Conversational AI for Customer Service: Market Growth

Conversational AI to contribute to 16% CCaaS market growth

Conversational AI for Customer Service Market Growth - CX Today News
Loyalty ManagementInsights

Published: August 22, 2023

Rebekah Carter

Excitement around conversational AI for customer service has grown significantly in recent years. The advent of generative AI and increased investment in intelligent technology among CCaaS vendors is revolutionizing the industry.

Now, Gartner believes conversational AI could be the key to accelerating worldwide contact center technology growth. According to a recent report by the industry analyst, Worldwide contact center and conversational AI spending is expected to reach $18.6 billion by the end of this year. That represents a boost of around 16.2% from 2022.

Gartner believes an uncertain economy may hamper near-term growth in the industry. However, increased interest in generative AI and the conversational AI landscape will likely lead to significant long-term growth. According to the report, contact center and CX leaders invest heavily in efficiency and customer satisfaction.

The conversational AI and generative AI space are set to accelerate contact center growth by as much as 24% by 2024. Here’s what we know about the evolving market.

What is Conversational AI for Customer Service?

Conversational AI is a broad concept referring to the AI algorithms which allow machines and humans to communicate in a “natural” format. It can encompass everything from speech-enabled IVR systems to chatbots and messaging solutions.

Conversational AI can complement a company’s broader approach to CX initiatives, working with self-service solutions like FAQs and help centers. Conversational AI for customer service can also support a wide range of use cases, such as:

  • Improving accessibility: Conversational AI can make customer support accessible to individuals with disabilities and special needs. It can translate voice into text for hearing-impaired customers or text-to-voice for visually impaired individuals. Some solutions can also offer real-time translation for multi-lingual contact centers.
  • Contact center efficiency: Voice assistants and IVRs use conversational AI to detect intent, customer sentiment, and more before routing clients to the correct department. NLU and NLP solutions can even gather essential details from a customer before a conversation begins.
  • Automating processes: Conversational AI can automate various tasks, such as arranging bookings and reservations or authenticating customers for security purposes. Some solutions can even use biometric technology to streamline the authentication process.
  • Self-service: Voice assistants, chatbots, and other conversational AI solutions can either fully or partially handle the troubleshooting process and directly answer questions. They can respond naturally to questions based on user input and assist with various account and order management tasks.
  • Data insights: Conversational AI solutions can collect valuable information about a customer’s sentiment, background, and other data. This can help companies make more intelligent growth decisions and personalize the customer experience.

How Customers Feel about Conversational AI in Customer Service

AI in customer service hasn’t always had the best reputation. Some early versions of AI tools, like chatbots and IVR, were considered clunky and unreliable. However, evolutions in AI algorithms, natural language processing, and conversational AI are beginning to change the market.

In one report from 2020, researchers found most consumers are now comfortable interacting with AI systems during customer service interactions. However, younger generations generally embrace technology the most. Older customers may feel less comfortable with bots. This is particularly true if they haven’t been informed they’re dealing with AI in advance.

Around 59% of customers rate their interactions with AI today at about 8 of 10 in terms of quality. However, conversational AI in customer service is generally seen as a solution for answering easier questions. For more complex interactions, there’s still a demand for live agents.

Gartner’s report further highlights this idea. It found that while customer service interactions with AI are growing, most engagements are “augmented.” In other words, customers prefer using AI alongside human support rather than dealing with a completely anonymous agent. Gartner predicts around 14% of interactions will be handled entirely by AI in 2027.

The Growth of Conversational AI in Customer Service

Gartner’s report highlights the global conversational AI and virtual assistant market as the fastest-growing segment in the current contact center forecast. According to the report, conversational AI abilities are gaining more significant investment in the quest for efficiency.

AI innovations are set to significantly reduce the reliance of contact centers on human agents for handling repetitive queries. Additionally, the analyst firm said AI in computers and mobile devices will address many aspects of the buying cycle going forward.

As generative AI continues to evolve, assistants can support customers with paying bills, accessing product information, and more. Plus, they can help streamline the path to human assistance by directing queries effectively to agents.

While the rise of AI has led to some concerns among human agents, many workers see AI as a valuable tool for their roles. One Salesforce study found 82% of business leaders believe generative AI will lower costs, and 80% say it will increase revenue. Around 54% of employees also said they look at generative and conversational AI as resources for developing new skills.

65% of employees also said generative AI would help them focus on more strategic work, saving up to 5 hours a week in productivity. Unfortunately, 70% of business leaders also said they don’t believe their teams are sufficiently trained in generative AI.

Around 40% of employees said they don’t know how to use generative AI effectively at work, and 53% said they’re unsure how to get the most value from these tools.

Can Conversational AI Thrive in an Uncertain Economy?

Though employees and employers are concerned about missing skills among workers, the outlook seems optimistic. Conversational AI tools are becoming more accessible as contact center leaders implement new tools for building powerful bots.

Additionally, 67% of employees polled in the Salesforce study said they expect their employer to provide additional training.

The uncertainty of the economy won’t necessarily diminish conversational AI opportunities either. Gartner’s report suggests that investment may be slower at the moment. However, organizations are likely to continue spending on customer engagement technology.

According to the consultancy, the reason for this is that customer experience facing projects are proven to deliver new opportunities for revenue generation. While other IT investment areas might weaken as budgets tighten, companies recognize the need for more CX investment.

According to Gartner’s report, CCaaS will also enjoy more funding in the years ahead. With their ability to support various communication channels and AI, cloud-based contact center services power new opportunities for business growth.

The Challenges in the Conversational AI Market

Although the evidence suggests Conversational AI in customer service is experiencing significant growth, there are still challenges to overcome. McKinsey’s recent report on AI customer service highlights three core issues. First, complexity is still a concern.

Some companies, particularly those with lower budgets, are still struggling to implement advanced AI tools. No-code and low-code solutions and tools built into existing contact center platforms may help. Secondly, customers have higher expectations than ever before.

Customers don’t just expect more from agents today. They also require customers to offer more intuitive self-service experiences. Generative AI solutions that deliver greater personalization and accuracy will be necessary here.

Finally, companies will also have to overcome a complex labor market. Professionals trained in AI technology aren’t always easy to access. This further highlights the need for companies to invest in training for conversational AI experiences and tools.

What’s Next for Conversational AI in Customer Service?

If companies can overcome the challenges in the conversational AI market, the landscape promises several potential benefits. Already, countless organizations have discovered the value of bringing the latest AI technology into their ecosystem. In one report, 80% of business executives said implementing AI technologies increased customer satisfaction.

Conversational AI also has the potential to significantly increase efficiency in the contact center, reducing workloads for agents. This also opens the door to potentially reduced operational costs. Plus, it ensures companies can scale rapidly and offer 24/7 support to all customers.

However, Gartner’s report and other analyst insights suggest conversational AI won’t take over the contact center completely. While chatbots and similar technologies can support companies in delivering enhanced customer experiences, a human element is still required.

While AI-supported systems can assist with routing customers, detecting intent and sentiment, and addressing simple queries, customers still want human interactions. This suggests the rise of conversational AI in the contact center won’t lead to the end of contact center agents.

Artificial IntelligenceChatbotsChatGPTConversational AI

Share This Post