, and NLG, Natural Language Generation. The NLU system analyzes the different aspects of the language. While the NLG system maps yhe given input in natural language into useful representation

Data Store

To train the chatbot, a chatbot needs data and AI. AI is what powers the chatbots to learn from the queries and text provided. Training a chatbot is an on-going process, so the data needs to be kept in a store for the chatbot to continue automated learning.

The benefits of chatbots

Benefits of chatbots

They can provide customers with a personalized experience 

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

They’re faster and very accurate 

Chatbots respond to the demands of customers faster than human agents can and are very precise in providing the clients with the information that they need. This makes the process of communication faster and leads to an increase in the number of purchases made.  With chatbots, your service delivery is faster. This is a crucial factor in enhancing the customer experience.  

You can also use bots to increase the credibility of your company. This could be done by sending out the latest industry news to your customers ahead of your competitors. 

They work round the clock 

Since chatbots 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 the ability to handle multiple requests and chats simultaneously without making a mistake. It's an absolute win-win situation. You can expend your human resources on other parts of your business to increase productivity while the bots answer the customers immediately at their request. This saves their time (and makes them much happier). 

P.S. Here’s our list of the 10 best chatbot features!

They’re more economical 

Although it is not possible yet to totally replace humans with chatbots in customer service relations, some reports already show that using chatbots reduces the amount you spend on customer service by as much as 29%. It is also easier to develop a chatbot than it is to develop an app. Startups and small businesses that do not have enough yet to fund a customer relations department would find chatbots useful. 

They provide better experience for customers

Customer support Chatbots are able to work round the clock to provide quick and relevant responses to a customer’s queries. This is, therefore, a factor in increasing the satisfaction of the customer at the business. According to a survey carried out in November 2017 on more than 1000 adults in the USA, 64% of the participants said that they prefer getting help from the chatbot at any time of the day. 43% of them claimed that the chatbots resold their complaints faster. 

Types of Chatbots

Chatbots can be classified either on the basis of the deployment platform or on the basis of capability.

Based on the deployment platform, we have 3 types of chatbots; those that are built into messengers, those that use standalone applications, and those deployed over a website.

When it comes to capability, we have:‍

1. Menu/Button chatbots

2. Keyword Recognition chatbots

3. Contextual chatbots

4. Hybrid chatbots.

There are a couple of different ways that chatbots can be programmed. The most rudimentary form is rules-based. 

Rules-based chatbots

Rules-based chatbots, also known as linguistic-based chatbots, are an excellent tool for automating customer service for certain situations. The conversation is driven with the use of very specific keywords, or through suggested responses. 

Rules-based chatbots use a very basic type 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. At best, these types of chatbots work as an interactive FAQ section.

However, Rules-based Chatbots have their own drawbacks 

Rules-based chatbots are best-used for transactional interactions. It acts based on a set of defined rules. It’s a simple approach to begin with, but it fails in handling more complex questions.

Variations of questions have to be inputted for a chatbot to understand what we’re trying to say. For example, a chatbot is trained to understand and answer the question, “Where’s my pizza?” But if a user were to ask a variation of this like, “When is my pizza arriving?”, the bot will not understand the user’s intent, unless it’s trained to do so.

If you decide to deploy a rules-based chatbot, be honest about its capabilities. It can only handle a number of simple inquiries, so be sure to also input a way for the user to contact a live agent via email, or by calling.

AI-powered chatbots

AI-powered Chatbots have evolved from that to incorporating NLP, which translates common language into a form the bot's system understands, as well as Machine Learning that allows the chatbot to learn from its own experience and helps you deliver a better customer experience. Hence, to build a full-fledged chatbot manually, you will have to program these AI applications in it.

While making smart chatbots, a builder has to comprise conversational dialogue training. Such dialogue training is done with the help of artificial intelligence, hence the name “AI chatbots”. The building process of all AI chatbots is pretty innovatory, mainly comprising of these three protocols:

Data processing

Data processing is basically a multi-step natural language processing workflow to correctly recognize and infer free input text. This process requires serious engineering efforts when the input is multi-line/multi-objective.


This helps the program to learn the interdependence between dialogues and the course of actions so that chatbots can drive the conversation in the right direction. This keeps the availability of previous chat conversations (message logs) in check, in order to build knowledge graphs.

Chatbot training

Providing training to learn new conversations at all times to improve chatbots performance with the help of unsupervised methods based on machine learning techniques.

Another approach to building bots would be opting for services that render you a substructure to build your chatbots on, without the need for any coding or programming. In this process, a bot builder uses one single code that can be used by everyone, at all the platforms available. They consist of all the necessary and advanced elements pre-built in the substructure that lets you build a chatbot that stands out in the competitive market out there.

A common question that gets asked when building an AI chatbot is:

Why does AI and data matter when it comes to chatbots?

A rules-based chatbot is built with a very basic NLP system. Its NLU can only understand phrases when they're said exactly as they're said, and its NLG will only generate the same response, allowing no room for personalization. The machine learning capabilities in an AI chatbot allow it understand your customers and their queries. AI powers the chatbot to learn from the interaction and to improve each response depending on the customer's reactions.

The Value Chatbots Bring to Businesses

Businesses usually use chatbots for lead generation, sales, and customer support. In terms of lead generation, a business chatbot can help automate your messaging strategy if you already have one in place. A business chatbot can help you convert more leads by reducing response rates. For sales, chatbots can help your business sell your service or product by guiding, educating, and helping your customers through the sales process. Finally, a chatbot can help your business by answering questions in real-time, at a quicker pace than your employees could.

Chatbots are bringing a new way for businesses to communicate with the world and most importantly with their customers with the help of exploding popularity of messaging apps, the accelerated development of all kinds of sensors and wearables, and of course with the rise of emerging technologies and Artificial Intelligence (AI).
- Digital Doughnut on benefits of chatbots.
chatbot use cases


How can industries benefit from chatbots?

Before deciding whether or not a business chatbot is right for your business, it’s important to ask yourself if you have a messaging strategy in place. And if you receive the same inquiries constantly from your customers or potential clients. Consider if your audience is already using WhatsApp Messenger and if they’re technologically savvy enough to use a WhatsApp chatbot without concerns. Finally, think about whether you have the resources to set up a chatbot software and monitor its performance. If your answers are positive to these questions, then you should look into getting a chatbot. 

Industries that need staff for performing repetitive processes are the best ones to utilize the benefits of a chatbot. Though certain communications can only be taken by human touch, the chatbots can still overtake industries. Like marketing, sales, e-commerce, customer support and management, talent, and employee engagement. In all practical ways, this allows a reduction in overhead expenses and an increase of efficiency.

Chatbot guide by AI Multiple.

Applications of Chatbots


As the world moves away from billboards and closer to screens, many businesses are using social media to connect with customers. However, having dedicated teams for each social media isn't feasible, so chatbots fill in the gaps. Many organizations use chatbots as a catalyst for brand communication, for lead generation, and to nurture warm leads.


So far, the entertainment industry is the largest industry to privilege a chatbot. Starting from the news and media publishing companies who have been using chatbots to share their content based on customer needs to a Doc Brown bot which was developed to promote the movie’s anniversary. Publishers and big media brands could share sponsored and branded content through bots.


We have to integrate chatbots with the e-health records so that they can 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.

Automobile Industry

Automobile is one more industry where a chatbot can show high levels of efficiency and save expenses. The industry is very customer-centric and is based on queries ranging from very basic ones to important issues. A chatbot can help a customer solve queries in a better and faster way. Moreover, automobile recall notices have a chance of being delivered directly and a higher chance of being read and acted on with the help of bots.


Customers expect lightning-fast responses and want the purchase process to play out nice and easy. Moreover, the surge in mobile e-commerce has raised the bar as organizations need to accommodate ever higher volumes of traffic. Chatbots come as an indispensable tool here. One that allows businesses to attract clients one-on-one, that too in a personalized manner.

Endless Possibilities with a Chatbot

Chatbot benefits in any scenario. Businesses wish to move towards ROI and a 24x7 service that is both intelligent and effective. They look for more profits and ways to get more business.

The future of chatbots

In spite of constantly being connected to the internet, GenZ is considered to be 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 would be able to judge the users’ emotional state and respond in a way that is sensitive to users’ state of mind.

Conversational AI is what the future is going to be all about. It’s almost certain that 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.

With businesses noticing the benefits of bots, especially that of having their employees focus on more important tasks, it’s clear that organizations will be integrating chatbots into their business processes to a much greater extent. A trend that we expect to be seeing is the growth of on-premise chatbots. These are bots that exist on the physical premises of the organization, rather than on the cloud. These are usually located within the organizations’ servers and data centers. With the benefits of increased security and control, a large number of organizations are expected to opt for on-premise chatbots. We at Engati recognize this need and have begun to cater to it as well.

In addition to the mainstream customer service bots, we’ll start to see bots entering the retail arena, among many other spheres.

One thing’s for sure, bots are going to become an indispensable part of business processes. It’s going to be truly exciting to see all the innovative ways in which chatbots will be utilized.

Chatbot building is no longer rocket science and has been made a lot easier through several chatbot platforms, like Engati.

How to build your first chatbot

Engati is a robust chatbot building platform. You can build and create bots in under 10 minutes with no coding or programming requirements. Integrations are also possible with your e-commerce website, apps, or other messaging platforms like Slack, Telegram, WhatsApp, Facebook Messenger, Kik, etc.

You can either build a bot from scratch or choose from 200+ bot templates that procure multiple use-cases or even ask our experts to build one for you!

Incorporating Machine Learning and Natural Language Process programs into the platform, which are the key aspects, leaves you with only creating the conversational flow and the tasks that you want the chatbot to perform.

Thus, designing these bots is as simple as dragging and dropping from a set of pre-defined functionalities, coupled with some scope to modify and customize them for your specific business objectives. Engati has been recognized for building the best chatbots out there and ranks as one of the best chatbot platforms in the market today. Engati provides your business with robust AI chatbots that can increase your profits and conversions. Creating a chatbot online from scratch can be time-consuming, costly, and usually falls down in the market pretty soon. These bots require regular testing and updating to keep them relevant.

Hence, businesses are opting for chatbot platforms not just to build bots faster and with ease, but also because it contains many benefits.‍

Getting started with Engati

First and foremost, before you think of creating a bot, you will have to register at the Chatbot building platform. Engati offers free registration in just a few simple steps.

Here’s a video guiding you on how to.

After you’re done registering, you have to follow these simple steps-

  1. Click on “create a bot” button
  2. Name your bot, give it an identity and a use-case.
  3. Build your conversational flow. Research with your team on the most frequent queries and build an answer that you’d want the chatbot to deliver to your clients.
  4. Train your bot to do all the necessary functions you expect it to automate.
  5. Use the various ‘Intelligent Nodes’ to make your bot even smarter and multi-functional.
  6. Or just use a free template to start straight away, with room for customizations and alterations as per your requirements. Visit the ‘Bot Marketplace’ to choose your ideal bot template, click on the template, watch the demo, click on ‘download’, customize the dialogue flow, and voila!

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

Build a chatbot with the incredible features we offer:

chatbot features

We offer some of the best features out there for you to build and customize your bot upon. You will not find these anywhere else. Here’s a short preview for you:

  1. Conversational Modeler.
  2. Contextual Conversations.
  3. Multi-platform Support.
  4. Human Takeover and Live Chat.
  5. Bot Building and Customisations at only USD 22 Per Hour.
  6. FAQ Builder.
  7. Multi-lingual Support.
  8. Broadcast.
  9. Voice Bots.
  10. Bot Templates.
  11. Mobile SDKs.
  12. WhatsApp Support.
  13. Intent and Entity Recognition.
  14. E. Sense.
  15. Easy Chatbot training.
  16. Easy Integrations Framework.
  17. Copy a Bot.
  18. White label.
  19. FAQ Upload.
  20. Rich Analytics.

For more information, click here!

Engati Integrations for your chatbot

Google Calendar Integration

Bypass the time-consuming back-and-forth with your clients for appointment bookings. Engati integrations with Google Calendar enables your customers and prospects to book slots straight into your calendar through your chatbot.

Google Sheets Integration

Enable Google Sheets Integration on your bot to store user-generated data in a Google sheet. It helps you focus on Lead Generation, Customer Service and Inquiry Collection.

SMS Integration

Send SMS node will enable bot builders to send instant notification on the mobile phone of the desired recipient. This functionality will also allow bot creators to send SMS to multiple numbers at once if their service provider allows them to.

Zapier Integration

Automate tasks and increase your team’s productivity within minutes. With Zapier, you can integrate 1,000+ applications to your bot to simplify customer journeys.

Social Media Integration

Integrate your chatbot across multiple social media channels to build a solid brand personality, generate leads, capture user data, engage customers and improve retention.

To build a Chatbot for your business, please visit Engati.

Ride the automation wave and register with Engati here.

Anyone who registers with Engati between now and the 15th of January 2021, can onboard unlimited live chat agents with their WhatsApp solution with no additional costs. Terms and conditions may apply.

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We aim to empower you to create the best customer experiences you could imagine. 

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