What is Conversational AI?

Conversational AI is a part of artificial intelligence that helps machines talk to people clearly and naturally. It uses a mix of special techniques, including natural language processing (NLP), understanding (NLU), generation (NLG), and machine learning (ML). Check this blog for details.

by Editorial Team • 12 February 2024

We live in a world where people are curious about getting answers. Unfortunately, humans cannot be present everywhere, 24/7, to answer them. That's where Conversational AI comes to the rescue!

Conversational AI is like language superheroes, understanding and generating human-like language to have natural and friendly chats with people.

In this blog, we're diving deep into the world of conversational AI, uncovering all the details about its applications and benefits. We'll also peek into some examples where AI has totally reshaped our world!

Let's begin!

What Exactly is Conversational AI?

Conversational AI is a part of artificial intelligence that helps machines talk to people clearly and naturally. It uses a mix of special techniques, including natural language processing (NLP), understanding (NLU), generation (NLG), and machine learning (ML).

Together, these help computers understand what we say, figure out what we mean, and respond in a way that feels easy and friendly, much like talking to another person.

Take Siri, Alexa, or Google Assistant as examples. These are like helpful friends you can talk to, asking them to do things like set alarms, tell you the weather, play music, or control lights in your house, all by just speaking to them.

Chatbots on websites are another way we see conversational AI in action. They're the helpful little boxes that offer to answer questions or help you buy something online. They can quickly give you the info you need, suggest items you might like, or help with your shopping, making things much easier and faster.

81% of customers say a positive customer service experience increases the chances of them making another purchase.

- Zendesk

Let's learn how the conversational AI model works.

Related Read: What Is Generative AI: A Complete Guide

How Does Conversational AI Work?

Conversational AI works by blending several smart technologies to mimic a real chat with people. Here's a simple explanation of how it does this:

1) Understanding Words (Natural Language Processing, NLP): First, the AI looks at the words or speech it gets from a user. NLP helps it break down and make sense of the language, figuring out what each word means and how they fit together.

2) Figuring Out What You Mean (Natural Language Understanding, NLU): After it knows what the words are, NLU helps the AI understand what the user really wants to say. This means picking up on the hints or the real request behind the words, like knowing that asking about the weather means wanting to know if it's going to rain or be sunny.

3) Deciding How to Reply (Dialogue Management): With the user's intent clearly, the AI decides the best answer. This could mean pulling up specific information or deciding how to put the answer together.

4) Creating a Reply (Natural Language Generation, NLG): Now, the AI needs to turn its answer into something that sounds natural and easy to understand. NLG helps it craft a reply that sounds like something a person would say.

5) Getting Smarter (Machine Learning, ML): Machine learning is at work through this process. It lets the AI learn from every chat, getting better at understanding and replying. This means the more it talks with people, the smarter it gets, making each conversation smoother and more helpful.

Now, let’s understand the working of conversational AI with an example:

Picture this: You're a popular online store, and your customers frequently slide into your social media DMs with queries about their orders. Now, handling all those messages manually can be overwhelming, right?

This is where a conversational AI comes to the rescue!

When a customer sends you a message, wondering when their order will ship, the chatbot smoothly jumps into action! It has learned from past interactions how to answer similar shipping questions. This is how AI works.

Why Should Businesses Use Conversational AI?

Conversational AI applications are excellent at generating and converting leads, helping businesses expand their customer base and increase revenue. Plus, the valuable insights from customer interactions allow businesses to make smarter decisions and customize their strategies for success. A conversational AI solution can work wonders for online businesses. As a business owner, you get:

  • Happier customers
  • Streamlined operations
  • Business growth.

Here are some more benefits of AI technologies to businesses.

1. Enhances Customer Service

Conversational AI provides unparalleled support to your target audience in a highly efficient and effective manner. It is available round the clock so that the customers no longer need to wait or be put on hold. It also personalizes every request to delight your customers. AI helps understand customers better and provides them with the best possible experience. 

AI can Enhances Customer Service

2. Saves Costs and Time

A study by Chatbots magazine revealed that AI technologies could lower a company’s customer care expenditures by up to 30%. Conversational AI streamlines customer interactions and automates repetitive tasks. This means optimizing operations, increasing productivity, and reducing unnecessary expenses. It also saves hiring and training costs for the customer experience department since most tasks can be automated using conversational AI.

3. Allow for Scalability

An AI chatbot can handle multiple queries simultaneously. It can handle increased workloads and grow with the needs of users or businesses. So, whether you have ten customers or a thousand, the AI chatbots understand human language and can effortlessly handle increased workloads. It ensures that no customer query goes unanswered and no opportunity for engagement is missed. 

4. Enables Personalization

Through conversational AI, customer service chatbots understand context and intentions. That means they can handle multiple questions easily. 

Successful personalization initiatives can result in 20% higher customer satisfaction, sales conversion rates, and employee engagement”

– McKinsey & Co.

By retaining past interactions and customer preferences, it tailors responses to each individual's specific needs. This level of personalized attention fosters a sense of familiarity and trust between the customer and the brand. This enables them to personalize the entire conversation and make the conversation meaningful.

5. Improves Operational Efficiency

With natural language understanding chatbots, your team does not have to spend time on manual tasks like replying to every query. They can focus on more important matters, saving time and allocating resources efficiently. This enables improved operational efficiency by reducing wait times and the number of missed queries.

6. Get Data-driven Insights

By embracing conversational AI tools, you get valuable data-driven insights into customer preferences, pain points, and behavior. This enables you to make informed decisions and refine your strategies as per insights. Understanding customer trends and needs can boost customer engagement, ultimately driving better business outcomes.

Conversational AI Examples and Applications

Artificial intelligence can solve various tasks and solve a broad range of problems. Here are some ways to leverage AI into your business and benefit from it. 

1. Resolve General Issues 

Answering user queries is one of the most popular applications of conversational AI. Typically, conversational AI chatbots can quickly come up with an appropriate response. The information they require is all readily accessible and searchable in the company's frequently asked questions. Therefore, conversational ai models help resolve customer queries without them having to speak to a representative.

And, in this sense, an AI chatbot maker can help you in effortlessly designing and deploying a sophisticated chatbot, that will continuously refine its algorithms to enhance response accuracy and streamline user interactions, making it an indispensable tool for efficient and autonomous customer support.

AI can Resolve General Issues

2. Land more appointments

If you're in a service business, booking meetings and scheduling appointments can be a significant concern. This is where AI in the form of virtual agents jumps in and virtual agents and helps customers book your services.

Often, there are too many stages while making an online appointment, and you can only remove them after starting over. With online customer service teams, you don't even need to speak to anyone. All you need to do is message the chatbot with the message "I'm looking for an appointment; here's my availability and location," and it will assist your customers in discovering the next available appointment promptly.

3. Understand customer preferences 

In today's digital landscape, knowing your customers is super important as it can help you get more leads and business. A lot of eCommerce businesses leverage AI chatbots to understand customer preferences. This, in turn, enables them to offer personalized recommendations based on the customer journey and relationship history. It helps increase customer loyalty but also helps in streamlining the customer journey.

What is the difference between conversational AI and Natural Language Processing?

NLP is a subset of Conversational AI. Conversational AI combines natural language processing (NLP) with machine learning. These NLP processes flow into a constant feedback loop with machine learning processes to continuously improve the AI algorithms.

Which industries can benefit from conversational AI?

Conversational AI technology can benefit several industries, especially the ones which are customer-facing. But sectors like healthcare, banking, hospitality, airlines, and logistics have successfully implemented AI with great success. The use cases of conversational interfaces are vast and continue to expand as technology advances.

Where can conversational AI be used?

Conversational AI systems aim to enhance customer journeys by improving the query response quality and providing accurate answers. Here are a few potential applications of Conversational AI:

  • Chatbots
  • Customer Support
  • Healthcare
  • Education
  • Banking and Finance
  • Human Resources
  • Smart Homes
  • Language Translation
  • Travel and Hospitality
  • Social Media
  • Gaming


A lot of online businesses rely on live chat features for human conversations. With conversational AI solutions, you can step up your customer support and engagement game! Conversational AI, backed by machine learning and voice biometrics, not only speeds up automated responses for customers but also makes the process more convenient for them.


With diverse backgrounds and expertise, the Dorik editorial team is committed to producing high-quality, informative, and engaging content for our readers. Whether you're a long-time reader or a new visitor, we hope you find our content valuable and informative.

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