How chatbots can help reduce customer service costs by 30%

By | 7 minute read | October 17, 2017

Key Points:
– Businesses spend $1.3 trillion on 265 billion customer service calls each year
– Chatbots can help businesses save on customer service costs by speeding up response times, freeing up agents for more challenging work, and answering up to 80% of routine questions
– Learn how you can increase productivity and performance at your call centers by seamlessly integrating chatbots and live agents

It’s 3 AM on a Monday. Maria, a product design engineer, is preparing her presentation of a new ergonomic adjustable standing desk. The weekend flew by, and now it’s crunch time to finalize the presentation. Maria opens the product design application and starts the login process and the application requests an activation code. Maria frantically looks for the code in her email and cloud storage, but to no avail. She calls the CAD design software company’s customer service number, hoping they offer 24/7 support. When a recorded greeting responds to the call, Maria starts to panic. Until she notices an option to communicate with a virtual agent on the company’s website. In under five minutes the customer service chatbot understands her question and walks her through how to access her alphanumeric code. A wave of relief washes over Maria as she enters the code in her app, and retrieves the needed files for her presentation. After a couple of hours of sleep, she nails the presentation and earns a much-needed vacation.

The company that created the software Maria uses clearly understands the benefit of providing around-the-clock customer support through a chatbot or AI assistant. Could a scenario like this happen to one of your customers, and wind up with a happy ending?

Unlike live agents, AI assistants don’t need coffee breaks or lunch hours. They aren’t absent due to illness, holidays or even natural disasters which can put human lives at risk. Beyond cost savings, these virtual assistants can be leveraged as a business continuity strategy for customer service centers. They can be programmed to cross-sell a company’s full portfolio of service, upsell from their product catalog, and make recommendations based on a customer’s previous orders and preferences.

Virtual Assistants lead to faster response times and first call resolution, 24x7x365

Autodesk, a global leader in 3D computer-aided design, has a customer service chatbot, AVA, that responds to queries around the clock. Any time of day, any day of the year, a customer can get help with routine Tier 1 queries like address changes, login issues, payment issues, and other frequently asked questions.

The Watson Conversation platform enabled Autodesk to build this virtual agent that delivers significant productivity and efficiency gains, including:

– A 99% improvement in response times: Cutting resolution from 38 hours to 5.4 minutes for most Tier 1 inquiries
– A drop in per-query cost from $15-$200 (human agents) to $1 (virtual agents)
– A virtual agent that answers and resolves an average of 30,000+ customer support queries per month
– A virtual agent that recognizes 40+ distinct use cases to quickly resolve simple requests

Better customer service experiences, at a lower cost

265 billion customer support requests are made every year, and it costs businesses a whopping $1.3 trillion to service them. Chatbots can reduce these costs significantly when companies upgrade from antiquated, inefficient IVR technology to AI, chatbots, virtual assistants, messaging and other new technologies that are already helping transform call centers across the world.

According to Chatbots Magazine, businesses can reduce customer service costs by up to 30% by implementing conversational solutions like virtual agents and chatbots.

Freeing up human agents at contact centers to address complex inquiries allows representatives to take their time and provide better service. It also reduces the number of agents required on the call center floor as well as employee attrition due to the repetitive nature of routine calls. All of these lead to significant cost savings. According to this QATC report, call center attrition rates are twice the average of all other industries combined (30% – 45% compared to the U.S. average of 15%).

According to the Human Resource Institute, it costs companies $10-$15k to replace one frontline employee.

Staffing a 24x7x365 contact center mainly with human agents can be costly, as can contracting a BPO contact center provider. When you add the resources required to support multiple lines of business and languages, it increases the headcount and skill sets required to serve customers around the clock.

For companies like Autodesk, about half of the customer support calls they receive are for routine requests that can be resolved fairly quickly. The virtual assistant acts as the first line of defense and only more complex inquiries can be escalated to human agents. Even if a call is escalated to a human agent, the chatbot “stands by” on the call for:
– Continuity and conversation wrap up and documentation
– In case there are human/machine learning opportunities
– If simple tasks like payment card or contact information changes need to be completed

Make customer service easy, because losing customers is expensive

Statistics from contact center software provider Aspect Software estimate that the average cost of a customer service phone interaction is around $35 to $50 per interaction. Text chat, by comparison, is significantly less expensive, averaging around $8 to $10 per session. In the healthcare and banking sectors, the Juniper Research study found that interaction costs can also be lowered significantly, by an estimated 70 cents per interaction by 2022 with chatbot automation. Studies show that it’s realistic to aim to deflect between 40% – 80% of common customer service inquiries to chatbots.

Customers, especially millennials, are increasingly turning away from calling for support and opting for messaging and other self-service channels.

According to a Deloitte study, 56% of companies in the multimedia and technology industries are planning to invest in contact center AI in the near future. They interviewed executives from over 450 cross-industry contact centers, and 33% percent said they planned on investing in AI chatbots for customer service in the near future. The highest priority for these investments would be to improve cross-channel experiences.

A poor online customer experience will prevent 3 out of every 5 customers from making future purchases from a brand.

Only 2% of those dissatisfied customers will reach out to the contact center to complain, but you can imagine that many of them will tell their friends and family about their poor online experience. Add the cost of a damaged reputation to a loss of $240 million in annual sales, and you have a recipe for serious erosion of market share and shareholder confidence.

Natural Language Processing to the rescue

Whether customers reach your customer service center by phone, website, SMS text, email or social media, Natural Language Processing is critical. It enables customers to connect with your company in a more human way than navigating through Boolean search terms, drop-down menus, radio buttons and forms.

A recent analyst report from Juniper Research found that by 2022, chatbots and NLP will save companies about $8 billion per year in customer supporting costs, which is a far cry from the $20 million in estimated savings for 2017. For every second chatbots can shave off average call center handling times, call centers can save as much as $1 million in annual customer service costs.

AI chatbots continue to learn from every customer interaction

Based on the successes of companies like Staples and Autodesk, we can already see why this trend is growing rapidly. As chatbots have more interactions with customers, they learn from each conversation. As they participate in “hybrid” conversations with live agents, they learn from the human representative, and the rep can learn from the virtual agent as well. When agents and chatbots help each other to deliver better service, it fosters increased customer trust and confidence in chatbots as well. It becomes a closed-loop “virtuous circle” of learning and trust.

In the instances where human-to-human interaction is necessary, the data gathered by virtual AI assistants can route customers more effectively to the most suitable representative who can address a customer’s concern. Improper contact center transfers have long been the bane of existence for many business and consumer customers, and chatbots are helping to eliminate that frustration.

Unlike live agents, chatbots don’t need coffee breaks or lunch hours. They aren’t absent due to illness, holidays or even natural disasters which can put human lives at risk. Beyond cost savings, AI could be leveraged as a business continuity strategy for customer service centers in the near future. They can be programmed to cross-sell a company’s full portfolio of service, upsell from their product catalog, and make recommendations based on a customer’s previous orders and preferences.

Looking for more insights on how chatbots will help companies reduce costs while providing better customer experiences? Or how to make your own AI assistant? Visit our web page on the Future of Customer Care to learn more.


AI is shaping the future of call centers. Discover how Watson can help you deliver exceptional customer experiences.