As a business owner Sarah was eager to use new technologies to give customers new ways of interacting with the business. This was provided the new technologies added real value to customers and made economic sense to her from a return on investment point of view.

Although she was aware of the hype around chatbots, it was not clear to her why she would build a chatbot in addition to an app or website.

She asked me if I could provide her with some guidance as to reasons she would want to offer a chatbot in addition to an app or website and I provided her with the following list:

1. Chatbots Cost Less to Develop than Apps

Apps cost a lot to develop, especially high quality apps that run on Android and IOS. The cost of developing a high quality chatbot is not immaterial either, however, it is still not as expensive as building an app.

It must be remembered, however, that even if it is cheaper to build a bot, the bot must add real value to the end customer and there must be a compelling reason why the customer would prefer to use the bot rather than the app.

2. Customers Don't Need to Download Bots

When smartphones first came to the consumer market, most people enjoyed downloading apps. Now that the novelty has worn off most consumers don’t download apps. A chatbot is like a webpage in that it can be used without being downloaded. It also has the advantages that the user doesn’t need to be authenticated and it can be used directly in the chat platform.

As long as the experience is better than a standalone web page on these and other important dimensions the consumer may prefer to use a bot. This is especially true for low frequency tasks, like checking into a hotel, for which the user has very low incentive to download an app.

3. Chatbots Are More Viral than Apps

Apps are often difficult to share on mobile devices, so getting other people to download them takes a lot of work. Chatbots don't have that disadvantage.

Chatbots can be easily shared between people who are already on a chat platform and can even be used in chat groups. This makes it much easier for chatbots to grow their user base.

4. Early Adopters Can Improve Customer Loyalty

Customers use companies that give good service. Businesses that adopt chatbot technology early have the opportunity to grab the attention of customers who enjoy technology (assuming the chatbot provides those customers with real value not just novelty value).

5. Chatbots Offer Higher Retention Rates than Apps

This is due in part to the fact that chatbots currently have some novelty value associated with them. This novelty value will of course fade in time.

It is also true that the viral nature of chatbots within the messaging app make it more likely that users will be prompted to use the bot again if they see others on the chat platform using the bot or it is shared with them somehow. This will potentially improve retention rates versus apps.

6. Chatbots Give Customers Better Experiences

This point is highly subjective and depends on the chatbot implementation. It is possible that a great chatbot implementation can be far better than an app implementation for certain use cases.

These use cases include the customer service use case (answering frequently asked questions) or infrequent tasks use cases such as ordering a coffee from a new coffee shop (assuming you don’t want to download a new app for every coffee shop you visit).

7. Chatbots Can Save Money on Human Labour

Big savings are available for businesses if chatbots can reduce the number of human agents needed for customer services especially chatbots in the manufacturing industry.

It’s also possible that chatbots can augment the services offered by human agents (by allowing them to become aware of additional relevant context and allowing them to respond with graphical widgets, not just text) thereby increasing the quality of the service (for more or less the same cost).

8. Chatbots Can Offer Multiple Routes to Monetization

Costs savings are a clear economic motivation for using chatbots. It’s likely that other routes to monetization will emerge including native and affiliate advertising opportunities.

A less well defined but potentially huge route to monetization is ecommerce i.e. doing transactions within the chat channel. No doubt this will also provide huge opportunities for “concierge” bots which allocate business to other bots on the fly.

9. Chatbot Technology Will Get Even Better

Many things are already possible with chatbots. The technology will improve as they become more mainstream which will further increase their adoption.

There are already use cases for chatbots that are economically viable such as using chatbots for enterprises or customer services. These use cases can provide a gateway for businesses to delivering more services via chatbots as the potential business cases in this area become more well defined.

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