Every business needs to have several methods of communicating with its customers. In addition to calling or sending an email, customers also expect live chat. As you decide how to set up live chat for your business, you may find yourself wondering whether a chatbot is right for your company.

To make an informed decision and improve communication, learn what a chatbot is and how to create one. 

What is a Chatbot?

Before you can learn how to build a chatbot, make sure you understand how the technology works. To put it simply, chatbots are bots or computer programs that interact with your customers via chat.

The computer program is commonly incorporated into chat software for small businesses. The program processes human communication and then delivers the appropriate response. Interacting with a chatbot is designed to be a similar experience to interacting with a real person.

The chatbot computer program can be advanced, but there are also simple chatbots. On the simpler end of the spectrum, chatbots can give one-line responses based on keywords. On the other end of the spectrum, advanced chatbots can approximate near-human levels of conversation. These more intelligent chatbots will rely on artificial intelligence and natural language processing. They tend to get even more accurate and human-like over time as they gather more data. 

How do chatbots work?

How a chatbot works depends on the type of chatbot in question. There are two types: task-oriented and data-driven.

Task-oriented or declarative

If you plan to use a chatbot to handle simple question-and-answer conversations, then a declarative or task-oriented bot will likely be a good match for your company.

These rely on rules and natural language processing (NLP) with a small amount of machine learning. They will create automated responses to the input from users. This type of chatbot is most useful for interactive FAQ sections and similar things. They are excellent at dealing with common questions, but they can’t do much else.

These chatbots tend to be simple, and therefore they are the most affordable and most common. That being said, the use of NLP means their responses seem more conversational than robotic.

Data-driven, predictive, or conversational

These chatbot frameworks are also commonly called digital or virtual assistants since they are more personalized and interactive. They use machine learning, natural language understanding (NLU), and NLP. They also use analytics and predictive intelligence. Examples of this type of bot would be Siri or Alexa.

Because of the complexity and cost, few businesses will use a chatbot builder to create this type of bot.

Other types of chatbots

While all chatbots will fit into one of the above two categories, some people divide them into other categories. For example:

  • Rule-based chatbots: These are the simplest type of task-oriented bots. People interact by stating predefined options or clicking buttons. They are excellent for FAQs and qualifying leads.
  • Intellectually independent chatbots: These incorporate machine learning to learn from requests over time. They understand phrases and words to trigger the response. In other words, they pick out the keywords from the customers’ input. 
  • AI-powered chatbots: These are conversational bots that use artificial intelligence. They have a predefined flow but understand free language. They use NLP and ML as well. 

woman talking with chatbot on laptop

Does your website need a chatbot?

If you start using live chats on your website, you may be wondering whether you need a chatbot. There are some pros and cons that you should keep in mind before you even look at chatbot platforms.


The biggest advantage of chatbots is their ability to boost efficiency and streamline costs, at least initially. Chatbots are much more affordable than hiring a dedicated person to respond to chats all the time.

Chatbots will also respond automatically any time of the day, so you can respond to customers and answer basic questions 24/7. By contrast, most small businesses cannot justify having a customer service agent available round-the-clock.

Customers will appreciate the fast responses and ability to chat 24/7. You will not miss out on potential customers who can only contact you during non-business hours. 

Customers prefer to get immediate responses, so chatbots boost their satisfaction. You can use chatbots as an immediate response and follow-up with human interaction to provide more personalization. 

Chatbots also streamline the process of collecting leads. They can have multiple conversations in real-time simultaneously.

If your business receives many messages via live chat, bots can be necessary to respond to all of them. You can overcome some challenges with chatbots by having a system to escalate the chat to a real person.


The most significant disadvantage of a chatbot is that you do not have a real person talking to your customers. This can lead to miscommunication. Even worse, it can hurt the customer experience. Most people will tell they are talking to a bot, especially the ones that your business would be using. This may make them feel like they are less valued. That, in turn, can reduce customer loyalty and referrals.

Customers also want more personalization and emotion than chatbots can deliver. This is especially true for customer support when resolving issues. 

The other major disadvantage of chatbots is their limitations. Most companies simply won’t be able to justify the cost of more advanced bots. This means you will be limited to the more basic ones that can handle basic live chat prompts and nothing more. This limits their functionality compared to a person. It can also frustrate customers if they don’t get as much information as they want. 

One of those critical limitations of chatbots is that they do not understand natural language. They typically cannot understand misspellings and seldom understand sarcasm or slang. If your chatbot does not understand what a visitor is saying, they cannot answer their question. 

You need to maintain chatbots regularly. This includes updating them with new information about your business or things like changes to business hours. It also consists of adjusting them as your company’s priorities for live chat shift. 

office worker at desk on computer

How to create a chatbot step-by-step

Once you decide to use one of these bots, you just need to learn how to create a chatbot. Thanks to the popularity of this tech, there are plenty of chatbot platforms to choose from. You will notice that there are a lot of free chatbot builder options available, but paid ones tend to be easier to use and have more features. If you want an AI chatbot, prepare to pay. 

Of course, if you have coding skills, you can build your own chatbot from scratch. 

Step 1 – Consider your needs

The first thing to do is think about your needs. For example, do you want to generate more leads or improve the customer experience? Think about how customers will interact with the bot and what features you want it to have. Will it be for the FAQ section, lead collection, or customer service support? 

This is also the time to think about where you want the bot to appear. Is it going to be for your website? Or do you need a chatbot for Facebook Messenger, WhatsApp, or another platform? What messaging apps will you use it on? 

Step 2 – Choose your platform

With your needs in mind, you can look at various chatbot-building platforms and figure out which one fits your needs. Many platforms require zero coding knowledge. Remember that these will be for the simpler, task-oriented chatbots.

Look at reviews for your chosen platform and consider its features and cost.

Step 3 – Create your chatbot

The exact process of building the bot will depend on the chatbot platform you choose. Most, however, feature dedicated bot builders with intuitive steps. Many have drag-and-drop functions, pop-up windows, or even wizards to guide you.

Step 4 – Test the bot

Before you deploy the bot, make sure it works. Your chosen chatbot platform will likely have a test feature built into it.

Step 5 – Extra steps for advanced bots

Depending on the type of bot you have, you will need to train your bot. This will typically involve adding common words and phrases to give the bot data.

Step 6 – Monitor the chatbot and adjust as needed

Now, you can go ahead and launch your chatbot. Remember to monitor it so you can make any changes that are needed.

Alternatives to using a chatbot

Chatbots are helpful, but they have some drawbacks because you don’t have a human on the other end.

You may want to consider other alternatives. Podium, for example, lets customers chat with your business on your website. From there, you can move the conversation to text. This enables you and your customer to use the most popular method of communication. Customers will appreciate the ability to text, as this is the preferred communication method. 


Business owners can create a chatbot to make their live chat responses more efficient. Some various builders and programs make it easy to create a chatbot. Just be sure to evaluate all of your options before creating a bot. You may find another alternative, such as the ability to move webchat to text, that makes more sense for your business.

Isaiah Rendorio
Isaiah Rendorio Product Marketing Manager, Campaigns

Isaiah Rendorio is the Product Marketing Manager for Podium Campaigns—helping local businesses tap into the power of SMS marketing to strengthen customer relationships, increase customer lifetime value, and drive more revenue.

Adapt the way you do business. Press send.