What Is Conversational AI: Examples, Benefits, Use Cases

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What is a conversational AI?

If you’re only thinking about chatbots, voice assistants, and automated email responders, think again.

From providing interactive customer support to nurturing leads, conversational AI is being used by businesses to understand human intentions and respond accurately.

But what exactly is its purpose, and how does it help your business?

In this article, we’ll tell you everything you need to know about conversational AI - from how it works to how it can help your business. We’ll also discuss some conversational AI cases and FAQs of conversational AI, and introduce you to one of the most powerful conversational AI solutions.

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What is a Conversational AI?

Conversational AI (Artificial Intelligence) refers to technologies that recognize human language and text, understand customer intent, and respond in a way that mimics human conversation.

Usually, you’ll find them behind automated messaging and speech-enabled applications like Amazon Echo and Google Assistant.

Conversational AI technology doesn’t need a script, unlike traditional chatbots or conversational bots, where the software is told what to say in response to specific keywords. Instead of taking instructions, conversational AI technologies can teach themselves progressively through reinforcement or machine learning.

And to interact like a human, conversational AI uses large amounts of data, machine learning, deep learning, and NLP (Natural Language Processing).

It basically:

  • Recognizes speech and text
  • Understands the intent of the speech or text
  • Interprets different languages
  • And finally responds by replicating human conversational experiences

How Does Conversational AI Work? (Step-by-Step)

Conversational AI uses various technologies to understand, learn, and respond to user inputs. Some of them include Natural Language Processing (NLP), Automatic Speech Recognition (ASR), Natural Language Generation, Machine Learning (ML), and advanced dialogue management.

With the help of these technologies, conversational AI develops a massive database of user inputs, making it better at recognizing patterns and predictions.

How Does Conversational AI Work?

Here’s a step-by-step breakdown of how conversational Artificial Intelligence engages with customers:

  • The first step is where a user provides voice or text inputs to the conversational AI platform.
  • Next, the generated input is analyzed. If it’s text-based, the conversational AI uses Natural Language Understanding (NLU) to interpret the meaning of the words provided by the user.
  • The conversational AI employs Automatic Speech Recognition (ASR) to analyze sound if the generated input is speech-based.
  • After the analysis, conversational Artificial Intelligence uses natural language generation (a part of Natural Language Processing) to create a response to the user's generated input.
  • And lastly, conversational AI analyzes the user inputs and customer intent to make the replies better and more accurate over time.

Different Types of Conversational AI

Let’s look at the different types of conversational AI you can find today.

Conversational AI applications can be personalized to serve as your very own digital assistant. These conversational interfaces facilitate uninterrupted interactions with customers and automate various business operations.

Examples of Conversational AI

  1. Chatbots: Chatbots are automated computer programs used in customer service. They use conversational flow techniques to mimic human conversation to address queries promptly and offer support.
  2. Virtual assistants: These are voice-activated applications that understand and carry out tasks based on human voice commands. They work seamlessly on mobile devices and smart speakers, making life easier for users.
  3. Text-to-speech software: Text-to-speech software transforms digital text into spoken audio. It’s used to create audiobooks, transcribe webinars, provide verbal directions for enhanced accessibility, and more.

Having covered the different types available, let’s focus on another important question:

How does conversational AI benefit you?

Let’s find out.

How Can Conversational AI Help Your Business?

Conversational AI is a cost-efficient solution for many businesses.

If you’re considering it for your business, here are some benefits you should know of.

  1. Hands-Off Support and Analysis

    Conversational AI is capable of resolving customer queries without involving any human agent. Not only does this save money, but it can also give you increased insight into your customers.


    With an advanced conversational AI tool, you can access various technologies that automatically track communication, customer behavior, and other metrics.

    These bits of analysis can help you understand your customers and their interests better. The analyses can also help you optimize your sales and marketing approach by providing you with detailed datasets about your customers’ interests and requests.

  2. More Authentic Than a Chatbot

    Traditionally, a chatbot needs users or customers to type the exact keyword to get the right response. That’s often the reason a customer can detect when they’re interacting with bots, usually resulting in a poor user experience.

    Unlike a chatbot, conversational AI has the ability to learn from and adapt to complicated queries and conversational experiences over time.

    This way, customers don’t have to enter predetermined queries and won’t receive robotic messages. The responses to their unique queries will provide a conversational experience, thereby increasing customer satisfaction.

  3. Cost Efficiency

    Hiring and maintaining a customer service department can be expensive. And the costs can keep rising as your business and team expands.

    Instead of hiring a large team of human agents, you can provide good customer service using conversational AI technology that operates like a virtual agent or virtual assistant.

    This way, you can reduce business expenditures such as infrastructure, salaries, and training without compromising customer care.

  4. 24/7 Availability

    Another popular benefit of conversational AI implementation is its ability to respond immediately, at any time of the day. AI technologies such as a conversational AI chatbot, voice assistant, and virtual assistant make it easy for you to deal with customers and leads 24/7.

    Since the queries and inputs generated by customers are primarily repetitive and information-based, you can quickly train your Artificial Intelligence for such use cases.

    This will ensure consistency and a good customer experience. Most importantly, it’ll allow your human agent to be available for more complex queries that arise throughout the customer journey.

    You can even employ agent assist, an AI, to improve the performance of your call center agents. This virtual agent assistant helps agents in real-time during a conversation with a customer to improve customer satisfaction.

  5. Increased Sales and Customer Engagement

    Since conversational AI applications are available 24/7, your customers will be taken care of at all times, increasing customer engagement. The promptness lets customers avoid long contact center wait periods, thereby improving customer experience.

    As a result, you’ll likely notice a spike in sales, customer loyalty, and customer satisfaction. Happy customers will also spread the news of your business, drawing in additional revenue from referrals.

  6. Scalability

    As your customer base expands, so does your need for support and scalable processes.

    This is where conversational AI can help.

    Setting up conversational AI infrastructure is cheaper and faster compared to the time and cost of recruiting and training new employees.

    According to a 2020 study, implementing Virtual Agent Technology in a large organization can result in substantial cost savings. The study estimated that each conversation handled by the virtual agent could generate savings of approximately $5.50 per call.

    Conversational AI can accelerate team growth by optimizing support operations, boosting self-service rates, reducing wait times, improving agent productivity, enhancing customer metrics, etc.

Now that you’re familiar with the benefits of conversational AI, let’s explore some of its use cases.

7 Use Cases for Conversational AI

When you think of conversational AI use cases, most people tend to be familiar with:

  • Customer service
  • Social media chatbots (like the bots in Facebook Messenger and Slack)
  • Virtual assistants

But there are many other conversational AI applications.

Here are some examples:

  1. Lead Nurturing

    Conversational solutions can be extremely helpful in nurturing leads. They do so by understanding when leads are ready to be moved along the funnel and identifying what they require to make a decision.

    For example, conversational AI can send a user content based on their past interactions and interests to keep them engaged during their customer journey.

  2. Revenue Growth

    If your company can search each conversation for clues on other products that a customer might be interested in purchasing, it creates a pathway to new revenue.

    Fortunately, conversational AI tools give you tons of data on all kinds of customer interactions.

    With this data, you can identify:

    • Existing revenue opportunities
    • Future potential revenue opportunities
    • The financial value of missed opportunities
    • Which monetization opportunities are being missed
  3. Healthcare

    Conversational AI in the healthcare industry can help patients gain insight into their health problems and quickly direct them to the right medical professionals.

    This reduces the number of patients waiting in line for contact center agents, eliminating call drop-offs. By keeping patients engaged and providing them with useful data, your healthcare facility can minimize the number of patients not getting the right guidance.

  4. Performance Monitoring

    A conversational platform helps with performance monitoring by automatically analyzing every customer interaction.

    For example, conversational AI can identify and track key phrases that drive conversions or call drop-offs, spot who your most productive agents are, etc. This gives you a wealth of information to build on when it comes to refining your business processes.

  5. HR

    Your Human Resources team can use conversational AI technology to onboard new employees. Instead of getting on a call to walk them through the onboarding process, you can deploy conversational AI tools to take over this job.

    Most importantly, conversational AI can integrate with other HR tools and systems to automate and streamline processes such as benefits, payroll, etc.

    This automation means businesses can enhance the employee experience, optimize workflows, ensure data accuracy, and answer FAQs for new as well as existing employees.

  6. Internet of Things (IoT) Devices

    In modern households, it's common to find multiple IoT devices such as Google Assistant, Amazon Alexa, Apple Siri, etc. These devices use Automatic Speech Recognition to have intelligent conversations with users and devices such as smart speakers, security systems, etc.

    Businesses can generate valuable insights by combining conversational AI and IoT devices. For example, IoT devices in the healthcare industry can collect patient data, like medication usage and vital signs.

    Conversational AI analyzes this data, detects patterns, and predicts when patients need care. This boosts productivity, minimizes downtime, and reduces maintenance expenses for companies.

  7. Customer Support

    Last but not least, conversational AI is a very popular customer support or contact center solution that’s far more advanced when compared to chatbots or conversational AI chatbots.

    It can address customer needs and be a provider of accurate solutions and a personalized experience without any human interference and can keep evolving with experience.

    The best part?

    Conversational AI can provide around-the-clock customer support, which customers who need assistance outside regular business hours can find valuable.

    You can offer conversational commerce via a virtual agent, like the IBM Watson Assistant, to effectively handle FAQs and provide personalized recommendations to customers.

Now for some conversational AI FAQs.

Conversational AI FAQs

Here are the answers to some common queries that you may have regarding conversational AI:

  1. What Are the Key Components of Conversational AI?

    There are a few key components of conversational AI that let it process, analyze, and produce responses like a human.

    First, the conversational platform or app receives written or spoken input from a human (usually the customer).

    If the input is:

    • Spoken: Automatic Speech Recognition (or voice recognition) interprets the spoken phrases and
    • Written text: Conversational AI uses Natural Language Understanding (NLU) to understand the text.

    Once the conversational AI understands the intent of the human input, it creates an appropriate response based on it using dialogue management. Then, dialogue management converts it into a format humans can understand with Natural Language Generation (NLG).

    Then the conversational platform delivers the response in text or uses speech synthesis to produce artificial human speech. It can also use text-to-speech to produce the response.

    Finally comes the reinforced or machine learning component that allows conversational AI to learn and improve itself to generate better responses for future conversations.

  2. What Are the Challenges of Conversational AI Technologies?

    Like most technologies, conversational Artificial Intelligence also has its share of challenges.

    1. Language Input

      Most language input, be it text or voice, can be a challenge.

      That’s because there are numerous dialects, accents, and languages in the world that can reduce the AI’s ability to interpret raw input.

      However, the biggest roadblock for conversational AI are the human aspects such as tone, emotions, and sarcasm. These factors and the lack of sentiment analysis make it hard for conversational AI to understand what the human intended to convey.

      Other language inputs that can impact the AI’s understanding include slang, background noise, and unscripted language.

      These challenges highlight the need for continuous improvement in conversational AI technologies.

      By addressing these issues, businesses can enhance the AI's ability to comprehend diverse language inputs and provide more accurate and contextually appropriate responses, leading to better user experiences.

    2. Privacy and Security

      Privacy is everything in the world of data.

      And conversational AI systems are entirely dependent on data to respond appropriately, making them prone to privacy and security breaches.

      The best way to protect against data breaches is to opt for conversational AI applications with quality privacy and security standards. Such conversational AI systems will help build trust among your customers, and their reliance on your conversational bots will also increase over time.

    3. User Apprehension

      Users may not feel comfortable sharing personal, sensitive information with a machine or a conversational AI chatbot instead of a human.

      Here’s the kicker: conversational commerce chatbots may not be equipped to handle all types of user inquiries. So, providing an alternative communication channel to address more complex queries is crucial.

      Receiving incorrect or incomplete answers can frustrate users, so offering the option to connect with a human agent is critical to ensuring customer satisfaction.

  3. What Are Some Conversational AI Best Practices?

    1. Know When to Leverage AI and When to Involve Humans

      AI tools can tackle time-consuming tasks, streamline processes, and resolve customer issues.

      However, AI may not be equipped to handle every customer query.

      That's why it's essential to have human agents available, ready to step in and provide assistance whenever a complex question arises.

    2. Enhance Customer Experience Using Prompted Questions

      Use prompted questions to gather relevant information from customers.

      Unlike generic, open-ended queries, prompted questions guide customers to provide targeted responses. This will help you effectively address their needs and concerns.

      The cherry on top — this approach significantly contributes to a successful and personalized customer experience.

    3. Develop and Optimize Your AI for Social Commerce

      Social commerce integrates social media platforms and digital media to enable transactions between businesses and their customers.

      From tailoring landing pages to individual interests to crafting targeted advertisements, AI is a game-changer, revolutionizing customer experiences through social commerce.

      By optimizing conversational AI specifically for social commerce, you can provide customers with 24/7 assistance, elevating their user experience to new heights.

  4. What Is the Difference Between Conversational AI and a Chatbot?

    AI powered chatbots are software applications that mimic human-like conversations through text. These innovative software applications bring text-based conversations to life thanks to the power of Natural Language Processing.

    Whether you need assistance or have burning questions, chatbots understand your queries and provide prompt responses.

    But here's the catch:

    They operate on specific rules, primarily answering common questions like FAQs.

    Conversational AI, on the other hand, combines Artificial Intelligence, Natural Language Processing, and Machine Learning. It allows for intelligent conversations and ensures a contextual understanding of human language.

    These systems can grasp the intent and context of customer interactions, learn from user interactions, and analyze sentiments, allowing them to improve their performance over time.

  5. What Future Developments Are Expected in the Field of Conversational AI?

    As the field of conversational AI continues to evolve, companies can expect numerous exciting developments:

    1. Conversational AI-Powered Search

      One of the hottest trends in conversational AI is the rise of conversational search engines. These systems enable users to interact with search engines in a conversational manner, using natural language.

      Additionally, conversational AI powered search has the potential to empower users with effortless access to information while delivering more relevant search results.

    2. AI Chatbots with Higher Emotional Intelligence

      Conversational AI chatbots are now being programmed to detect and respond to human emotions, revolutionizing customer communication.

      With the power of AI and machine learning, these smart bots can analyze vast datasets of human speech and emotions. As a result, they become skilled at recognizing and responding to different emotional states.

      This training enables them to provide personalized and empathetic customer experiences, further enhancing the bond between businesses and their customers.

    3. Proactive Customer Service

      Through monitoring user activities on websites or apps, AI powered chatbots can offer support or recommendations even before customers seek help.

      Conversational AI can identify patterns and trends, empowering businesses to anticipate and address customer needs before they arise.

      This proactive approach minimizes customer frustration and boosts overall satisfaction, creating a win-win situation for businesses and customers.

With that said, what’s a solution or platform that can give you all the benefits of conversational AI while minimizing these drawbacks?

iovox Insights: The Most Efficient Conversational AI Solution

Some companies try to build their in-house conversational AI platform with their own algorithms, which can be quite expensive and time-consuming.

However, the fastest and most efficient way to bring conversational AI to your company is by partnering with a conversational AI solution like iovox Insights.

This conversational AI platform leverages the power of Artificial Intelligence, Natural Language Processing, speech recognition and analytics technology that allows businesses to enhance their customer interactions and gain valuable insights from conversations.

Here are some of the things iovox Insights can do for you:

  1. Make Conversations Searchable

    With iovox Insights' automated transcripts and conversational AI tool, you can search and analyze an unlimited number of phone conversations from your call log.

    By automating this process, you can quickly identify keywords within call transcripts and extract vital information, such as:

    • Which calls mentioned specific products?
    • What keywords led to a sale?
    • What are the key challenges that callers are talking about?
    • Which calls involved unhappy customers?

    This enhances transparency in overall customer interactions. Additionally, you can use this functionality to analyze past customer calls to determine your best sales and marketing approaches.

  2. Track Calls with Keywords

    Using iovox’s keyword spotter feature simplifies the process of adding specific keywords and phrases, making it effortless.

    Once added, the tool automatically identifies and tracks them within call recordings and transcriptions, enhancing your ability to analyze and extract valuable insights.

    These insights can provide you with a sneak peek into keywords that:

    • Improve customer satisfaction Scores
    • Influence customer decisions and sales
    • Build a meaningful relationship with your customers
  3. Measuring KPIs to Improve Customer Experience

    With iovox Insights, you can record customer conversations to:

    • Spot and track trends
    • Find upsell and cross-sell opportunities
    • Predict outcomes based on criteria specific to your business
    • Ensure the staff adheres to the script/set questions that maximize revenue

    Moreover, you can get a clearer picture of the customer experience by monitoring every agent’s performance. Access your iovox dashboard to explore valuable insights, including:

    • Average daily calls
    • Total talk time
    • Call outcomes
    • Use of preferred keywords in conversations

    By increasing the exposure of AI to customer interactions, you can discover numerous opportunities to train it in a manner that improves your business.

    This approach ensures the continuous evolution of iovox Insights, helping you to enhance overall quality management and customer service.

Want to know more? Learn how to capture new sources of revenue with Conversational AI from iovox

Final Thoughts

Since conversational AI relies on machine learning and constantly bettering itself, it will let you automate highly personalized customer service resolutions.

This will give your customers a far more authentic experience where every conversation will seem unique, quick, and relevant.

That’s why more and more businesses are leveraging this AI technology to improve not only their customer support but other departments, too, like marketing, sales, and training new employees.

Fortunately, starting with conversational AI doesn’t have to be complicated.

Start using iovox Insights to find endless growth and revenue-building opportunities with every customer interaction!

At iovox, we make it easy to experiment and we’d love to learn more about your business and how we can help. To connect with us, click the call button below and our team will be in touch with you shortly.

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