Where do Chatbots Fit for Retailers?

Customer Experience

Over the last few years, chat­bots have start­ed to make their pres­ence felt through­out the dig­i­tal mar­ket­ing ecosys­tem. The retail indus­try has been as excit­ed as any to exper­i­ment with this new tech­nol­o­gy, with the hope that the con­ve­nience these inte­gra­tions would pro­vide would delight users and cre­ate deep­er cus­tomer expe­ri­ences. After all, chat­bots pro­vid­ed retail­ers with a 24X7 per­son­al-assis­tant alter­na­tive to store asso­ciates. And bots with ecom­merce func­tion­al­i­ty could help shop­pers avoid check­out lines.

But recent­ly, chat­bots have been aban­doned by sev­er­al high-vis­i­bil­i­ty retail­ers. So where do they fit in, if any­where, at this moment in time? And what does the future hold for bots?

First, let us look at why chat­bots pro­vide an excit­ing oppor­tu­ni­ty for retail­ers. Many retail­ers oper­ate with thin mar­gins, and though it is nec­es­sary for the retail indus­try to improve cus­tomer expe­ri­ence, doing so isn’t always mar­gin-friend­ly. The poten­tial that chat­bots offer for improv­ing the cus­tomer expe­ri­ence at a rel­a­tive­ly mod­est cost, com­pared to many oth­er alter­na­tives for doing so, is attrac­tive to retail­ers.

Chat­bots can inter­act on a large scale, and many pro­vide real-time trans­ac­tion func­tion­al­i­ty, so the oppor­tu­ni­ty to intro­duce this touch point before and at the point of sale appeals to retail­ers. If the path to pur­chase is made more flu­id, the user expe­ri­ence is enhanced.

Anoth­er impact is brand sup­port. Chat­bots can be more than sim­ply infor­ma­tion providers or trans­ac­tion agents. They offer an oppor­tu­ni­ty to cre­ate or extend a brand’s per­son­al­i­ty. With the abil­i­ty to imple­ment direct­ly into a retailer’s web­site or app, mar­keters can add a key touch point on the cus­tomer jour­ney.

On the oth­er hand, if bots can suc­cess­ful­ly han­dle rou­tine requests, such as “where is my order?”, then brands can utilise exist­ing asso­ciates or call-cen­ter staff for respond­ing to more com­plex cus­tomer queries.

Mil­lenials favour chat­bots

The good news for chat­bots is that mil­len­ni­als view their use favourably. Accord­ing to eMar­keter, “in a Decem­ber 2016 sur­vey by Retale, near­ly 60% of US mil­len­ni­als said they have used a chat­bot. More than half of those who had nev­er used a chat­bot said they’d be inter­est­ed in try­ing one.”

The eMar­keter arti­cle goes on to explain that “two-thirds of respon­dents said they’d be like­ly to buy an item direct­ly from a chat­bot, [ver­sus] only 14% who said they would not be inter­est­ed in doing so.” This sounds like a strong endorse­ment from an influ­en­tial tar­get seg­ment.

Chat­bot chal­lenges exist

Although the poten­tial for this tech­nol­o­gy is appar­ent, prob­lems exist in the capa­bil­i­ties around voice recog­ni­tion and nat­ur­al lan­guage pro­cess­ing, which has led to sev­er­al high-pro­file brands aban­don­ing bot imple­men­ta­tions.

For exam­ple, fash­ion retail­er Everlane–a part­ner in Facebook’s chat­bot launch via its Mes­sen­ger service–announced that it would no longer use the plug-in after it hit a fail­ure rate of 70 per­cent.

Con­sumers have also not shown tol­er­ance for chat­bot inter­ac­tions, whether those inter­ac­tions are suc­cess­ful or not. A Digitas/Harris Poll sur­vey found that 73 per­cent wouldn’t use a brand’s chat­box a sec­ond time if some­thing went wrong on the first inter­ac­tion. And cus­tomers with high­er-lev­el needs, such as prod­uct cus­tomi­sa­tion, will not like­ly enjoy the expe­ri­ence until capa­bil­i­ties improve. Even when a request is a sim­ple “where’s my ship­ment?”, some may become frus­trat­ed at deal­ing with a brand agent that is lim­it­ed in func­tion.

Retail­ers must advance cau­tious­ly when decid­ing to pro­vide the chat­bot expe­ri­ence. As with any new opt-in expe­ri­ence, users will expect much. They will want per­son­al­i­sa­tion, they’ll seek excep­tion­al ser­vice, and they will need to feel sat­is­fied when the expe­ri­ence is over. While Face­book may be able to tol­er­ate incon­sis­tent bot inter­ac­tions, retail­ers who oper­ate on thin mar­gins to begin with can­not risk poor engage­ments and unhap­py cus­tomers.

In addi­tion, retail­ers must be wary of the impact of chat­bots on store employ­ee roles. Train­ing asso­ciates to add more val­ue to the shop­ping expe­ri­ence will be impor­tant as more rou­tine tasks are man­aged by bots. Brands will need to take more care in pro­vid­ing a delight­ful, per­son­alised phys­i­cal expe­ri­ence along with dig­i­tal inter­ac­tions.

The future of chat­bots in retail

Although the tech­nol­o­gy is not yet where it needs to be–in terms of a low fail rate–retailers can be hope­ful that chat­bots will become more effec­tive at cus­tomer inter­ac­tions. Much of their effec­tive­ness will rest on fur­ther advance­ments in nat­ur­al lan­guage pro­cess­ing as well as on fur­ther evo­lu­tion in sophis­ti­ca­tion of design­ing voice- or chat-dri­ven user inter­faces.

In fact, AI devel­op­ers such as Google are mak­ing huge strides in improv­ing algo­rithms to mim­ic seman­tic pat­terns in speech. Also, the pace at which AI-dri­ven tech­nolo­gies are being devel­oped can only mean a sig­nif­i­cant jump in suc­cess­ful bot imple­men­ta­tions for retail­ers.

As so-called deep rein­force­ment learn­ing is opti­mised, the fail­ure rate will shrink and con­sumers will become more com­fort­able with this next excit­ing dig­i­tal engage­ment tool. Bots will become more con­ver­sa­tion­al, and hope­ful­ly empa­thet­ic, too. This will serve to enhance the cus­tomer expe­ri­ence and restore retail­ers’ enthu­si­asm for chat­bots.

It’s impor­tant for retail­ers to ask whether bots can effec­tive­ly aug­ment an excep­tion­al in-store expe­ri­ence. Retail­ers will want to use bots to guide cus­tomers, such as those search­ing for gift ideas. Doing so must be as easy as tex­ting a friend.

Deploy­ing chat­bots to pro­vide sto­ry­telling, prod­uct explo­ration, and oth­er mar­ket­ing func­tions will help brands suc­ceed with this tech­nol­o­gy. But oth­er func­tions will be avail­able as well, such as seam­less trans­ac­tion pro­cess­ing, so brands will need to deter­mine how chat­bots will be used for mar­ket­ing, util­i­ty, or core busi­ness func­tions.

While it’s dif­fi­cult to pre­dict exact­ly when chat­bots will become ubiq­ui­tous in retail, I firm­ly believe they will become a strong com­po­nent once the kinks have been worked out.


Customer Experience
Vijayanta Gupta

Posted on 05-22-2017


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