The Future of Chatbots Report

How Chatbots Can Improve

the Customer Journey
© 2017 SAP SE or an SAP affiliate company. All rights reserved.

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Table of Contents

3 Introduction

4 Market Catalysts in the

Chatbot Revolution

6 The Increasing Usage of Chatbots

8 The Technology Landscape

10 Challenges with Chatbots

11 Quotes from Respondents

12 Conclusion

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© 2017 SAP SE or an SAP affiliate company. All rights reserved.

Introduction
Mark de Bruijn,
Head of Marketing EMEA & MEE
SAP Hybris
HOW CHATBOTS CAN IMPROVE THE
CUSTOMER JOURNEY
The customer journey is more complex now than
ever. Consumers move fluidly between channels
and devices, online and offline. Engaging with
them in the right time and the right way is no
small feat.
Enter the chatbot, which can be deployed to
improve the omni-channel customer journey
through a combination of machine learning and
intelligence. Driven in part by the rapidly
progressing maturity of natural language
processing and the pervasiveness of mobile
devices, it’s no surprise that chatbots are on an
upward curve.
Add machine learning, and chatbots are able to
handle increasingly complex tasks – whilst also
making interactions that are more credibly
‘human’. With the right solutions, businesses are
able to bring in contextual data to create these
highly-personalized experiences at scale in real-
time. And automating simple, transactional tasks
allows front-line representatives, such as
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salespeople, to focus on more complex
client interactions.
WHAT COMES NEXT?
It won’t be long before machines will be able to
interpret emotions too, understanding not only
explicit actions, but also implicit signals that
come from customers. It’s tremendously exciting
to be working with this technology now, where
businesses are making bold visions into reality.
The most fertile soil for a winning innovation is
when you use focused tech to deliver a great
experience. You can use AI-powered chatbots to
drive conversion in a number of ways, from
personalized communications and contextual
ecommerce in-the-moment to shorter delivery
times or seamless processes. But these will only
work if you are also listening to and addressing
your customers’ needs.
Ultimately the objective is – as it always was –
about creating meaningful, personal interactions
for consumers.
Market Catalysts in the
Chatbot Revolution

Like most disruptive technologies, there are several external influences that have
contributed to the rise of chatbots in recent years. The first is the ongoing
developments within the field of Artificial Intelligence (AI) and the second is a
behavioural shift in how we use technology to communicate.

ADVANCEMENTS IN AI Since then, AI has evolved at an exponential rate.

The concept of AI predates modern computing.
The notion that a machine might be able to
perform reasoning on par with that of a human
being was born in the realm of science fiction,
but over the past 70 years, has become a
tangible reality thanks to advances in computer
science, as well as parallel disciplines such as
neurology, information theory and cybernetics.
In 1997, IBM’s Deep Blue beat reigning world
champion, Garry Kasparov, in a game of chess
and put the capabilities of AI firmly in the Communication (GSM). The message was sent
global spotlight.
Today’s chatbots draw on these advancements,
using a combination of Natural Language
Processing (NLP) and Machine Learning to not
only analyse human input but also generate
complex responses.
THE CONTINUED GROWTH OF MESSAGING
The second market catalyst driving the adoption
of chatbots is a behavioural shift, rather than
a technological one. In 1992, the first SMS was
sent over the Global System for Mobile
by Vodafone engineer Neil Papworth to colleague
Richard Jarvis and simply read ‘Merry Christmas’.

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© 2017 SAP SE or an SAP affiliate company. All rights reserved.

By today’s standards, the SMS is a relatively
primitive form of digital communication. It is
therefore ironic that the technology has evolved
to become one of the most dominant channels in
existence today. Text messages remain the most
used feature on mobile devices; an incredible feat
when one considers the wealth of applications
and communication channels available. More
than 22 billion SMS messages sent each
day worldwide.
While text messages remain a hugely popular
communication channel, messaging has evolved
well beyond the humble SMS. Applications such
as iMessage, Facebook Messenger, WhatsApp
and WeChat have become a preferred means of
communication, not just on mobile devices, but
across the entire digital ecosystem.
Messaging systems are so deeply engrained in
our social fabric, that they have now made the
leap to the business world and have become one
of most popular channels for B2C interactions.
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A recent study commissioned in by One Reach
found that 64% of consumers preferred to use
text over voice as a customer service channel.
Analysts at Mobilesquared found that the growth
rate of mobile messaging systems outperformed
all other communication channels amongst
businesses between 2013 and 2017, with a CAGR
of 20%.
The appetite for messaging becomes even more
pronounced when broken down demographically.
The same report from Mobilesquared found that
nearly 90% of students prefer messaging over
any other channel for customer service-related
tasks. With the digital generation having
embraced text as their preferred communication
channel, it only takes a small leap to understand
the role that chatbots are likely to play in
coming years.
© 2017 SAP SE or an SAP affiliate company. All rights reserved.
The Increasing
Usage of Chatbots

95% of respondents in the SAP Hybris survey felt that their usage of chatbots
would grow in the coming years. However real world uptake remains relatively slow
with only 19% of the respondents in the SAP Hybris survey said they were currently
using chatbot technology.

The tentative uptake figures are mirrored in
external data. Just 9% of Fortune 500 companies
currently work with bots, according to
Forrester Research.
While usage is still in its infancy, interest levels
are growing, with a significant number of
deployments in the pipeline. In fact, nearly 77%
of respondents in the survey said they had near-
term deployment plans or were seriously
considering the benefits of chatbot technology.
WHY IS INTEREST SO HIGH?
Chatbot technology is an increasingly attractive
proposition to businesses for many reasons. Even
the simplest rule-based chatbot offers enticing
benefits, such as the automation of repetitive
tasks, increased availability, more efficient use of
resources and reduced operating costs.
Sophisticated chatbots that draw on NLP and
deep learning, are capable of providing rich and
immersive experiences, resulting in increased
customer satisfaction, brand loyalty and even
sales conversions.
The perceived benefits of chatbot technology
were reflected in the SAP Hybris survey.
Improved efficiency and increased customer
satisfaction were seen as the two top benefits of
chatbot technology, with 60% of respondents
rating these factors as either ‘important’ of
‘very important’.
These were followed closely by increases in
conversions (55%), cost effectiveness (53%) and
better use of human resources (45%).

19% 77% 95%

believe their use of
are currently are seriously
using chatbots considering deploying chatbots will grow in
chatbot technology the coming years

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© 2017 SAP SE or an SAP affiliate company. All rights reserved.

WHICH DEPARTMENTS WILL BENEFIT FROM MOST USED CHATBOT APPLICATIONS
CHATBOTS?

72% Customer service 39% Slack

45% Sales 28% Facebook Messenger

42% Marketing 28% Line

33% Social media 17% WeChat

11% WhatsApp

While nearly three quarters (72%) of Amongst respondents with existing chatbot
respondents felt that their customer service deployments, Slack was the most utilised
department would benefit from the use of application. The collaboration platform was
chatbot, sales, marketing and social media were followed closely by both Facebook Messenger
also seen as departments likely to profit from and LINE.
chatbot deployments.
The SAP Hybris survey found that existing
A BLEND OF HUMAN AND CHATBOT deployments were split 50/50 across integrated
INTERACTIONS and standalone applications.
While the benefits to the business are clear,
respondents felt that striking a balance between
human services and chatbot interactions
remained critical to the success of chatbot
deployments. Nearly half of all respondents said
that they felt that their customers would prefer to
use humans for the majority of interactions, with
the help of chatbots for simple tasks.

Just over a third of the professionals surveyed

said that their customers would be happy to use
chatbots for the majority of interactions, so long
as there was easy access to human employees
if needed.

Only 14% of participants felt that their customers

would prefer to interact exclusively with humans,
highlighting just how quickly customer
perceptions are changing.

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© 2017 SAP SE or an SAP affiliate company. All rights reserved.

The Technology
Landscape
THE COMPANIES ARE ARRANGED IN
CONCENTRIC CIRCLES WHICH REPRESENT
(FROM INSIDE-OUT):
Platforms: The messaging platforms that enable
the existence of bots through robust send-and-
receive APIs, frameworks, and ecosystems.
Brands: Companies that have launched and
experimented with bots in that quadrant (for
example, Managed x Support).
Providers: Companies that have the capabilities
to deliver exceptional work in that quadrant.
CHATBOT LANDSCAPE 2017 BY KEYREPLAY
Marketing
Managed
Self-serve
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Tools: The supporting tools used by providers,
brands, or developers to deliver bot experiences.
SAP Hybris Conversational Commerce chatbot
called Charly helps you find products, make
recommendations, manage your shopping cart
and check out. You can even search for products
by entering emojis. Come and have a chat with
Charly the Chatbot and discover “conversational
commerce” at TFM and e-commerce Expo on
stand E342. Both events take place from 27-28
September 2017 at London Olympia. Register for
your free ticket today.
Support
© 2017 SAP SE or an SAP affiliate company. All rights reserved.
It is impossible to address chatbots without developer’s access to the platform’s cognitive
looking at the technology stack that powers and Natural Language Understanding (NLU)
them. There are a number of disparate capabilities.
technologies that make up the AI landscape
today, each with varying levels of maturity and In 2016, Microsoft announced Bot Builder. The
influence. Facebook’s 2016 announcement that framework provides open-source SDKs for the
the Messenger platform would support the use of development of chatbots, primarily for use in
bots was a landmark moment in the evolution Microsoft’s ecosystem of apps and services.
of chatbots. Microsoft has also developed the Azure Bot
Service, which provides an integrated
While chatbot development was already vigorous, environment, enabling developers to build, test
Facebook’s platform announcement acted as a and deploy chatbots in a serverless environment.
springboard for businesses looking to leverage
the capabilities of the technology. Despite AI technologies being readily available,
this fractured ecosystem of tools, micro-services
With circa 2 billion active users and 65 million and frameworks introduces obvious challenges
active businesses, Facebook is primed to become for developers and organisations looking to build
a significant operator in the space. While the sophisticated chatbots. Many of these competing
platform is open to third party tools, Facebook is services lack out-of-the-box interoperability,
investing significant resources into its own AI making it difficult to develop well-integrated
capabilities. There are already more than solutions with the deep functionality and cross-
100,000 active bots on the Messenger Platform, channel deployment capabilities needed.
up 233% year over year.
This has led to the rise of ‘Platform as a Service’
Looking at the AI platforms specifically, IBM providers such as Kore.ai, which offers an end-to-
Watson is perhaps the best-known technology on end platform for building, deploying, and using
the market today. IBM’s question answering chatbots in a fully managed environment. PaaS
system shot to fame on the US TV program – providers such as Kore are likely to play an
Jeopardy – when it defeated two of the show’s increasingly integral role in the development
most successful contestants. Watson has since arena, by packaging all of the tools and
been successfully commercialised with the components needed to build, test and deploy
Watson Conversation Service API offering complex chatbots.

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© 2017 SAP SE or an SAP affiliate company. All rights reserved.

Challenges with
Chatbots
It could be argued that many of the challenges
that chatbots face can be traced back to
limitations of artificial intelligence. In 1950, Alan
Turing proposed a procedure to test a machine’s
ability to exhibit intelligent behaviour
indistinguishable from that of a human. Although
some systems have come close, not a single
machine has passed the Turing Test in any
meaningful sense.
For many in the development community, the
Holy Grail of chatbot technology is to be able to
provide customers with an equivalent level of ser-
vice to that of a human. While great strides are
being made in the area of AI, expectations must
be managed if the value of chatbots is to be fully
recognised.
A lack of human finesse was the single largest
barrier to entry amongst survey respondents,
with 66% of the professionals polled stating that
GREATEST CHALLENGES WITH CHATBOTS
66% 35%
Making bots Development and
more human maintenance
10 / 12
making chatbots more human posed a significant
challenge. Other top challenges and concerns
included development and maintenance (35%),
finding the right balance between human-based
and chatbot-based interactions (33%) and cyber
security (9%).
There are also challenges when it comes to
utilising chatbots beyond simple interactions. For
example, it is expected that chatbots will play a
central role in ecommerce in the years to come,
but without integrated payment functionality, the
use cases for chatbots as a sales tool remains
limited.
By recognising the capabilities and limitations of
chatbot technology, and working with them, it is
possible to overcome most – if not all – of these
challenges and fully recognise the value that
chatbots provide.
9%
33%
Finding the right Cyber
balance between human security
and chatbot interactions
© 2017 SAP SE or an SAP affiliate company. All rights reserved.
Quotes from
Respondents

Respondents to the survey were invited to provide a quote about their views on how
chatbots will impact business. Many agreed that chatbots will be a “game changer”
if they become the “primary touchpoint between customers and organisations”.

One respondent described it as “inevitable” that
they will become a standard feature of all digital
platforms.”
The comments reveal interest in the efficiency
gains that chatbots offer as virtual employees
who “can work 24/7” and there was interest in
the data that chatbot interactions can provide to
“inform and shape products and services
going forward”.
A number of respondents focused on the need
for both human and chatbot interactions in order
not to “lose credibility” with customers.
For example:
“Chatbots will be the voice and ‘face’ of your
business within a decade, but today the tech
has far to go before it will really add value.
Conversational UIs work great in some
contexts but are inefficient for many tasks, so
bots will not replace online stores and visual
interfaces for a long time, if ever.”
“Chatbots suppliers should find a way to let
clients know what they are really capable of,
and what kind of input they can process, in
order to avoid over expectation.”
What do you think?

“We need to remember that sales and

customer service channels should be there to
support our customers. Like many previous
technological improvements chatbots can help
us do this - but we should not force our
customers to use them, and should always
provide a path to a live human being.”

“Chatbots should provide assistance with easy

tasks. However, at some point, users may
prefer engaging another human being.”

A number of comments revealed some healthy

cynicism about inflated expectations for the
technology and questions about the value that
the current generation of chatbots delivers.

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© 2017 SAP SE or an SAP affiliate company. All rights reserved.

Conclusion
According to Gartner, chatbots will power 85% of all
customer service interactions by the year 2020.

Nearly 95% of respondents in the SAP Hybris survey felt

that their usage of chatbots would grow in the coming years.
Fuelled by advances in artificial intelligence, evolving
customer expectations and a paradigm shift in digital
communication, there is no denying that we have firmly
entered the age of the chatbot.

From marketing and sales to customer service and after-

sales support, this new era of communication will force
business models to evolve.

The survey highlights challenges that have yet to be

overcome. Despite the many advancements made in fields
of AI and machine learning, chatbots still lack the ability to
interact on a truly human level. While this is a technical
limitation, it would be a mistake to assume that chatbots
lack business value simply because they are unable to
achieve a human-levels of intelligence (yet).

It’s important to remember that chatbots are nothing more

than a means to an end. Your real objective should be to
ensure that your customers’ needs are met and their
expectations are exceeded each time they interact with
your business.

If a chatbot can often fulfil those needs effectively, then the

issue of ‘not human enough’ becomes a moot point. How
will you be using them in the years ahead?

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 www.hybris.com

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