We use cookies to enhance your experience through analytics. Some analytics may process user data such as device and browsing behavior. By clicking Accept, you consent to this use.
AI Chatbots – What a Chatbot Is, What It’s Used For, and Its Advantages - Neviox Digital Blog
AI Chatbots – What a Chatbot Is, What It’s Used For, and Its Advantages
Although the first chatbot, called ELIZA, was created back in 1966 at MIT by Joseph Weizenbaum, by 2025 chatbots have made tremendous progress thanks to multimodal LLM models (text, voice, images, video) and the increasing use of AI agents capable of executing tasks independently.
Tin Martinić
Share this article
Source: Freepik
What Are Chatbots and How Do They Work?
A chatbot is a computer program designed to conduct conversations with users via text or voice. Its purpose is to enable fast, automated communication between humans and systems, whether in customer support, sales, education, or everyday assistant tasks.
Modern chatbots can be integrated with databases, CRM systems, or web services and perform complex tasks – from providing information to independently executing actions such as making reservations or processing requests. Thanks to advances in natural language processing (NLP) and contextual understanding, chatbots are increasingly becoming digital assistants capable of meaningful collaboration with users.
Classification of Chatbots by Architecture
Generative Chatbot
Technology: Large language models (LLM) such as GPT-5, Claude, Gemini.
How They Work: They receive user input and generate responses based on their pre-trained knowledge.
When Used:
When the goal is natural dialogue and flexible conversation.
Examples: Virtual assistants, chat support for a wide range of topics.
Limitation: The model only knows what it learned during training and cannot access private documents or databases.
RAG Chatbot (Retrieval-Augmented Generation)
Technology: Combines LLM with a knowledge base or documents (vector database/embeddings).
How They Work:
User input is searched through proprietary data or documents.
Relevant content is passed to the LLM as context to generate a response.
When Used:
When the chatbot needs to answer questions based on private or organization-specific data (manuals, databases, PDFs).
Examples: Internal company support systems, Q&A bots for documentation, quick retrieval of objects from a database (ads, references, invoices, official documents).
Note: RAG chatbots operate directly on personal or organizational files and are customized for each organization.
#ai#chatbot#business#development
Tin Martinić
Neviox Digital CEO with an Engineer's degree in Computer Science from the University of Split, and multiple certifications, my core competencies span across front-end and back-end technologies, with an emphasis on Langchain, Next.js and AWS
Have a vision for a PropTech or Tourism solution? Want to share your technical expertise? Let's collaborate and build the future together!
Agentic AI (Agent Chatbots)
Technology: LLM + task planning + integration with external applications.
How They Work: The model not only responds but also executes actions: sending emails, booking appointments, calling APIs.
When Used:
When complex business processes need to be automated.
Examples: Digital assistants, sales or support agents.
Agentic RAG Chatbots
Technology: Combines RAG + Agentic AI.
How They Work: LLM uses private data to generate responses while simultaneously executing tasks.
When Used:
For advanced digital assistants that must remember user data and act on it.
Examples: Financial or real estate assistants that query databases and simultaneously generate reports or send offers.
Specialized AI Chatbots
Technology: Fine-tuned LLM models for specific domains.
How They Work: The LLM is additionally trained on a domain-specific corpus of data.
When Used:
For highly specialized tasks and accurate responses within a single industry (medicine, law, engineering).
Advantage: Greater accuracy and relevance in a specific domain.
What Modern Chatbots Are Used For and Why They Are Trending
Modern chatbots today are not just tools for answering simple questions; they have become essential parts of digital communication and automation in business. Their primary purpose is to automate user interactions, providing 24/7 responses while reducing the workload on human agents. Advanced agentic and RAG chatbots can also perform tasks independently, such as sending emails, querying databases, or scheduling meetings, effectively becoming digital assistants that increase productivity and efficiency.
Another key advantage of modern chatbots is their ability to access and interpret large volumes of data. By integrating with documents, CRM systems, or internal databases, chatbots enable users to receive precise and personalized answers to complex questions. This significantly enhances user experience and engagement, which is particularly important in sales, support, and education.
Main reasons why modern chatbots are so popular:
They can conduct natural, contextual dialogue thanks to LLM technology.
They provide instant access to information and automate tasks.
They increase efficiency and scalability of business processes, reducing costs.
They enable personalized user experiences and higher satisfaction.
They reduce repetitive work for employees.
They are available 24/7.
They enhance company credibility.
Because of these capabilities, nearly every application aiming to remain competitive today integrates some form of modern chatbot solution, whether as customer support, a digital assistant, or a tool for interactive data management.
Why Introduce a Modern Chatbot into Your Business
Integrating a modern chatbot solution into your business can significantly improve internal processes, customer support, and overall client experience. Chatbots provide faster responses to inquiries, automate routine tasks, and grant access to relevant information in real time, increasing efficiency and freeing up employees for more complex responsibilities.
Key Chatbot Statistics
Global Market Growth: The chatbot market was valued at approximately $7.76 billion in 2024 and is expected to exceed $27 billion by 2030, with a compound annual growth rate (CAGR) of 23.3% (masterofcode.com).
Widespread Adoption: By 2025, 79% of organizations report at least some level of AI agent adoption, with 43% allocating more than half of their AI budgets specifically to AI capabilities, including chatbots (en.wikipedia.org).
Customer Interaction: Nearly half (49%) of adults in the U.S. have used an AI chatbot for customer support in the past 12 months (backlinko.com).
Operational Efficiency: Organizations using AI agents report an average return on investment (ROI) of 171%, with expectations that agentic AI will autonomously resolve 80% of common customer issues without human intervention by 2029 (en.wikipedia.org).
Revenue Impact: 57% of companies state that using chatbots provides a significant return on investment with minimal investment (dashly.io).
Companies that implement chatbots often notice increased customer satisfaction, higher productivity, and better utilization of data. Given the complexity and capabilities of modern agentic and RAG chatbots, implementation may require expert guidance to ensure the solution is fully tailored to the specific needs of the business.
In this context, partnering with a company like Neviox Digital, which understands both the technology and business processes, can simplify implementation and ensure that a chatbot not only communicates effectively but also truly adds value to the business.
