What is Conversational AI? (Everything You Need To Know)

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What is a conversational AI?

If you’re only thinking about chatbots, voice assistants, and automated email responders, think again.

From providing interactive customer support to nurturing leads, conversational AI is being used by businesses to understand human intentions and respond accurately.

But what exactly is its purpose, and how does it help your business?

In this article, we’ll tell you everything you need to know about conversational AI - from how it works to how it can help your business. We’ll also discuss some conversational AI cases and FAQs of conversational AI, and introduce you to one of the most powerful conversational AI solutions.

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What is a Conversational AI?

Conversational AI (Artificial Intelligence) refers to technologies that support humanlike interactions between computers and humans. Usually, you’ll find them behind automated messaging and speech-enabled applications like Amazon Echo and Google Assistant.

Conversational AI technology doesn’t need a script, unlike traditional chatbots or conversational bots, where the software is told what to say in response to specific keywords. Instead of taking instructions, conversational AI technologies can teach themselves progressively through reinforcement or machine learning.

And to interact like a human, conversational AI uses large amounts of data, machine learning, deep learning, and NLP (Natural Language Processing).

It basically:

  • Recognizes speech and text
  • Understands the intent of the speech or text
  • Interprets different languages
  • And finally responds by replicating human conversational experiences

How Does Conversational AI Work? (Step-by-Step)

Conversational AI uses various technologies to understand, learn, and respond to user inputs. Some of them include Natural Language Processing (NLP), Automatic Speech Recognition (ASR), Natural Language Generation, Machine Learning (ML), and advanced dialog management.

With the help of these technologies, conversational AI develops a massive database of user inputs, making it better at recognizing patterns and predictions.

Here’s a step-by-step breakdown of how conversational Artificial Intelligence engages with customers:

Step 1: Input Generation

The first step is where a user provides voice or text inputs to the conversational AI platform.

Step 2: Input Analysis

Next, the generated input is analyzed. If it’s text-based, the conversational AI uses Natural Language Understanding (NLU) to interpret the meaning of the words provided by the user.

The conversational AI employs Automatic Speech Recognition (ASR) to analyze sound if the generated input is speech-based.

Step 3: Dialog Management

After the analysis, conversational Artificial Intelligence uses natural language generation (a part of Natural Language Processing) to create a response to the user's generated input.

Step 4: Reinforcement Learning

And lastly, conversational AI analyses the user inputs to make the replies better and accurate over time.

But how does it benefit you?

Let’s find out.

How Can Conversational AI Help Your Business?

Conversational AI is a cost-efficient solution for many businesses. If you’re considering it for your business, here are some benefits you should know of.

  1. Hands-Off Support and Analysis

    Conversational AI is capable of resolving customer queries without involving any human agent. Not only does this save money, but it can also give you increased insight into your customers.


    With an advanced conversational AI, you can access various technologies that automatically track communication, customer behavior, and other metrics.

    These bits of analysis can help you understand your customers and their interests better. The analysis can also help you optimize your sales and marketing approach by providing you with detailed datasets about your customers’ interests and requests.

  2. More Authentic Than a Chatbot

    Traditionally, a chatbot needs users or customers to type the exact keyword to get the right response. That’s often the reason a customer can detect when they’re interacting with bots, usually resulting in a poor user experience.

    Unlike a chatbot, conversational AI has the ability to learn from and adapt to complicated queries and conversational experiences over time.

    This way, customers don’t have to enter in predetermined queries and won’t receive robotic messages. The responses to their unique queries will be natural and humanlike, thereby increasing customer satisfaction.

  3. Cost Efficiency

    Hiring and maintaining a customer service department can be expensive. And the costs can keep rising as your business and team expands.

    Instead of hiring a large team of human agents, you can provide good customer service using conversational AI technology that operates like a virtual agent or virtual assistant. This way, you can reduce business expenditures such as infrastructure, salaries, and training, without compromising customer experiences.

  4. 24/7 Availability

    Another popular benefit of conversational AI implementation is its ability to respond immediately, at any time of the day. AI technologies such as a conversational AI chatbot, voice assistant, and virtual assistant make it easy for you to deal with customers and leads 24/7.

    Since the queries and inputs generated by customers are primarily repetitive and information-based, you can quickly train your Artificial Intelligence for such use cases.

    This will ensure consistency and a good customer experience. Most importantly, it’ll allow your human agent to be available for more complex queries. You can even employ agent assist, an AI, to improve the performance of your human agents. This virtual agent assist helps agents in real-time during a conversation with a customer to improve customer satisfaction.

  5. Increased Sales and Customer Engagement

    Since conversational AI applications are available 24/7, your customers will be taken care of at all times, increasing customer engagement. The promptness lets customers avoid long contact center wait periods, thereby improving customer experience.

    As a result, you’ll likely notice a spike in sales, customer loyalty, and customer satisfaction. Happy customers will also spread the news of your business, drawing in additional revenue from referrals.

  6. Scalability

    Conversational AI also offers easy scalability.

    Adding infrastructure to support conversational AI is very affordable. Moreover, the entire process is much faster and simpler than hiring and onboarding a new human agent.

    Scalability especially helps when your business starts expanding to newer locations or when there’s a rise in unexpected short-term demand, such as over the holidays.

Now that you’re familiar with the benefits of conversational AI, let’s explore some of its use cases.

7 Use Cases for Conversational AI

When you think of conversational AI use cases, most people tend to be familiar with:

  • Customer service
  • Social media chatbots (like the bots in Facebook Messenger and Slack)
  • Virtual assistants

But there are many other conversational AI applications.

Here’s some examples:

  1. Lead Nurturing

    Conversational solutions can be extremely helpful in nurturing leads. They do so by understanding when leads are ready to be moved along the funnel and identifying what they require to make a decision.

    For example, conversational AI can send a user content based on their past interactions and interests to keep them engaged during their customer journey.

  2. Revenue Growth

    If your company can search each conversation for clues on other products that a customer might be interested in purchasing, it creates a pathway to new revenue.

    Fortunately, conversational AI tools give you tons of data on all kinds of customer interactions.

    With this data, you can identify:

    • Existing revenue opportunities
    • Future potential revenue opportunities
    • The financial value of missed opportunities
    • Which monetization opportunities are being missed
  3. Healthcare

    Conversational AI in the healthcare industry can help patients gain insight into their health problems and quickly direct them to the right medical professionals.

    This reduces the number of patients waiting in-line for contact center agents, eliminating call drop-offs. By keeping patients engaged and providing them with useful data, your healthcare facility can minimize the number of patients not getting the right guidance.

  4. Performance Monitoring

    A conversational platform helps with performance monitoring by automatically analyzing every customer interaction.

    For example, conversational AI can identify and track key phrases that drive conversions or call drop-offs, spot who your most productive agents are, etc. This gives you a wealth of information to build on when it comes to refining your business processes.

  5. HR

    Your Human Resources team can use conversational AI technology to onboard new employees. Instead of getting on a call to walk them through the onboarding process, you can deploy conversational AI tools to take over this job.

    Your HR team can also use it to automate and optimize simple workflows, leave management, and answer FAQs for new as well as existing employees.

  6. Internet of Things Devices

    The Internet of Things devices such as Google Assistant, Amazon Alexa, Apple Siri, etc., use automatic speech recognition to interact with users.

  7. Customer Support

    Last but not least, Conversational AI is a very popular customer support or contact center solution that’s far more advanced when compared to chatbots or conversational bots.

    It can address customer needs and be a provider of accurate solutions without any human interference and can keep evolving with experience.

Now for some conversational AI FAQs.

Conversational AI FAQs

Here are the answers to some common queries that you may have regarding conversational AI:

  1. What are the Key Components of Conversational AI?

    There are a few key components of conversational AI that let it process, analyze, and produce responses like a human.

    First, the conversational platform or app receives written or spoken input from a human (usually the customer).

    If the input is:

    • Spoken - Automatic Speech Recognition (or voice recognition) will interpret the spoken phrases and translate them into a machine-readable format.
    • Written text - conversational AI will use Natural Language Understanding (NLU) to understand the text.

    Once the conversational AI understands the intent of the human input, it creates an appropriate response based on it using dialog management. Then, dialog management converts it into a format humans can understand with Natural Language Generation (NLG).

    Then the conversational platform delivers the response in text or uses speech synthesis to produce artificial human speech. It can also use text-to-speech to produce the response.

    Finally comes the reinforced or machine learning component that allows conversational AI to learn and improve itself to generate better responses for future conversations.

  2. What are the Challenges of Conversational AI Technologies?

    Like most technologies, conversational Artificial Intelligence also has its share of challenges.

    1. Language Input

      Most language input, be it text or voice, can be a challenge.

      That’s because there are numerous dialects, accents, and languages in the world that can reduce the AI’s ability to interpret raw input.

      However, the biggest roadblock for conversational AI is the human aspects such as tone, emotions, and sarcasm. These factors and the lack of sentiment analysis make it hard for conversational AI to understand what the human intended to convey.

      Other language inputs that can impact the AI’s understanding include slang, background noise, and unscripted language.

    2. Privacy and Security

      Privacy is everything in the world of data.

      And conversational AI is entirely dependent on data to respond appropriately, making it prone to privacy and security breaches.

      The best way to protect against data breaches is to opt for conversational AI applications with quality privacy and security standards. Such AI systems will help build trust among your customers, and their reliance on your conversational bots will also increase over time.

    3. User Apprehension

      Users may not feel comfortable sharing personal, sensitive information with a machine or a conversational AI chatbot instead of a human.

      This means you’ll have to educate your target audiences about the benefits and safety of your conversational AI solutions.

With that said, what’s a solution or platform that can give you all the benefits of conversational AI while minimizing these drawbacks?

iovox Insights: The Most Efficient Conversational AI Solution

Some companies try to build their in-house conversational AI platform with their own algorithms, which can be quite expensive and time-consuming.

However, the fastest and most efficient way to bring conversational AI to your company is by partnering with a conversational AI solution like iovox Insights.

iovox Insights is a service that allows you to transcribe recorded conversations to draw insights and spot trends. Most importantly, it can help you achieve your business goals.

Here are some of the things iovox Insights can do for you:

Here are the answers to some common queries that you may have regarding conversational AI:

  1. Make Conversations Searchable

    With iovox’s recorded and transcribed calls, you can easily read through and search prior conversations. This makes important information easily accessible and increases transparency over every conversation with customers.

    Additionally, you can use these transcripts as scripts, and a trainer can use them as coaching material.

  2. Track Calls with Keywords

    With the iovox platform, you can use the keyword spotter feature to add specific phrases and keywords. The tool or app then automatically identifies the keywords from call recordings and tracks them. This can be very useful when you’re looking for visibility over what influences key decisions.

    You can also add other advanced criteria to train your Artificial Intelligence, such as adding a trigger or filter.

  3. Measuring KPIs to Improve Customer Experience

    With iovox Insights, you can record your calls to track and spot trends as well as predict outcomes based on criteria important to your business. When it comes to monitoring your call performance, just go to your iovox dashboard.

    Some of the insights include average calls per day, total conversation time, your preferred keywords spotted in conversations.

    Over time, as the conversational Artificial Intelligence tracks more customer interactions, you will discover more opportunities to train the AI. This will make it a powerful platform that can help improve your customer experience and overall customer satisfaction.

    And since conversational AI can also identify future and existing revenue opportunities, you’re looking at more ways to boost sales.

Final Thoughts

Since conversational AI relies on machine learning and constantly bettering itself, it will let you automate highly personalized customer service resolutions.

This will give your customers a far more authentic experience where every conversation will seem unique, quick, and relevant.

That’s why more and more businesses are leveraging this AI technology to improve not only their customer support but other departments too, like marketing, sales, and training new employees.

Fortunately, starting with conversational AI doesn’t have to be complicated.

Start using iovox Insights to find endless growth and revenue-building opportunities with every customer interaction!

At iovox, we make it easy to experiment and we’d love to learn more about your business and how we can help. To connect with us, click the call button below and our team will be in touch with you shortly.

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