How Chat Bots Can Reduce Customer Service Costs


For customer service managers looking to reduce costs, signing up for an on-site chat bot platform like Formilla can be a great move. Chat bots can reduce customer service costs in a number of ways, including providing round-the-clock coverage, answering routine questions without human staff, and freeing up your live agents to devote more time to the most important and valuable interactions.

When it comes to calculating the true cost of customer service, there are quite a few factors to consider. As discussed by, aside from simple wages you should be considering costs such as employee attrition and service discounts, while also factoring in revenue elements like repeat business and sales lost due to poor service. As we’ll see, chat bots can move the needle in all of these important areas – and more.

Chat bots come in two main varieties: menu-based and AI-based. Menu chat bots allow customers to solve their own problems through self-service options similar to phone IVR menus, while AI chat bots use machine learning and natural language processing to respond intelligently to questions customers enter via a site’s live chat widget.

Let’s take a closer look at the ways adding a customer service chat bot to your site can lower your costs and increase efficiency, all while also improving the customer experience your site offers.

24×7 coverage

One of the biggest advantages of adding a chat bot to your website is that they can provide your site with 24×7 coverage, 365 days a year. That kind of coverage is a costly proposition when dealing with human agents, but that’s not the case with chat bots. They work just as well in the middle of the night as they do during the work day, and that’s a huge plus for our online world, where customers may be coming to your site seeking assistance at any time, potentially from around the globe.

According to, the average hourly pay for a customer service representative in the United States is $13.61 per hour, a cost that doesn’t include benefits and bonuses. That means that companies need to pay over $300 in wages for 24 hours of customer service representative coverage – for a single agent at a time. Even for companies that take the option of outsourcing their customer service to an overseas agency, 24/7 coverage from human agents doesn’t come cheap. Compared to these costs, it’s simple to see how chat bots can offer much more affordable customer support, no matter what time a site visitor needs help.

How to Add a Chat Bot to Your Website

Scale up while controlling costs

One of the great things about a chat bot service like that provided by Formilla is that you’ll just be paying one predictable flat rate for your bots, regardless of the hours of the day you have the bots active. You’ll pay a monthly flat price for the chat bot software itself, and as your bot gets more useful and capable, it drives human capital costs way down with only small cost increases as your bot needs grow.

This predictable low cost makes chat bots especially attractive for businesses that are looking to grow. It allows solo ecommerce shop owners on sites like Shopify to provide a professional level of customer service that feels like what customers would get from a big business. And as your business grows and your customer service needs increase, a solid chat bot system can handle more and more queries. Hiring a new customer service representative is costly and takes time, but well-trained chat bots makes it less urgent to rapidly scale up your service team, thus reducing a potential pain point for a growing business.

Live chat support in general is also significantly more efficient than phone-based customer service. Industry estimates indicate that a phone call can be twice as expensive for a company as a chat interaction. Phone agents can only handle one customer at a time sequentially, unlike multi-tasking chat agents, and that makes phone support both more costly and slower than live chat. Working with call centers or answering services can offer phone support at a lower cost than hiring in-house employees, but even at its cheapest phone support will be much more expensive than a live chat system supported by chat bots.

Offer self-service menus


Though AI-based chat bots can feel more advanced and impressive, menu-based bots provide valuable self-service opportunities for customers – and encouraging self-service is a great way to reduce your overall customer service cost. Since many customer problems can actually be easily solved by the customers themselves, there’s no need to involve a human live chat agent if a menu-based chat bot can do the job of walking the customer through the process.

Also known as “rule-based” and “button-based” chat bots, these chat bots can display a list of options for customers to choose from, which can make them easier to use for older site visitors and others who aren’t as comfortable with online chat. They often replicate the options and menu flow presented in phone IVR menus, and can direct customers through steps and options that funnel them towards the appropriate answers or direct them to the right part of your website.

More advanced forms of menu bots can integrate directly with other functions of your business, potentially providing opportunities for customers to make orders or update their contact information without ever leaving the chat widget. Some even combine menu options with AI natural language processing, taking information the customers provide and intelligently performing tasks in order to help the customer. A bot like this might be able to ask the customer for an order number and then tell them, in natural language, when that order will be shipped.

Menu-based chat bots are fast, easy to use, and simple to update when options need to be adjusted. If you already have a phone self-service menu set up for your customers, you likely have a lot of the necessary options already determined. Setting up a menu-based chat bot on your site puts that work to use in a whole new format, immediately improving the customer service experience on your website.

Instant response to customer questions

In a look at chat bot statistics documented by Convince and Convert, we can see that “getting an instant response” was one of the most popular aspects of chat bots with the general public. And it’s no surprise. Anyone who has ever waited on hold for customer service knows how frustrating it can be, and even though waiting for a live chat agent isn’t quite as painful as waiting on the phone, it still irritates customers.

But chat bots can always respond immediately, and that makes a huge difference in customer satisfaction. Even if a chat bot can’t ultimately solve the problem without involving a live chat agent, the bots still eliminate the time a customer has to spend waiting “on hold” before they can start interacting with your business. And the bots can start gathering useful information about the problem before the live agent takes over, getting the customer that much closer to a quick and satisfying resolution.

That increased satisfaction benefits your business in multiple ways, most of which come down to the concept of loyalty. Customers who are satisfied with your service are likely to be repeat customers, and it’s much more efficient to keep an existing customer rather than go out to get a new one. A commonly-cited estimate puts the cost of attracting a new customer at 5x that of retaining an existing one – and quality, quick customer service is an essential part of retaining customers.

Automatically answer routine questions


What percentage of customer service questions that come to your business have never been asked before? If you’re like most businesses, probably not very many. The vast majority of service interactions your customer support teams encounter most likely fall into a few broad categories: order status inquiries, account updates or cancellations, contact info modifications, or a handful of friction points around your product or service of which you’re probably already well aware.

Those routine questions can often be answered in much the same way, every time, whether it’s an interaction that takes place fully within the chat widget or by directing the customer to the relevant portion of your site for self-service. And it’s in answering these repetitive questions that chat bots excel. Menu-based chat bots can display the most common customer needs directly in front of site visitors in the form of chat menu buttons, while AI bots can understand a wide variety of customer inputs and determine whether they are asking one of the common questions for which they have a pre-programmed answer.

We have an AI chat bot on our own homepage at that we’ve trained with a collection of common customer questions, and today that bot can answer about 35% of customer questions correctly, without the need for a human agent to step in.

Let’s stop and think about how significant that is, for a moment. As a customer service manager or other business leader, how often do you get an opportunity to implement technology that can potentially reduce the workload on your employees – and associated labor costs – by more than a third?

How often do you get a chance to reduce employee workload and costs by more than a third? #chatbots Click To Tweet

And the success we’ve observed on our own site lines up with industry-wide statistics. Reporting covered by Forbes indicated that chat bots “handled nearly 27% of total chats from start to finish without the need for an agent” in the samples examined over the course of 2018. Your exact results will vary depending on your industry, the amount of training you do, and the type of chat bot you use, but these numbers are compelling for any manager or business owner looking to cut costs or scale up while keeping costs under control.

You can skip down to the end of this post for more examples of routine questions that chat bots often answer, including recommended starter questions for your new customer service chat bot.

AI chat bots improve over time


As we document in detail in our blog post covering chat bot training, we were able to improve our AI-based Helper Bot’s accurate response rate from just over 10% to nearly 35% over 22 weeks of training. That means that in just about 5 months we were able to triple the number of customer chat interactions on our site that didn’t require a human agent to resolve.

Machine learning is one of the most exciting and important benefits of AI-based chat bots for customer service. By regularly investing time in reviewing chat transcripts and training your bot accordingly, your AI help will just grow more useful over time. That means that all of the other benefits on this list will only become more true and consequential for your business.

As your chat bots improve, customers will be able to get faster and more complete answers without the need for human agents, further freeing up those agents to focus their attention on more complex and valuable interactions. And your chat bots will be capable of handling more and more questions providing better service and an improved customer experience around the clock – without an increase in cost.

Human agents can spend more time on priority problems

formilla-live-chat-widgetSo you’ve deployed and trained chat bots on your site, and more and more of your customer service needs are being handled by these AI agents. What does that mean for your human customer service team?

It means that those valuable live chat agents can spend more of their time offering personalized, highly satisfying customer service interactions to customers who need it. As we’ve examined previously, some of the biggest strengths of live chat agents compared to chat bots include the human ability to sense emotions and respond appropriately and the capability to tackle complex, multi-stage problems. When customers need this kind of attention, it’s worth the time it takes for your human agents to resolve it.

If a customer’s issue can be resolved with a quick chat bot interaction, great. They’ll go on about their day satisfied, probably not thinking about it again. But if their issue is complicated enough to require human assistance, it’s likely to come along with some frustration as well. That’s the perfect time for a human customer service agent to provide the kind of support that makes a difference, and that keeps a customer satisfied, and retains them as a repeat customer. And that has a direct impact on your bottom line. According to research from Bain & Company, increasing customer retention rates by 5% can increase profits by 25 to 95%.

As an additional benefit, reducing the workload on your customer service team – especially that portion of the workload that consists of repetitive tasks – can help increase job satisfaction and lower your employee turnover rate. And as we mentioned at the start of this article, employee attrition is one of the hidden costs of customer service that business owners too often overlook.

Hiring and training a new customer service representative is expensive and time-consuming. Deploying chat bots to assist your team and free up time for human agents to devote to more engaging problems can keep your employees happy and successful – while also saving you money.

How to Add a Live Chat Plugin or App to Your Site

Get started with a customer service chat bot

It’s simple to add a chat bot to your site with the Formilla platform, and it can start handling customer service issues with just a bit of basic training up front. You’re likely already aware of the most common questions your customers have that can be answered by a chat bot, but if not, here are some recommendations to get started.

Starting questions for a customer service chat bot

  1. How do I sign up for an account?
  2. Where are you located?
  3. What are your hours?
  4. How do I reset my password?
  5. How do I update my contact information?
  6. What’s the status of my order?
  7. Do you have any promotions or specials?
  8. How can I schedule an appointment/demo?
  9. How can I report a problem with my order?
  10. Do you ship internationally?
  11. What is your return policy?
  12. How do I cancel my account/return a product?

With a Formilla Helper Bot, you’ll start by entering in common variations of the above questions that apply to your business, and writing appropriate answers. With that done, you can deploy your chat bot live on your site, where it will immediately begin responding to customers and reducing your customer service costs.

If you have questions about Formilla, visit our homepage and reach out via our chat widget in the lower-right corner of the page! We’d be happy to hear from you.


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