The Complete Customer Service Chatbot Handbook

Customer service is crucial for retaining clients and boosting revenue, with many businesses turning to chatbots for efficiency. Traditional chatbots have often underperformed, but generative AI promises significant improvements. Recent studies indicate widespread chatbot usage, high satisfaction rates, and substantial cost savings for businesses. This article provides a detailed guide on selecting the right AI chatbot for customer service, backed by the latest industry data.



Good customer service is key to retaining clients and boosting revenue. Businesses consistently aim to enhance the efficiency and effectiveness of their customer service.

Many companies have recently adopted customer service chatbots, indicating a notable shift. Traditional chatbots, however, often fell short in satisfying customer needs.

Generative AI in customer service chatbots is a significant transformation in dealing with this problem.

This article will offer guidance on choosing the right customer service chatbot, enriched with the latest industry data.

Recent studies shed light on the increasing role of chatbots in customer service:

In 2022, a study from showed that about 88% of people used a chatbot last year..This shows how common chatbots are in talking to customers.

A study by found that 80% of people had good good experiences with chatbots. says that companies can cut customer service costs by up to 30% by using AI chatbots. This indicates that companies can save a lot of money by implementing AI chatbots.

These studies tell us that more and more, businesses want to use AI chatbots for customer service. This is because they answer fast, save money, and people generally like using them.

This guide aims to provide you with vital insights and considerations for selecting a customer service chatbot.

What's a Customer Service Chatbot?

A customer service chatbot is a program that quickly answers customer questions. More and more businesses use these chatbots to make their customer service faster and better.

Here are the four main functions of a chatbot customer service:

(1) Responding to Customer Queries

The main job of a chatbot customer service is to quickly answer customer questions. With AI, it understands and replies to different types of questions. These can be simple FAQs or more detailed questions about products or services.

(2) Facilitating Customer Self-Service

Chatbots let customers find their own answers, great for common questions. They don't always need a person to help them. This way, customers can quickly get information, like checking their account or seeing where their order is.

(3) Transfer to Human Agents

In instances where a chatbot is unable to resolve a query, it transfers the conversation to a live agent.

This transition could occur via live chat, email, or phone. A seamless handover prevents customers from repeating themselves.

(4) Assisting Customer Service Agents

Chatbots do more than just help customers. They can also make things easier for customer service agents.

Customer Service Chatbots find information quickly and draft initial responses. This makes it faster for agents to reply to customers.

These chatbots are changing the way customer service works. They're crucial for supporting customers and the teams that help them.

Chatbots are very flexible. They can do many different things, from answering simple questions to dealing with more complicated customer service problems.

Key Business Outcomes of a Customer Service Chatbot

A customer service chatbot can significantly impact a business. Here are the main benefits of an effective chatbot customer service:

1. 24/7/365 Availability

Chatbots provide continuous support to customers at any time, ensuring assistance is always available.

2. Scalability During Busy Times

They can handle large numbers of customer inquiries, scaling up effortlessly during high-demand periods.

3. Quick First Response Time

Chatbots greatly improve the initial response time to customer queries, offering immediate answers. This enhances customer satisfaction and engagement, creating a positive first impression and better customer experience.

Chatbots reduce wait time, make a good first impression, and improve the customer experience.

Learn more strategies and insights about reducing customer service response time.

4. Speedy Average Response Time

Besides quick first responses, chatbots also reduce the average response time. They give fast, automated answers to customer questions, speeding up the overall support process. This not only satisfies customers but also allows human agents to focus on more complex issues.

5. Reduced Resolution Time

Chatbots can decrease the time needed to resolve customer issues. They do this by instantly responding and guiding customers through troubleshooting or providing information quickly. This boosts customer experience and team effectiveness.

6. Higher Deflection Rate

Chatbots increase deflection rates by handling routine inquiries efficiently and reducing the need for human intervention. This allows teams to focus on more complicated issues, increasing overall efficiency. Automating responses to common questions reduces the workload on human agents.

7. Lower Abandonment Rate

By providing quick help, chatbots can decrease the abandonment rate, or the rate of customers leaving support interactions. This maintains customer engagement and prevents frustration that might cause abandonment, improving retention during service interactions.

8. Improved Customer Satisfaction (CSAT)

Chatbots contribute to higher CSAT scores by providing prompt, precise answers. This immediate support improves the customer experience, leading to higher satisfaction with the service.

9. Increased Net Promoter Score (NPS)

The use of chatbots can result in a higher NPS, a measure of customer loyalty and satisfaction. By effectively addressing customer queries, chatbots enhance the overall customer experience, increasing the likelihood of customers recommending the company.

Check out this article to learn about how to calculate and improve NPS.

Why Have Customer Service Chatbots Failed to Meet Expectations?

Customer service chatbots have historically faced several challenges that limit their effectiveness:

(1) Struggling to Understand Customer Queries

Chatbots often have trouble fully grasping customer questions. They often rely on certain keywords, which means they don't fully get what the question is about.

Because of a limited ability to comprehend questions, chatbots might respond in ways that don't truly fit the question. This can make customers frustrated and lead to a less helpful service experience.

(2) Limited Action Capabilities

Chatbots try to make customers happier by answering quickly and correctly. But sometimes, they don't truly meet customer needs.

Customer support chatbots need to do more than just answer simple questions. They increasingly need to take actions on behalf of customers.

(3) Lack of Context Misunderstanding

Chatbots may not fully comprehend the context of customer inquiries. They might overlook the real essence or tone of a question. This limitation can result in responses that do not align well with the customer's actual issue.

(4) Lack of Personalization

Chatbots usually give basic answers that don't take into account each customer's specific situation. This can make customers feel like they're just getting a generic, impersonal response.

(5) Repetitive Response Loops

Chatbots may become trapped in loops, where they repeat the same answers. This frustrating experience can leave customers going in circles without the help they need.

(6) Difficulty Escalating to Human Agents

Chatbots sometimes do not efficiently transfer complex queries to live agents. This can make customers unhappy.

(7) Absence of Empathy and Emotional Intelligence

Chatbots typically lack the ability to sense and respond to a customer's emotions or tone. This deficiency hinders their ability to offer empathetic and emotionally aware service.

(8) Inadequate Problem Resolution

This makes it hard for them to respond in a way that shows they understand what the customer is going through. Empathy is key in customer service to make customers feel heard and cared for.

(8) Inability to Reach Resolution

Chatbots often struggle with resolving complex problems, requiring human intervention.

If chatbots can't solve problems, customers might feel like the brand doesn't value their time.

Why Some Customer Service Chatbots Let Us Down

Sometimes customer service chatbots don't work well because they use old technology. This can lead to bad experiences for users and make them frustrated.

Here are some outdated chatbot technologies and their problems:

(1) Rules or Decision Trees

These chatbots follow a set of rules to answer questions, kind of like following a map. They give specific answers based on these rules.

But they're extremely inflexible. Customers can only select from menus and submenus. Often, customers aren't able to find a menu option that meets their needs, and they need to escalate to a live agent.

These customer support chatbots are difficult to maintain as well.

(2) Keyword Matching

Keyword matching chatbots look for certain words in the customer’s question and then gives a pre-defined answer based on those words.

This is quick for common questions but often misses what the customer truly means. This can give unhelpful answers. Also, you have to keep updating the list of words and answers.

(3) Question Matching

Some chatbots use conversational AI, or natural language processing (NLP) to understand customer questions and match them to a list of pre-defined questions and answers. These are also called conversational AI chatbots.

These chatbots try to figure out what the customer really wants to know.

The chatbot might give the wrong answer if the customer asks a question that is not on the list. This can be frustrating.

Like keyword matching, you need to keep updating the pre-defined questions and answers.

How Generative AI is Changing Customer Service Chatbots

Generative AIis making a big change in how customer service chatbots work. It's moving away from old ways like set rules or pre-written answers.

Generative AI chatbots advanced systems called Large Language Models (LLMs) like GPT-3.5 or GPT-4.

These LLMs let chatbots understand all kinds of customer questions, even tough ones. They get the whole picture and the small details right.

These chatbots also give answers that sound really human. This makes talking to them feel more real and helpful.

They're not just for typing messages; they can also talk in voice assistants, sounding a lot like people.

Generative AI chatbots are good at figuring out what language a customer is using and replying in the same language. Sometimes, they can even seem more understanding than humans.

The change is really noticeable. Chatting with a generative AI chatbot feels a lot like talking to a person. This new technology is leading to happier customers and better customer service.

Challenges of Generative AI in Customer Service Chatbots

Sometimes, generative AI chatbots can hallucinate or create responses that aren't based on facts or reality.

This can be a significant issue in customer service chatbots, as it might lead to a considerable amount of frustration for customers.

Addressing the hallucination issue is important for a quality chatbot customer service.

Why Do Chatbots Hallucinate?

This happens with chatbots using Large Language Models (LLMs).

The main reason is that LLMs are designed to predict the next word in a conversation, but they don't know if the response is accurate or not.

Their responses often sound believable because they use correct grammar and understand the question's context. But sometimes, these responses are wrong or don't relate to reality at all.

Here’s a brief one-minute video about AI hallucination.

Can We Stop Hallucination?

LLMs are prone to hallucinate by nature. However, well-designed generative AI chatbots can minimize hallucination.

For instance, Gleen AI is a generative AI solution for customer service teams that manages to avoid hallucination.

An example can be seen in a video where Gleen AI and a standard GPT trained on the same information are compared.

The GPT model tends to hallucinate, but Gleen AI does not.

Key Factors in Choosing a Customer Service Chatbot

When selecting chatbots for customer service, consider these essential criteria:

(1)Generative AI Capability

Choose customer service chatbots with generative AI. They're good at answering complex questions with correct, detailed responses.

Generative AI can spot small things and change replies to suit different situations.

(2) Custom Knowledge Integration

Opt for a customer service chatbot that enables the integration of your custom knowledge base. This empowers the chatbot to deliver responses that are highly personalized to your business.

(3) Response Accuracy

Prioritize accuracy when choosing chatbots for customer service. Opt for a chatbot solution like Gleen AI that delivers precise responses without errors or hallucinations.

(4) Security and Privacy Standards

When selecting a chatbot for customer service, prioritize security and data protection. Ensure that the chatbot adheres to robust security measures and complies with privacy standards such as GDPR. Look for solutions that are SOC 2 Type 2 compliant to guarantee data security and privacy.

(5) Ability to Observe

Choose a chatbot for customer service that allows you to monitor and analyze customer interactions. This capability is essential for maintaining quality control and making continuous improvements to the chatbot's performance.

(6) Ongoing Improvement

Opt for customer service chatbots that actively improve responses based on feedback from users and administrators to ensure ongoing effectiveness and relevance.

(7) Agent Assist Capability

Ensure that the chatbot for customer service has the capability to assist agents by offering timely information and suggesting responses.

Agents should be able to edit responses, and the chatbot should learn from edited responses.

(8) Easy Maintenance

Select a customer service chatbot that automatically updates its knowledge base, ensuring that it stays up-to-date with the latest information.

(9) Integration Compatibility

Choose a customer service chatbot that seamlessly integrates with your existing systems and communication channels, including email, live chat, text response, and social media.

This ensures a consistent support experience across all platforms.

(10) Action-Oriented Assistance

Opt for a customer service chatbot that actively assists users in completing tasks and simplifies transactions.

(11) Support for Multiple Chatbots

Look for a platform that can manage multiple chatbots concurrently, each customized for different customer segments or customers.

(12) LLM Agnosticism

Ensure that the chatbot can seamlessly integrate with different Large Language Models (LLMs) for flexibility and adaptability.

(13) Public Cloud Flexibility

Choose a chatbot for customer service that works on your favorite public cloud platform like AWS, Azure, or Google Cloud. This ensures seamless integration with your existing cloud infrastructure.

(14) Single Tenancy Option

Evaluate whether the customer service chatbot offers the option to operate on a dedicated server and database. This option improves data security by separating your data and actions from others customers, giving extra protection.

(15) Dedicated Hosting Availability

Examine whether the customer service chatbot provides the option of hosting on a dedicated server.

This feature offers enhanced performance, security, and greater control over the hosting environment, making it particularly suitable for businesses with stringent data security requirements.

(16) Private Network Connection

Evaluate the chatbot's ability to establish secure connections with your Virtual Private Cloud (VPC) for heightened data protection. This feature significantly reduces the risk of data breaches and unauthorized access.

(17) Scalability

Verify that the chatbot platform can expand its capacity horizontally to accommodate increasing demands. This ensures that the chatbot remains effective and responsive as your business grows and customer interactions change.

(18) Service Uptime Guarantee

Seek out chatbot solutions that provide robust uptime guarantees to ensure consistent and uninterrupted service availability. This is essential for maintaining reliable customer support and ensuring that the chatbot is accessible whenever customers need assistance.

(19) Vendor’s Customer Service Commitment

Choose a provider that commits to specific response times and maintains high-quality support standards. This ensures that the chatbot meets your expectations for customer service and responsiveness.

(20) Graceful Failure Mode

Opt for a chatbot that maintains functionality even during downtimes, ensuring uninterrupted service. This resilience is crucial for providing consistent support to customers, even when the chatbot faces temporary issues.


Generative AI is changing the chatbot world, making customer service better and more efficient.

A customer service chatbot with generative AI can be a big plus for your business. It works well with what you know and gives clear answers.

It's important to pick a chatbot that keeps your private data safe and fits with your current tech setup.

Think about 20 important things when choosing a customer service chatbot.

Gleen AI is a top choice in generative AI for customer service. It meets or even beats these 20 things.

See what Gleen AI can do with a demo


try making your own generative AI chatbot for free on Gleen AI

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