ReadingWhat is conversational AI? How does it help in customer engagement?

What is conversational AI? How does it help in customer engagement?


With each passing day, we are moving closer to a world where chatbots converse, virtual assistants anticipate needs, and words weave experiences. As our lives intertwine seamlessly with the digital landscape, the spotlight falls on the transformative force of conversational AI.

Looking at how artificial intelligence continues to be an integral part of our daily lives, understanding how businesses can harness the power of the same for customer service is paramount.

In this guide, we’ll helm the complexities of conversational AI, exploring its inner workings, benefits for customers and agents, as well as optimal implementation strategies for a stellar customer experience.

So, let’s go straight into conversational AI; a technology that’s not only transforming businesses but also raising questions about who’s really behind the words you read.

What is conversational AI?

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Conversational AI technology is an advanced branch of artificial intelligence designed to enable natural and human-like interactions between machines and users. It utilizes algorithms, machine learning, and natural language processing to comprehend and respond to spoken or written language.

Did you know?

Projections indicate that by 2030, the worldwide chatbot market within the banking, financial services, and insurance (BFSI) sector is anticipated to surge to around $7 billion. In 2019, this market was assessed at approximately $586 million.

Conversational AI is the driving force behind chatbots, virtual assistants, and other automated systems that engage with users in a conversational manner. Its primary goal is to enhance user experiences, streamline customer support, and provide real-time assistance, making it an indispensable tool for businesses seeking to improve customer interactions and operational efficiency.

Distinguishing features of conversational AI

Conversational AI chatbots possess distinctive features that set them apart in the artificial intelligence realm. These distinguishing attributes revolve around three key components:

Conversational AI chatbots leverage the synergy of NLP, ML, and NLU to deliver human-like interactions, learning from data and adapting to user needs, making them an important asset in various industries, particularly for enhancing customer support and engagement.

In our exploration of the diverse world of conversational AI, it’s important to recognize its role in shaping customer experiences.

Natural language processing (NLP)

NLP is the backbone of conversational AI. It equips these chatbots with the ability to comprehend and generate human language. Through NLP, they can understand the context, sentiment, and intent behind user messages. This enables them to engage in conversations that feel natural, as if interacting with a human, and ensures that they respond appropriately, making them invaluable for customer support and interaction.

Machine learning (ML)

ML plays a vital role in enhancing the capabilities of conversational AI. These chatbots employ ML algorithms to learn from the data they process continuously. By analyzing large datasets of past interactions, they become more proficient at recognizing patterns and refining their responses over time. This adaptability ensures that they can handle a wide range of queries and provide increasingly accurate and context-aware responses.

Natural language understanding (NLU)

NLU is a subset of NLP, focusing on extracting meaning and intent from text or speech. When it comes to conversational AI, NLU allows chatbots to understand not only the words but also the user’s intentions and the context of the conversation. This deep understanding empowers them to offer personalized responses, making interactions more efficient and user-centric.

Chatbots vs. conversational AI

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Chatbots and conversational AI solutions are often used interchangeably, but they have distinct characteristics. Chatbots, while capable of providing automated responses, are more limited in their functionalities and generally operate based on predefined rules.

In contrast, conversational AI tools, harnessing the power of advanced natural language processing and machine learning, offer a more comprehensive and dynamic user experience.

Considering the statistics, the interest in chatbot platforms has seen steady growth, with an average of 1.1k searches per month in 2022, increasing to 1.5k in 2023. In comparison, other conversational AI solutions saw 473 searches in 2022, which rose to 512 in 2023.

This data underscores the evolving landscape, with users showing a growing inclination towards the capabilities and versatility of conversational AI solutions over traditional chatbots.

How does conversational AI work?

Conversational AI operates as a sophisticated system that enhances customer satisfaction and customer experience through its intricate workings.

It starts with natural language processing (NLP) and machine learning algorithms, which enable the system to understand and interpret human language. When a user interacts with a conversational AI, their input is processed and analyzed for intent, context, and sentiment.

The AI leverages predefined rules and data from previous interactions to craft relevant responses. It learns from user interactions and refines its capabilities over time, ensuring increasingly accurate and personalized replies. These interactions create a seamless, human-like experience, making it a valuable tool for businesses aiming to enhance customer satisfaction.

Benefits of conversational AI

What are the prevailing terms used to characterize Chatbot / Conversational AI Platforms?

The most favorably referenced term associated with Chatbot / Conversational AI Platforms is "User-Friendly," mentioned in 13% of the reviews. Conversely, the term “Challenging” is the most frequent negative descriptor, appearing in 3.00% of Chatbot / Conversational AI Platform reviews.

As we uncover the multifaceted advantages of conversational AI, it’s essential not to overlook the remarkable impact of chatbots in redefining customer interactions.

Conversational AI brings a plethora of benefits to businesses that extend far beyond automation. It’s the bridge that transforms customer conversations, making them more engaging and efficient.

Here are the key benefits of conversational AI:

Seamless omnichannel integration ensures consistency

Conversational AI can seamlessly integrate with various communication channels, from websites and social media to mobile apps and messaging platforms. This allows for a consistent user experience across multiple touchpoints, making it easier for customers to engage with the brand.

Imagine automatic updates from tickets to customer conversations and vice versa, ensuring your customers are never left wondering.

With a shared system of record, DevRev’s Convergence brings automation into the heart of your workspace, ensuring that information flows effortlessly across functions. It’s the bridge that connects customer-facing functions, product teams, and development, all without human intervention.

DevRev’s Convergence:

  1. Ensures that your development team is always in the loop about ticket changes, making collaboration smoother than ever
  2. Simplifies the management of complex issue hierarchies
  3. Bridges the gap between enhancements and the issues linked to them, ensuring everything is in sync
  4. Provides automatic updates on ongoing product enhancements for your support team
  5. Takes care of conversation resolution and archival, ensuring a smooth customer experience.

Real-time insights enable swift decision-making

Conversational AI can provide real-time insights into customer sentiment and trends. By monitoring and analyzing interactions, businesses can identify issues or opportunities as they emerge, allowing for swift decision-making.

A majority of contact center and IT leaders, accounting for 53%, report that conversational AI capabilities have led to a reduction in the overall operational costs of their contact centers.

Enhanced user engagement boosts conversions

Conversational AI’s ability to provide relevant, personalized responses and recommendations increases user engagement. This leads to extended user sessions and a higher likelihood of conversions.

Turing AI by DevRev instantly generates customer insights by auto-generating common themes, prioritizes enhancements based on customer impact, auto-creates enhancements from customer insights, and automates the creation of release notes for your product improvements. These features streamline your software development process, allowing you to focus on making a meaningful impact on your customers.

Predictive analytics enhance problem resolution

Advanced conversational AI can utilize predictive analytics to anticipate user needs and provide proactive assistance. It can predict queries or issues based on historical data, which results in faster problem resolution and more efficient support.

DevRev’s smart cluster feature brings the power of intelligent clustering to your customer feedback analysis. It helps you uncover the voice of the customer by grouping tickets based on semantic similarity, automatically generating valuable product insights. With this innovative customer support automation software, understanding your customer’s needs becomes more accessible than ever.


Customization for brand alignment

Conversational AI is highly customizable. Businesses can tailor the AI’s responses, appearance, and behavior to match their brand’s unique tone and style, ensuring a cohesive and on-brand customer experience.

CEOs and top executives were polled about the areas of their companies benefiting the most from AI solutions in a recent survey by PwC.

What stood out were their resounding responses: a staggering 40% acknowledged AI’s role in enhancing employee experiences, while 37% lauded its impact on consumer interactions, all achieved through the marvel of conversational AI.

Reduced response time for efficient support

The instantaneous nature of conversational AI means that response times are significantly reduced, resulting in quicker issue resolution and a more efficient customer support process. A notable 57% of businesses assert that chatbots result in substantial cost savings due to their ability to provide quicker response times.

Ticket deflection stands out as a key factor contributing to quicker response times, ensuring that customer queries are efficiently addressed through automated solutions, enhancing overall support efficiency. In the AI world, “deflection” takes center stage, transforming customer service. It’s the magic trick where AI chatbots automatically provide tailored responses to common customer queries. No more redirects to websites or PDFs; it’s all about direct, personalized answers.

With natural language processing (NLP) as their secret sauce, these chatbots comprehend customer queries and respond in a personalized, contextual, and conversational manner. But here’s the real thing: they keep getting better. With each response, AI chatbots learn, improving their accuracy and relevance. It’s like having an AI assistant that constantly sharpens its skills.

And speaking of AI, DevRev’s PLuG widget, powered by DevRev Turing AI, is the game-changer. It’s swift, efficient, and limitless. Deploy it in minutes, with no decision tree management involved. Point, click, deploy, and let Deflection work its magic seamlessly.

Continuous learning leads to proficiency

Conversational AI systems are built on machine learning algorithms that improve over time. They learn from each interaction, adapting to evolving user preferences and trends, which means they become increasingly proficient with continued use.

Types of conversational AI

There are several distinct types of conversational AI, each tailored to specific functions and industries:

Automatic speech recognition (ASR)

ASR is a foundational component of conversational AI that converts spoken language into text. It plays a vital role in voice assistants, transcription services, and applications requiring voice input. ASR ensures that conversational AI can understand and respond to spoken language accurately.

Voice assistants

Voice assistants represent a prominent category within conversational AI, exemplified by industry-leading technologies such as Siri, Google Assistant, and Alexa.

Apple Siri:

Siri excels in facilitating seamless communication. It not only initiates calls and sends messages but also ensures hands-free correspondence, keeping users connected without distractions. Siri’s navigation prowess extends beyond physical routes. It adeptly navigates through apps, searches the web, and opens applications, streamlining interactions with Apple devices.

Amazon Alexa:

Beyond playing music and answering queries, Alexa transforms residences into smart havens. It deftly manages smart home devices, adjusting lights, thermostats, and even providing security updates. Alexa acts as a reliable assistant, setting reminders, creating to-do lists, and updating schedules. Its seamless integration with third-party applications extends its utility for various personal and professional tasks.

Google Assistant:

Google Assistant thrives on contextual understanding. It tailors responses based on previous interactions, ensuring a personalized experience that evolves with user preferences. It seamlessly integrates with various apps and services, allowing users to send messages, make reservations, and order services without leaving the conversation.


Conversational AI chatbots are prevalent in customer service, e-commerce, and a range of industries. They engage with users in text-based conversations, answering queries, providing assistance, and facilitating transactions.

Retention rates for messaging apps surpass those of traditional apps by 20%. These chatbots enhance customer support, streamline operations, and improve user experiences.

Conversational AI applications

Beyond voice and text interactions, conversational AI is deployed in specialized applications. Conversational AI applications are tailored to address specific industry needs.

Like in healthcare, it can assist with medical diagnostics and patient engagement. In finance, it enhances customer service and fraud detection.

Conversational AI examples and use cases

Conversational AI, with its unique capabilities, finds application across various industries, enhancing interactions and operational efficiency. Its versatility enables businesses to streamline operations, enhance customer experiences, and engage users effectively through text and voice interactions.

Here are some compelling examples and use cases of conversational AI:

Interactive voice response (IVR)

In telecommunication, conversational AI powers IVR systems, enabling automated voice interactions with callers. Users can access information, make payments, and navigate services seamlessly through voice commands.


Conversational AI in e-commerce can use natural language processing to understand product descriptions and customer reviews. By analyzing this data, it can offer shoppers more detailed and personalized product recommendations, creating a shopping experience that rivals in-store interactions. This results in improved user experiences and increased sales.


In the medical field, conversational AI is used for patient engagement, appointment scheduling, and even preliminary diagnosis. It streamlines healthcare operations, enhances patient experiences, and allows medical professionals to focus on critical tasks.

Financial services

Conversational AI is deployed in financial institutions for tasks like account inquiries, fund transfers, and fraud detection. It streamlines operations, improves security, and enhances customer interactions.


Educational institutions use conversational AI to provide virtual tutors and personalized learning experiences. It offers students immediate assistance and feedback, fostering better learning outcomes.

Travel and hospitality

In the travel sector, conversational AI can track real-time weather and flight information, helping travelers avoid disruptions and stay informed. It also assists hotels by providing concierge services and recommendations for local attractions, enhancing the overall guest experience.

Customer support

Conversational AI revolutionizes customer service by providing 24/7 support through chatbots. These virtual agents can answer queries, troubleshoot issues, and offer solutions, significantly improving response times and overall customer satisfaction.

As your AI copilot, DevRev’s Turing is designed to revolutionize your software development journey. It’s a game-changer, streamlining your workflow and enhancing productivity.

With Turing AI, you can instantly generate valuable customer insights. It auto-generates common themes, allowing you to focus your efforts on what truly matters – creating a meaningful impact on your customers.

Turing also helps you prioritize enhancements effectively. By ranking enhancements based on their potential customer impact, you can ensure that your resources are allocated where they matter the most.

But that’s not all. Turing’s capabilities go further by auto-creating enhancements directly from customer insights. It’s a remarkable synergy between customer feedback and product development.

And the convenience doesn’t stop there. Turing AI automates the often time-consuming task of generating release notes for your enhancements, making the process efficient and hassle-free.

Thus, incorporate the transformative power of Turing AI into your software development process with DevRev and experience the future of streamlined, customer-centric development.

How to implement conversational AI in your business?

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Implementing conversational AI in your business garners the attention of nearly 80% of CEOs, resulting in changes or planned alterations to their approach to managing customer engagement through these transformative technologies.

By meticulously following a strategic implementation approach, you can effectively integrate conversational AI into your business, leading to improved customer satisfaction, heightened operational efficiency, and harmonious coexistence with your human agents.

Here’s a roadmap for seamless integration:

Compiling FAQs establishes the foundation for conversational AI

Frequently asked questions lay the groundwork for conversational AI. Define user needs by collaborating with your customer success team. For example, consider FAQs like:

  • How do I set up my user account?
  • Where can I find my API key?
  • What steps should I follow to integrate the software?
  • How do I troubleshoot common issues?
  • Are there any developer resources available?
  • How can I reach out to technical support?

Begin with a segment of questions for a prototype, adding more over time.

Converting FAQs into AI goals brings precision to interactions

FAQs become goals or intents in your conversational AI tool. Teach the AI variations users might employ.

For instance, if addressing “How to set up my user account,” consider phrases like “How to log in” or “Create a new account.”

Collaborate with analytics and support teams for diverse user phrases.

Identifying nouns and keywords enriches intents with relevant entities

Envision entities around your intents, such as creating an entity for “user account information.” Values might include “username,” “password,” or “API key.”

Use collected information to develop intents, ensuring nouns complement primary inquiries.

Crafting a meaningful dialogue helps with conversations tailored to specific needs

Integrate goals and nouns to construct a logical conversation. Imagine a dialogue with a user seeking technical support:

User: How do I troubleshoot common issues?

AI: Sure, I can help. Are you experiencing issues with your API integration or software functionality?

Align goals and entities to create a seamless conversational flow tailored to user needs.

This process ensures your conversational AI addresses core concerns, enhancing user experience and support efficiency.

Conversational AI best practices

Conversational AI is a technological frontier redefining how we interact with machines. However, the sophistication of these systems is not just a product of technological advancements but also a reflection of the meticulous adherence to best practices. These guidelines are not merely suggestions but are the backbone of creating functional but also reliable, user-friendly, and innovative systems.

Craft conversations with a keen emphasis on user experience

Prioritize user experience by designing conversations that are intuitive, natural, and user-friendly. Acknowledge that 35% of consumers desire increased chatbot utilization, highlighting the growing interest in conversational AI. Implement user testing to gather feedback and refine the conversational flow, ensuring it aligns with user expectations and preferences.

Ensure consistency across multiple channels

Ensure consistency in the conversational experience across various channels, including messaging apps, websites, and voice interfaces. Adapt the AI’s responses based on the unique characteristics of each channel while maintaining a cohesive brand voice.

Prioritize scalability and flexibility

Design your conversational AI system to scale seamlessly with increasing user interactions. Opt for flexible architecture and technologies that accommodate future enhancements and evolving business needs.

Implement robust performance monitoring and analytics

Implement robust monitoring tools to track the AI’s performance, identify bottlenecks, and gather insights for continuous improvement. Recognize that customer service satisfaction with service chatbots averages around 30%, underlining the importance of continuous improvement and refinement. Analyze user interactions, feedback, and system metrics to refine conversational models and enhance overall effectiveness.

The future of conversational AI

Conversational AI has made remarkable strides, but the future holds even more promise.

With a projected growth from USD 6.8 billion in 2021 to an impressive USD 18.4 billion by 2026, the market is poised for a remarkable Compound Annual Growth Rate (CAGR) of 21.8%. This growth, underpinned by the relentless advancement of technology, will usher in a new era of conversational AI.

The future will witness enhanced personalization, context awareness, and empathy in conversational AI interactions, making them feel more human-like. This technology will continue to shape the customer service landscape, impacting industries far and wide, from healthcare to e-commerce.

The future promises conversational AI that not only understands language but also comprehends context, sentiment, and intent, leading to more profound and intuitive interactions. As we venture into this future, we can anticipate conversational AI becoming an indispensable part of our technology landscape, enriching our interactions and simplifying our tasks.

Conversational AI: Your gateway to smarter, more human-like conversations

As we explore the intricacies and benefits conversational AI brings to customer interactions, one thing becomes clear: conversational AI is not just a technology but a gateway to enhancing customer satisfaction and operational efficiency.

With the potential to reshape industries and enrich user experiences, Conversational AI stands at the forefront of technological innovation.

As we step into the future, the continued growth and adaptation of this technology promise an exciting journey ahead, where human-like interactions and tailored responses become the norm. It’s a transformation that businesses should embrace to stay ahead of the curve and deliver outstanding customer experiences.

Frequently Asked Questions