With chatbots getting smarter, value-driven, and user-friendly, it has fueled customer-led demand for chatbot-driven interaction at every touchpoint. As a result, businesses are scrambling to keep up with this requirement and investing aggressively in chatbot development; so much so that the market for chatbots is expected to reach a valuation of USD 10.2.29 in 2026 with an impressive CAGR of 34.75%.

In its simplest sense, a “chatbot” is a portmanteau of human “chatter” as conducted by a “bot.” It is a software application or computer program that can simulate human conversations through speech or text.

Such a service can rake in the following advantages:

Given the whole suite of advantages listed above, the role of chatbots boils down to empowering businesses by making them human, accessible, responsive, and reliable. For some businesses, it can also function as a competitive differentiator that sets them apart from others. And as a culmination of these qualities, your organization can achieve the highest level of customer approval and satisfaction. Who doesn’t want that?

Now that we’ve established that a chatbot can be a valuable addition to your business allow us to lead the way. We have formulated a detailed step-by-step guide on how to build a business chatbot — from identifying when it is the right fit, understanding the different types of chatbots, and defining goals, to launching and improving the chatbot. The following is your almanac to building a business chatbot:

While chatbots offer a plethora of advantages, it is not advisable for all businesses to hop on this trend. After all, the process of building a business chatbot from scratch is not easy on the pocket. Plus, it is a time-consuming and resource-intensive process.

Therefore, it would be wise for business leaders and C-suite executives to involve the crucial stakeholders and ask probing questions, such as those illustrated below, to audit the business processes and identify the need for a chatbot as a solution:

If the answer is a resounding yes to the above questions, then it is time to give it serious thought. Apart from the intangible and non-monetary benefits, a cost-to-benefit analysis and Return on Investment (ROI) calculation can be performed to justify the impending financial implications.

As cliche as it may sound, not all chatbots are created alike. Depending on various factors (some of which we discussed in the previous section), businesses can settle for something as simple as a menus-based chatbot. Alternatively, businesses with resources and bandwidth could create something as elaborate as a conversational chatbot with sentiment analysis and Natural Language Processing (NLP) capabilities. Frankly, that’s your decision to make. However, to help you in this direction here’s a quick overview of some of the commonly available options:

Knowing these basics will help one understand what is right for the business. Once that is out of the way, you can define the chatbot goals, as discussed in the subsequent section. (Or the following sections may shed light on how to make this decision. It works both ways!)

Chatbots are as versatile as they are diverse. One could use them in lead generation activities, closing deals, upselling or cross-selling during sales, offering technical support, and more! As such, businesses must define their goal right at conception to stay focused on the outcomes.

To understand the primary objective of the chatbot, ask the beneficiary team or department the following questions:

Upon defining the roles and responsibilities of the chatbot, you can then move on to fleshing out additional details using the following steps.

Once the basics of the chatbot are outlined t, it is time to make a few strategic decisions, namely the channel and the language. Though chatbots are commonly found on websites and landing pages, they can also be implemented across instant messaging platforms like WhatsApp or Messenger. As such, businesses must identify the viable channels they wish to target.

One will have to gather user data to make a well-rounded decision in this regard. For instance, determine the following:

Based on these findings, shortlist about three to five media for a truly multichannel experience. Follow a similar approach while deciding on the language support offered by the chatbot. After determining the channels and languages, you can move on to assimilating such a solution within your business infrastructure.

Chatbots do not operate in a vacuum; they have to function in harmony with other tools and systems employed by your business. Making such provisions right at the design and development stage will lend immense flexibility and scalability to the chatbot and make it future-proof to some degree. Given this fact, one will have to work out integrations between the chatbot environment and disparate systems, such as the Customer Relationship Management (CRM) platform, calendar, cloud storage, maps, payment systems, and more. Again, one will have to take a call on the impact and importance of certain integrations and prioritize them over the others.

Businesses taking on the mammoth task of in-house chatbot development will have to put together a robust team that can lead the mission to success. Start by treating the process as any other digital transformation project. Prepare a requirement report containing all the features, specifications, and outcomes expected from the chatbot; one may have already done that by following the preceding steps.

After completing the homework, one will need to add the following members to the chatbot development team:

Put together your A-team by handpicking experts from various fields, or we have another shortcut approach that you can try — outsourcing!

Building a chatbot development team and maintaining them can be costly, especially when complexities get involved. Not to mention, it is also a hassle to recruit and retain talent, sustain engagement and productivity, and keep everyone motivated towards the goal. In this scenario, outsourcing appears to be a viable alternative.

That being said, choosing the right chatbot development agency is key to the project’s success. Here’s how one can find the right fit:

Once a chatbot development team has been put together, or the expertise of an agency has been engaged, it is time to get down to business. Whatever chatbot-related details that one has collected, such as expectations, desired outcomes, and project deliverables, will have to be shared with the developer/development team. This information will act as a baseline for them and allow them to ideate and innovate without losing focus on the primary goal. At this point, the team might also refine the ideas or negotiate on certain terms so that your chatbot is realistically possible.

Upon discussing all these nitty-gritty, prepare a roadmap with well-defined Key Performance Indicators (KPIs), milestones, deliverables, timelines, and so on.

Now that you’ve laid down the complete foundation, you can start chatbot development!

Based on all the inputs, the development team will work on creating the chatbot as per the business requirements. One may be required to actively participate in the development process, so be prepared to step up!

Rather than delivering a fresh, out-of-the-box chatbot solution, the development team will first deliver a Proof of Concept (POC) or a Minimum Viable Product (MVP). This prototype, of sorts, will help to test the chatbot’s performance in real-world conditions.

A prototype gives the opportunity to identify and fix issues before they turn catastrophic. As such, the typical chatbot performance assessment will evaluate across the following spheres:

Of course, this list is purely indicative, and you will have to modify it according to your industry, chatbot type, roles and responsibilities, and other variables.

After the beta testing is a success, the development team will start creating the full version of the chatbot. All the necessary changes will be implemented, additions will be incorporated, and integrations will be tested. Once the chatbot performs to expectations, it is time to launch it into the real world!

Bup bup bup! Hold your horses because that’s not all! You have one final consideration to make for the continuous improvement of your chatbot. We discuss that in the final section.

Simply launching a chatbot is not enough. After all, chatbots are not “build it and forget it” things.

Businesses need to vigilantly monitor their performance to pave the way for continuous growth. First, the business will have to define certain KPIs and corresponding parameters that serve as benchmarks to analyze the chatbot’s performance. Next, businesses will have to take note of every anomaly or discrepancy and find justification for the same. Then, perform corrections are required to get the performance back to optimal values. Finally, the business will have to detect any underlying patterns.

In the meantime, one will also find opportunities to scale and expand your chatbot capabilities based on market conditions, ongoing trends, customer feedback, and metrics like satisfaction rates. Such a holistic approach will allow your chatbot to improve at every iteration!

Now that we have indulged in some heavyweight reading about chatbot development, let’s polish this knowledge with a few important tips and tricks to make the process fun:

As a treat for your perseverance, here’s a quick recap of the detailed 10-step process:

Sure, the process seems overwhelming, but it is well worth the effort. All it takes is a little initiative to get the ball rolling, and once such an ambitious project gains momentum, it would put your business on the fast track to customer-friendliness.

So, get started with building the business chatbot now!