In 1896, an Italian economist, Vilfredo Pareto, published a paper that demonstrated that around 80% of the land in Italy was owned by the wealthiest 20% of the population. He went on to carry out further studies and discovered that this ratio also applied to many other countries.
Long after Pareto passed away, reports revealed that global wealth distribution follows an 80:20 split (20% of the population own 80% of the wealth) and that it also applies to US taxation (the top 20% of earners pay approximately 80% of all federal income taxes). This 80:20 ratio has made an impression on many an academic and is now known as Pareto’s Principle. It’s also commonly used in the business world – particularly in reference to customer service.
80:20 in customer service
In general, Pareto’s Principle is formulated in the following way –
“80% of the effects come from 20% of the causes.”
In practical business terms, this could be formulated as “80% of a business’ sales come from 20% of its customers.” When it comes to customer service, it’s often presented as “80% of all queries come from 20% of the questions asked.” This means that there are a small number of questions responsible for a large number of interactions. In other words, some questions are incredibly common.
Pareto’s Principle is relevant to chatbots due to the way in which this type of technology is utilised to drive efficiencies by automating those simple queries that are asked time and time again. If you can implement a self-serve solution capable of processing just 20% of the questions asked by customers, you could automate 80% of the interactions your organisation handles.
A straightforward solution
Chatbots are best utilised when there’s a relatively simple solution. Though AI technology can handle increasingly complex tasks and we’re witnessing a rapid expansion in customer engagement and enquiry handling by Chatbots, most successful bots are currently employed to handle high-volume customer queries that boast a relatively simple answer.
This makes sense for many different reasons. First and foremost, it’s cost-effective. If you’re automating the largest number of interactions possible by creating a chatbot that handles a few key queries, you’re saving a considerable amount of money with a relatively small investment. Keeping it simple is also necessary for customer satisfaction reasons. If a chatbot isn’t advanced enough to handle complex communications, it’s going to leave users frustrated. It’s better initially to quickly pass a customer through to a human agent than potentially losing their custom because of a negative chatbot experience. As the Bot learns this will result in a greater enquiry handle to completion.
Why is intelligent chatbot use necessary?
While chatbots are a relatively new technology and many organisations are yet to deploy them, they are becoming increasingly necessary and will soon be an essential feature in all large-scale businesses. This will occur because chatbots offer companies and public bodies several benefits, all of which will become industry standard and all of which will need to be adopted by businesses if they’re to survive and thrive.
As the speed of technological development increases, the need to maintain pace with the competition becomes increasingly essential. If a company doesn’t meet the standards expected of it by consumers, they’ll haemorrhage customers to those that do. The three benefits listed below offer a strong justification of the use of chatbots and demonstrate why they’re becoming increasingly necessary in a customer service setting.
- Agent attrition
- Greater efficiency
- Satisfied customers
- Common questions
- The right demographic
- A suitable platform
- Dissatisfied customers
- The upsell
- Complex problems
- Frustrated users
The cost of customer service centre turnover is surprisingly large. A recent report suggests that the average cost of replacing a call centre staff member is £6,125. The same study found that the average call centre has a turnover of around 26% of its agents. With the average call centre employing 126 agents, this comes to an annual expenditure of £202,125 on hiring new employees alone (source: evaluagent.com). While not all customer service centres are this large, it’s clear that there’s still a considerable amount of money to be saved.
Chatbots help limit agent attrition by reducing the number of high-volume, common queries that human agents have to process. By passing the simple, repetitive interactions on to a chatbot, human agents can focus on more complex and rewarding tasks. This increases the value agents attribute to their jobs and ensures they’re likely to be better motivated, more productive, and willing to stay at an organisation for a longer period of time.
By increasing the number of queries that are handled instantly by automated self-serve technologies, you’re making your organisation increasingly efficient. Chatbots allow larger volumes of queries to be processed in less time and at a lower cost. They also give employees an opportunity to focus on more complex tasks. In many customer service centres, staff are rarely pushed to their limits and don’t typically utilise their full skill set. By allowing them to focus on more complex tasks, businesses realise their real value and increase efficiency. As with all business resources, companies need their human agents operating at full capacity if they’re to maximise profits.
Finally, chatbots are beneficial because, when implemented correctly, their use results in a higher number of satisfied customers. When consumers have relatively small problems, they don’t want to wait in a queue to speak to a human agent. They want to resolve the issue as quickly as possible, preferably without having to wait or discuss the matter with a live agent.
Particularly when it comes to younger generations, that have grown up with digital technology and are more accustomed to text-based communication, there’s a clear preference for automation. If you want to satisfy your customers, you need to give them a way to interact with self-serve channels that can quickly resolve simple problems.
When is a chatbot the better option?
A well as understanding the reasons why chatbots are both beneficial and necessary, it’s essential that we also know when to use them. If chatbot technology is implemented in the wrong place or at the wrong time, it can have a significant impact on how consumers view your customer service. There are three things to think about when trying to establish whether a chatbot is the better customer service option.
As has already been mentioned, chatbots are best deployed in response to high volume questions that are asked time and time again. The purpose of the technology is to reduce the number of customers having to interact with a human agent – as this is expensive, time-consuming, and inefficient use of resources.
However, the queries also need to be relatively simple (or at least within the capabilities of the chatbot) otherwise you’re going to frustrate the customer, and they’ll be passed on to a human agent anyway. This means that organisations need to analyse the quantity and frequency of certain types of question and identify those that would benefit most from automation.
A technology is only as useful as those who can use it. If you’re targeting a demographic that has little or no experience with digital self-serve technologies, you’re not doing it right. Chatbots should only be used with an appreciative audience that has the digital literacy to use them.
For instance, Inform has recently developed a student chatbot for use by Local Government Authorities and Councils who want to automate student registration and tax exemption processes. This is an example of a well-targeted chatbot. Students are of an age and disposition to use self-serve options (they actually often prefer chatbots) and usually own the devices necessary to access such services. On the other hand, if you were to release a chatbot aimed at OAPs applying for benefits, you may not meet with quite the same success.
Finally, organisations need to ensure that there’s a suitable platform for their chatbot and that customers can be routed through this self-serve channel before they attempt to contact a human agent. There’s no point in investing in a Facebook Messenger chatbot if you have a limited presence on Facebook and none of your customers uses the platform to interact with you.
Likewise, it’s vital that your chatbot access point is situated in the right place. It needs to be the first thing they see to ensure that it’s the first port of call for customers. That’s why so many companies have their chatbot pop up as soon as you access their website.
When is a human agent the better option?
While chatbots can be incredibly useful and are quickly becoming a common feature of high-quality customer service provision, they’re not designed to replace human agents. Instead, they tackle menial and repetitive interactions, leaving the agent to handle those tasks that require their full attention. Examples of this type of complex task include;
If a customer is unhappy with a product or service, they need to be won back. To do this, the very human quality of empathy is necessary. As of yet, chatbots are not sophisticated enough to communicate with users in a realistically empathetic way. This task is best reserved for those human agents with excellent communication skills and an understanding of human psychology.
Whereas chatbots are unable to defy the rules and regulations, humans are very good at making exceptions. This allows them to use their initiative to strike a bargain that a chatbot isn’t programmed to offer. For instance, a human agent is better placed to give discounts, refunds, or upgrades. Similarly, their own consumer experience allows them to recommend other products the customer may enjoy based on a personal appraisal of the customer’s character. Chatbots, on the other hand, can only offer advice based on other customers’ purchases.
When customers contact an organisation with nuanced and complex issues, it’s a good idea to use a human agent. Human agents can rely on common sense, intuition, and highly developed problem-solving skills to achieve results that chatbots aren’t yet able to. These tasks often require a great deal of focus and attention and are where human agents should be spending their time, rather than on repetitive, menial tasks.
Finally, human agents should be used to interact with frustrated customers – by which we mean those customers who have already attempted to resolve their problem but for whatever reason been unable to do so. Even if their issue is something that would traditionally be handled by a chatbot, the fact that they’ve been frustrated means that a human touch is probably beneficial in the situation. Speaking to a human agent can often reassure customers that their problem is being taken seriously and that it will soon be resolved.
Technology in tandem with human action
When it comes to chatbot implementation, one of the most important things to remember is that self-serve technologies are not intended to replace human agents. Instead, they are designed to complement human agents and improve the efficiency of their work. Chatbot use in businesses and Local Government Authorities is not predominantly about making savings by cutting back on staff. It’s about freeing up your existing employees to handle more critical and demanding matters. Planned and implemented well, automation is beneficial to businesses, councils, and customers. It ensures consumers get the information they want quickly, while also reducing costs and driving efficiencies in customer service departments. However, it only does so if this technology is used in combination with human action.
There are various contexts in which chatbots are the best choice for both customers and customer service departments. Likewise, there are times when human agents are necessary. Knowing the difference is essential to intelligent chatbot implementation and will differentiate a successful deployment from a failed opportunity. If you’re to use chatbots in the most effective manner possible, it’s necessary to understand the strengths and weaknesses of this technology and explore ways it can combine with and complement the work of human agents. If you can create an automated response to just 20% of all questions asked, Pareto’s principle dictates that you’re on your way to a much more efficient customer service department.
Have a question or want further information on how chatbots can help improve customer service? Our expert team have been providing customer contact solutions for over 25 years. Call us on 01344 595800 or drop us a line.