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What is conversational analytics?

Conversational analytics refers to the process of analyzing and extracting insights from natural language conversations, typically between customers interacting with businesses through various conversational interfaces like chatbots and virtual assistants or other automated messaging platforms. 

Gartner predicts that by 2026, conversational AI deployments within contact centers will reduce agent labor costs by USD 80 billion.1 As more of customers’ engagement with organizations become mediated by such applications, this field has become a critical component of customer relationship management (CRM).

This type of analytics focuses on understanding the content, context, intent, sentiment and other relevant aspects of conversations. The goal is to gain actionable insights to improve customer experiences, enhance service quality and help managers make more informed business decisions.

Key components of conversational analytics include:

  • Natural language processing (NLP): NLP is a branch of artificial intelligence (AI) that helps computers understand and interpret human language. Conversational analytics relies heavily on NLP techniques to extract meaning and context from text or voice inputs.

  • Sentiment analysis: This involves determining the customer sentiment or tone embedded within human speech. This helps businesses gauge customer satisfaction and identify potential issues or concerns.

  • Intent recognition: Intent recognition is about understanding the purpose or goal behind a customer's query or request. It allows businesses to provide relevant responses and improve the effectiveness of conversational interactions.

  • Customer journey analysis: Conversational analytics can be used to analyze customer interactions across multiple touchpoints and gain insights into their journey with the business.

  • Performance monitoring: Businesses can use conversational analytics software to track the performance of their conversational interfaces, such as self-service dashboards equipped with chatbots. This includes measuring KPIs like response times, resolution rates and identifying areas for improvement.

  • Topic extraction: Conversational analytics can identify the main topics or subjects of the conversations. This helps businesses focus on the most relevant issues and identify trends or patterns in customer inquiries.

  • Personalization and recommendations: By analyzing conversations, businesses can personalize responses and recommendations based on customer behavior and preferences.

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How conversational analytics works

Conversational analytics enables businesses to understand customer needs better, optimize interactions and make data-driven decision-making to improve customer experiences and operational efficiency. Here's how it works.

1. Collection and pre-processing

The process begins with the collection of conversational data. This can involve multiple data sources, including chat logs, call recordings, email interactions, social media messages and voice assistant interactions. Once customer data has been collected (transcription is required for voice data), it is pre-processed to clean and normalize the text, removing noise and irrelevant information. This step involves tasks like tokenization (splitting text into words or phrases), lowercasing, and removing stop words (common words like "and," "the," etc.).

2. Processing

Then, NLP techniques are applied to understand the content and meaning of the conversations. NLP algorithms analyze the pre-processed text to identify entities, sentiments, intents, contexts and other linguistic features.

3. Conversation analysis and reporting

Once NLP and machine learning algorithms have processed the data, analytics platforms generate insights and metrics. Businesses can gain insights into customer preferences, sentiments, common issues and trends. This information is reported with visualization tools to present customer insights in a clear and intuitive way, helping users interpret and act on the information. As new data is collected, the system can update its models to provide more accurate and personalized responses over time.


Use cases for conversational analytics

Conversational analytics finds applications across many industries. Some key use cases include:

Customer support

Conversational analytics can be used to analyze customer interactions with chatbots, virtual assistants or call center agents. It helps businesses identify common customer issues, monitor agent performance and improve response times to provide better customer service.

Voice of the customer (VoC) analysis

By analyzing customer feedback from different conversational channels like phone calls to a contact center or chatbot interactions, businesses can gain insights into customer preferences, pain points and overall sentiment towards products or services.

Sales and marketing optimization

Conversational analytics can assist in understanding customer inquiries during sales interactions. It helps businesses identify potential upsell or cross-sell opportunities and optimize marketing messages based on customer responses.

Personalization and customer journey mapping

Analyzing customer conversations can help create personalized experiences based on individual preferences and behavior. It also aids in mapping customer journeys to improve engagement and retention.

Fraud detection and risk management

In financial institutions, conversational analytics can help detect suspicious activities or fraudulent behavior during customer interactions, enhancing security measures.

Compliance monitoring

Conversational analytics tools can be used to monitor compliance with regulations and internal policies during customer interactions to ensure adherence to industry standards.

Challenges for conversational analytics

Conversational analytics, while powerful and promising, also comes with several challenges that need to be addressed for successful implementation and effective use. Some of the key challenges of conversational analytics include:

  • Ambiguity and variability of natural language: Natural language is inherently ambiguous and can vary greatly between individuals. Conversations may involve slang, colloquial language or non-standard grammar, making it more challenging for NLP algorithms to accurately interpret intent and sentiment.

  • Context sensitivity: Understanding context is crucial for meaningful responses in conversations. However, capturing and maintaining context throughout a conversation can be complex, especially in multi-turn interactions.

  • Data quality and noise: Conversational data can be noisy and contain errors, misspellings or incomplete information. Low-quality data can affect the accuracy of NLP models and lead to misleading insights.
  • Training data bias: NLP models are trained on historical data, which may contain biases present in past interactions. Biased training data can lead to biased responses, potentially causing harm or reinforcing stereotypes.
  • Scalability and performance: Handling a large volume of real-time conversations requires scalable and high-performance infrastructure. The processing speed of NLP algorithms can be a challenge in maintaining responsive conversational interfaces.

  • Multilingual support: Supporting multiple languages in speech analytics introduces additional complexities, as different languages have unique linguistic characteristics and syntactic structures.

  • Privacy and data protection: Conversational analytics involves analyzing sensitive customer interactions. Ensuring data privacy and compliance with data protection regulations is essential, but it can be challenging to strike a balance between providing personalized responses and safeguarding customer information.

  • Continuous learning and adaptation: Conversational analytics systems need to continually adapt and improve based on new data and changing user behavior. Ensuring seamless integration of new data and updates into the models is an ongoing challenge.

  • User trust and acceptance: Customers interacting with chatbot apps may have concerns about privacy, data security or the accuracy of responses. Building user trust and acceptance is crucial for the success of conversational AI initiatives.

Addressing these challenges requires ongoing research, advancements in NLP and AI technologies, and a thoughtful approach to data collection, model training and system design. Overcoming these hurdles will lead to organizations realizing the many benefits of conversational analytics solutions.

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