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In the Iron Man movies, J.A.R.V.I.S. is the AI assistant that Tony Stark uses to design inventions, manage his buildings, and control his flying suits. While we’re not quite at the J.A.R.V.I.S. stage yet, consumers are increasingly interacting with bots and the line between human and machine is getting blurrier by the day: 27% of consumers weren’t sure if the last customer support interaction they had was with a real person or a chatbot.

Today, it’s easier than ever for businesses to have live chatbot software for websites to scan their entire knowledge base and technical documentation so customers can sort out the answers to their questions using natural language rather than wading through mounds of help portal pages. This ease of use means higher customer satisfaction, with 50% or more of customer inquiries often being resolved by bots before ever going to human support agents.

So what does this mean for the world of human-powered live chat? As impressive as artificial intelligence advances have been, chatbots still struggle to understand and solve complex questions and edge cases—and they don’t provide the same level of human touch or relationship-building that live chat does.

In this article, we’ll review the pros and cons of live chat and chatbots, look at examples of SaaS chatbots and live chat in action, and consider a ‘hybrid approach’ that combines the best elements of each to reduce costs and keep customers happy.

Live Chat Is More Essential Than Ever

Here’s what most customer support interactions looked like before the era of live chat:

“Hi, welcome to Initech. Your call is extremely important to us. All of our agents are busy with other customers. Your estimated wait time is [robotic voice] 34 minutes. *Cue hold music.*”

Customers hate waiting, and hate having their time wasted. Phone support often requires both. Fortunately, live chat is an increasingly common option—and these days, customers expect it.

Live chat gives both customers and businesses what they want:

  • Customers get faster responses with less effort.
  • Businesses get improved efficiency and increased revenue.

Now, often within 30 seconds or less, customers can get in touch with someone to help them—without having to wait on hold. Due to this positive user experience, live chat adoption has steadily grown: 41% of customers prefer live chat, followed by phone (32%), email (23%), and social media (3%).

Benefits of Live Chat

Live chat gives customers the support they need quickly and conveniently. Meanwhile, businesses are able to increase conversions and revenue while increasing support efficiency.

Key live chat benefits include:

But that doesn’t mean live chat is perfect.

Limitations of Live Chat

When executed well, live chat is a win for customers and a win for businesses. But live chat is often done poorly: 47% of consumers haven’t had a good live chat experience in the last month, and 84% of consumers have quit a live chat due to frustration at slow or low-quality replies.

Customers commonly face these live chat frustrations:

  • Although live chat is displayed as available, support is offline.
  • Unexpected disconnections in the middle of a chat.
  • Pre-chat forms that make it cumbersome to start a chat.
  • Scripted responses that feel impersonal.

Although businesses know customers hate to wait for support, most don’t have the resources to employ live chat agents 24/7. They may also struggle to balance their support team availability for peak traffic times.

As live chat’s popularity has grown, some businesses have struggled to allocate resources effectively. Agents now juggle more chats than ever: in 2020, agents managed 480 chats per month, while in 2022, they managed an average of 1023 chats per month.

As agent workloads have increased, customer satisfaction with live chat has suffered, falling by 2.9% from 2021 to 2022.

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Chatbots Are On the Rise

Chatbots have emerged as one of the key tools to meet increasing live chat volume without sacrificing customer satisfaction. When well-designed, chatbots are effective; and unlike human agents, they can handle an unlimited number of chats simultaneously.

Chatbot usage is growing fast: 88% of consumers had at least one chatbot conversation in 2022. And with recent advancements in AI chatbot technology, these tools have become easier for customers to use and easier for businesses to train and deploy: 54% of businesses now use some form of chatbot or conversational AI.

Benefits of Chatbots

Most businesses and consumers see 24/7 availability as the key initial benefit of chatbots.

But that’s just the start: chatbots also provide faster replies to messages, automatic replies to FAQs, scalability to handle high volumes of inquiries, and omnichannel integrations with messaging apps like WhatsApp.

Key chatbot benefits include:

  • Cost savings: Chatbots are cost-effective—they save businesses an aggregate of $11 billion per year by reducing the burden on human customer support teams and save up to 2.5 billion customer service hours.
  • Increased deflection and resolution rates: Expertly-designed chatbots can handle as many as 80% of inquiries without human intervention.
  • Improved customer satisfaction: 87% of consumers rate their chatbot experience as either neutral or positive.

Limitations of Chatbots

Despite recent AI-powered advancements, chatbots still have distinct limitations: difficulty understanding complex questions, a frequent lack of context and nuance, and a tendency for conversations to get off track. While conversational AI is improving the root causes of these issues, for now they remain.

Customers continue to have reservations about chatbots:

  • Consumers feel chatbots can’t understand them as well as humans: A survey by Userlike found that consumers still have hang-ups over their interactions with chatbots. Some common ones: the chatbot didn’t know how to solve their issue, couldn’t understand them, or never responded.
  • Concern about replacing humans with bots: 60% of consumers aged 35-44 think businesses are replacing human customer service reps with chatbots too quickly.
  • Consumers have a preference for human interaction: 60% of consumers would still rather wait for a human agent rather than talk to a chatbot.
  • Bots risk entering the ‘uncanny valley’ as they get more human-like: Chatbots simply aren’t human, and that’s a built-in disadvantage from a perception basis. 54% of consumers want chatbots to proactively clarify that they’re a bot (and not a human).

How To Choose: Chatbot Vs Live Chat

When deciding what resources to allocate to chatbots versus live chat, you’ll want to keep these five factors in mind.

1. Response Time

Winner: Chatbots

Customers hate waiting: 82% say an immediate response from businesses is either “important” or “very important.” Response time is one reason for the migration toward live chat, where response times are faster than email or phone support. But chatbots—with their nearly instant responses—beat all of them. However, customer expectations are high: 40% of consumers expect a response within 5 seconds or less when using a chatbot.

While this seems like a ringing endorsement for chatbots, response time is only part of the equation; the responses themselves have to be genuinely helpful. If consumers have to pick between speed and accuracy, 95% would choose high-quality, thorough support over speed.

Either way, live chat response times are getting faster and faster. In 2022, the average wait time to connect to a human agent on live chat was just 30 seconds, according to a report by Comm100.

Example:

My anecdotal experience corroborates this shift to faster live chat response times. After asking RingCentral’s chatbot a simple question, I clicked “get in touch with a sales representative” and started a timer. A human agent was with me in 33 seconds.

ringcentral screenshot

2. Customer Experience

Winner: Live Chat

There’s an inherent tension in what customers expect from the support experience: they want answers fast, and they also need those answers to be thorough and accurate. But sometimes, speedy support comes at the expense of thoroughness—and vice versa.

Creating a stellar customer support experience means finding the right balance between speed and helpfulness. And this is where live chat shines: 81% of customers rate their live chat experience as positive, versus 61% of email users and 44% of phone users. Meanwhile, 69% of consumers are satisfied with their last interaction with a chatbot.

Live chat has an edge when it comes to customer experience. But for the optimal CX, live chat and chatbots work best hand-in-hand: chatbots for handling simple inquiries, along with human agents who can take the time to build connections with customers and understand nuanced questions.

Example:

Zendesk automatically steers users toward common questions that are easily handled by its chatbot. They make it clear that users are chatting with a digital assistant, and redirect users to human agents for more complicated customer questions.

zendesk screenshot

3. Chat Availability

Winner: Chatbots

Live chat isn’t usually staffed by human agents 24/7, which means that live chat often risks falling short of customer expectations. It’s not uncommon to click the live chat widget, only to find that no agents are available—or worse yet, to be dropped in a long queue and then never attended to. A study by SuperOffice found that an astounding 21% of live chat requests are ignored.

The 24/7 availability of chatbots helps businesses smooth over these gaps in live chat availability.

Example:

I started a chat with Mable, a company based in Australia, at 3AM. Understandably, no human agents were working at that hour: I got a message saying “All our agents are busy, please try again later” with no redirection to email. An AI-powered chatbot would be the perfect solution to smooth over the support experience after business hours.

mable screenshot

Meanwhile, RosterElf, also based in Australia, did have a 24/7 chatbot that was able to answer my middle-of-the-night inquiries:

rosterelf screenshot

4. Customer Service Costs

Winner: Chatbots

According to HelpScout, most customer service agents can handle up to 3-5 chats at once. Compare that to phone support, where each agent can only handle one inquiry at a time, and it would seem that live chat is a no-brainer from a cost perspective.

However, quality can start to suffer after an agent takes on more than two concurrent chats, which limits the potential savings; and according to a Gartner survey, both phone and live chat cost an average of $8.01 per contact. That means that while live chat may offer some efficiencies, the real cost savings are reserved for chatbots.

Fin, an AI chatbot designed by conversational AI company Intercom, charges $0.99 per resolution—a savings of 87% compared to live support provided by a human agent. Incorporating advanced AI models from OpenAI, Fin has a deflection rate of 60% and a resolution rate of up to 50%.

Example:

Linktree uses Intercom’s AI bot to resolve 42% of its inquiries. Due to the incorporation of OpenAI’s natural language processing abilities, Linktree’s bot is able to have more natural conversations than rules-based chatbots.

linktree screenshot

5. Handling Complex Issues

Winner: Live Chat

Most consumers are happy to talk with a chatbot to get answers to simple questions. And if the answers are quick, they might even prefer chatbots: 54% of consumers would choose a chatbot over a human agent if it saved them 10 minutes.

But consumer trust in chatbots has its limits: only 23% of consumers are willing to settle disputes through chatbots. A failure to grasp and respond to complex customer queries is one of the most frequent consumer complaints about chatbots—50% of consumers report frustration with chatbots not understanding how to solve their issue.

Meanwhile, live chat support agents excel at understanding context and nuance, making them the better choice for handling complex queries. 60% of consumers believe that humans are better at interpreting their needs than chatbots.

Example:

I started a chat with Hivebrite, an online community platform. Hivebrite’s AI chatbot pointed me toward some knowledge base articles in response to simple questions, but once I asked something outside of that scope, the chatbot asked me to wait for a member of the team to get back to me.

hiverbite screenshot

A Hybrid Approach: Combining Chatbots And Live Chat

Let’s recap:

  • Chatbots offer 24/7 availability, reduced costs, and faster response time. Using chatbots reduces the volume of support tickets for human agents.
  • Live chat helps solve complex customer issues, builds customer loyalty, and increases conversions and revenue.

Meanwhile, 40% of consumers don’t have a preference for chatbots or human support, as long as they get the support they need. Which begs the question: why not combine them?

Indeed, this is exactly what many companies are doing. By using customer messaging platforms, businesses can design a custom omnichannel support system that includes a combination of bots and live chat.

Here’s what that often looks like:

  1. Chatbots are the first line of defense: Chatbots serve as an initial point of contact to immediately address simple questions and qualify leads with quick 24/7 responses. Chatbots can use quick answer flows, integrate with knowledge bases, and use AI to allow the conversation to proceed more naturally.
  2. Triage and hand-off to agents: To prevent user frustration and dead-end conversations, chatbots can seamlessly transfer chats to live agents, using keywords to get customers to the agents with the right expertise to solve their issues. AI can also detect customer dissatisfaction and confusion, using those as triggers to route customers to a live agent.
  3. Human agents can focus on the more complex cases: By letting bots handle the heavy lifting up front, chatbots can deflect a majority of queries without getting human agents involved. They can also gather essential information from customers before transferring them to live chat operators. As a result, human support agents are able to spend less time on repetitive questions and data entry, and more time listening empathetically to customers and troubleshooting complex issues that can’t be addressed via self-serve support options.

Finding The Right Chat Balance For Your Business

There’s no “one size fits all” answer to the question of which communication channels to emphasize in your business. One reason for this is demographics: younger age groups are heavily-focused on text-based communication, while older demographics tend to still prefer phone support.

But increasingly, the evidence points to a growing consumer preference for live chat. Along with that trend, there’s an opening for businesses to combine the best of chatbots and human-based live chat to create a 24/7, always-on support system that makes it easier and faster for customers to get the support they need. The customer support experience of the future isn’t a question of chatbots versus live chat; instead, it’s omnichannel support, automated self-service, and real-time human assistance—all blended seamlessly together.

Ready to dig more into the world of chatbots and live chat? Check out our articles on the best AI chatbots for customer service and the best live chat software. And to keep a pulse on the ever-changing world of CX, be sure to subscribe to our newsletter for CX leadership tips, marketing strategies, insights, and trends.

By Ryan Kane

Ryan Kane has been researching, writing about and improving customer experiences for much of his career and in a wide variety of B2B and B2C contexts, from tech startups and agencies to a manufacturer for Fortune 500 clients.