Chatbot Development Guide: Things to Consider, Types, and Cost-Benefit Analysis

We are here to help! This blog post breaks down everything you need to know, from cost, and types of chatbot, to factors that affect your budget.

Know Your Chatbot: Its Types and Use Cases

A chatbot is nothing but a digital conversation partner who can communicate with you through text. Advanced bots can even understand audio and images. They don’t even need proper grammar or language to understand your words. You can even make them work for you like placing orders.

So, deciding the use cases of AI-based chatbots is the first thing to do. Otherwise, any investment you make will go to waste. If you are unsure where to use a chatbot, we have a few suggestions:

1. Solve your customer's queries with a conversational chatbot.
2. Track your orders and sales with a chatbot.
3. Attract visitors to your website and collect leads with the chatbots.
4. Make your marketing campaigns effective through chatbots.
5. Onboard or train new employees using an HR chatbot.
6. Engage or educate the audience with voice-based chatbots.
7. Recommend better products using a chatbot with predictive power.
8. A Chabot who simplifies complex information of the documents in easy language.

Figure out what is the most important thing you want the chatbot to do. It will help in deciding which type of chatbot would be good for your business.

Types of Chatbots

Just like not every human is equal, not every bot is the same. They are built differently and have characteristics different from one another. Here are a few common types of chatbots.

1. Rule-based chatbots: They follow rules and work on if-then-else logic. Such bots are good for simple functions like answering a query. However, they are difficult to build as developers should consider multiple permutations and combinations of questions.  
2. Menu-based chatbots: Unlike rule-based, these bots don’t give answers but rather guide users through buttons or menus. They are great for tasks like booking appointments or ordering food.
3. Keyword-based chatbots: Such bots look for pre-defined keywords in users’ queries to give a response. However, they cannot answer questions outside their scope.
4. Contextual chatbots: Advanced chatbots who can understand the context and improve their response from past interactions. They are best for customer service where personalization and customer-centricity are important.
5. Voice bots: They work on voice recognition technology and are great for industries like e-commerce, retail, home appliances, and so on.
6. AI-based chatbots: These are super bots who can learn, understand, and improve with every interaction. AI bots are the smartest of all types of chatbots.
7. Hybrid chatbots: They are a combination of different types of chatbots and are good for specific business use cases.

Once you decide which chatbot you need, move to the next step i.e. cost of chatbot development.

Options to Explore for AI-based Chatbot Development

It’s a big investment, therefore you must explore every option out there for accurate chatbot pricing. Here are the available options in the market.

1. Go DIY

If you want an AI-based chatbot that does specific tasks, opt for a DIY approach. Everything would be under your control, from ideation to deployment. However, it would require a dedicated team of AI experts, software developers, UI/UX designers, and project managers.

And within a few weeks or months, your chatbot will be ready to deploy. A DIY chatbot brings a medium upfront cost compared to other approaches. However, the quality of the bot would depend heavily on the expertise and experience of your team.

2. Subscribe to a Bot

Chatbot builders are great if you cannot wait to implement a chatbot in your business. They offer pre-built templates that you can customize according to the workflow. You can even integrate the ready-made chatbot solutions into the tools often used by your team or customers.

For example, users can get details of their orders on WhatsApp when they place an order through a bot. Such bots are even less expensive than custom chatbots and start as low as $15 per month. Here are a few chatbot builders you can explore.

3. Hire the Experts

The above approaches are good if you are running out of time and money. But if you don’t know how to build a chatbot, hire a chatbot development company.They have experts who have been developing different types of chatbots for small, medium, and large enterprises.

You won’t have to worry about anything. They even help you identify which chatbot is good for your specific use case. From development to even maintenance, they will do it all. Outsourcing AI chatbot experts would tentatively cost you between $5,000 to $20,000 and more. This is just a monthly cost of chatbot development in 2024.

The features and types of chatbots you want will add additional cost. That would require a budget of up to $30,000 if it’s simple and if you are making something like ChatGPT, expect the cost beyond $50,000.

However, the final cost of chatbot development will revolve around these questions:

1. Should I get a complex or simple bot?
2. Will it be a simple bot working or rule-based scenarios or advanced with AI or NLP power?
3. What my chatbot can do?
4. How would it look?
5. What type of tools it would work with?

Lastly, the cost of a chatbot also depends on the industry it will be implemented.

Do the Cost-Benefit Analysis

Identify the actual cost based on the benefits of chatbot development. Again, you have to figure out answers to a few questions here especially if your chatbot is a query bot.

1. Find the queries to be automated

Ask your customer service team about repetitive questions they get from your customers. These questions should be automated as they waste more time for your agents.

2. Filter queries

Decide which queries need automation and which ones will be solved by live agents.

3. Estimate the time of query resolution

Calculate the amount of time your team spends on all the queries. For example, they may take 5 minutes to answer queries related to order tracking. Queries like order delivery issues take more time.

4. Figure out the cost of handling queries

Calculate the average hours a live chat agent spends on queries per day. Multiply the amount by the number of working days to get a monthly cost estimation. Multiply by 12 for annual estimation.

5. Compare the cost

Do a comparison between the cost of a chatbot handling queries versus the agents. You can do this by calculating the number of hours a bot will take to solve those queries. If the cost is lower than what you spend on a live agent, it's worth investing in chatbot development.

However, keep in mind that chatbots take time to learn and adapt to situations. So, initially, you may not see the benefit and working with chatbot-human collaboration. Once they adapt, you can switch the human resources for better tasks.

The Final Decision

The final decision of developing an AI chatbot for your business is in your hands. It should be made on considering the above factors and after proper evaluation of your needs. Whether you develop it in-house or outsource a chatbot development company, make sure the investment delivers your expectations.