Phone that says "Hello".

How customer service chatbots increase companies' value

Research shows that customers value the fast, personalized services provided by AI chatbots.

By George Spencer

Investors reward publicly traded companies that use artificial intelligence (AI) chatbots in customer service roles. That's the key finding of new research by Michael Wiles, an associate professor of marketing.

When B2B (business-to-business) and B2C (business-to-consumer) companies announce the rollout of automated helpers, their stock prices rise an average of 0.22%, boosting a typical firm's market value by about $175 million, according to analyses conducted by Wiles and co-author Darima Fotheringham, an assistant professor of marketing and supply chain management at the Rawls College of Business at Texas Tech University.

Their 2022 paper, "The Effect of Implementing Chatbot Customer Service on Stock Returns: An Event Study Analysis," published in the Journal of the Academy of Marketing Science, marks the first research on investors' response to non-human conversational customer-service assistants.

3 consumer benefits of chatbots

To judge the specific impact of the news, the researchers ran an event study on 153 announcements of AI chatbots over four years (2016-2019). This technique isolates the effect of the news from other market factors.

"We looked at the difference between how much a company's stock moved on that particular day versus how much you would estimate it would have moved based on general larger stock market movement," explains Wiles.

Chatbots provide three primary benefits to consumers, according to this work. First, they offer faster speed and more convenience. Waiting on hold becomes a thing of the past, and 24-hour service becomes the norm. Second, they provide more personalized service as they learn and improve through consumer interactions over time. Third, they represent a seamless service by collecting and aggregating information across a firm's platforms. By providing these benefits, chatbots help the firm foster robust, relational, market-based assets.

"That's a fancy way of saying consumers will like the company more. Because they like the company more, the firm will have the ability to be more successful in marketing their new products, and customers will be more accepting of price increases if they happen," he says.

Investors shrewdly evaluate news announcements and make educated decisions about the nature of a company's planned use of chatbots.

Customer service chatbots' limitations

A stock's price rose higher than other companies making a similar announcement if its press release emphasized a gradual introduction of automated systems; however, when a firm said its chatbots would handle complex tasks right away, its stock price rose but less dramatically.

"That's a natural hesitation we as consumers have about technology and its tendency to overpromise benefits. Investors and we still maintain a healthy skepticism regarding what technology can accomplish. We become more comfortable with chatbots doing more complex tasks over time, but when firms come out of the gate with too many promises, those claims are less credible," he says.

B2B vs. B2C: Which benefits most from chatbots?

According to the study, B2B firms, compared to B2C companies, have "substantially" more to gain from investor response by rolling out chatbots.

"When B2B companies introduce chatbots, they're more likely to impress investors, and that's another reason why they should strongly consider doing so. Chatbot introduction provides a signaling role. It shows the investor community a company is at the forefront of adopting new and appreciative ways of servicing its customers," says Wiles. He believes B2B firms are slower to implement new digital technologies in part because they have clunkier user interfaces than their consumer counterparts.

The research shows that investors respond positively when chatbots have human characteristics such as names, faces, personalities, and voices. Such anthropomorphism benefits B2C companies more than B2C companies.

"Everyday shoppers like that social and emotional connection. It makes using a chatbot more fun for people," says Wiles. "In the B2B context, a company employee that uses another company's product or services places less value on the enjoyment of the human aspects of working with a chatbot. Business customers focus more on efficiency and improving complex value-added services, not fun."

To support this finding, Wiles and Fotheringham conducted two experiments to replicate this conclusion. They asked consumers to imagine they were checking with a pharmacist on a prescription, either as a patient or a company, and they found the same response pattern to greater or lesser anthropomorphic characteristics.

Ethical and social implications of chatbots

The authors caution that AI's rapid evolution and adoption outpaces the exploration of its ethical and social welfare implications. For example, companies tend to assign the female gender to customer service chatbots — Amazon has its Alexa, and Erica speaks for Bank of America — believing this will reduce consumer anxiety about trying novel technology.

This could risk inadvertently reinforcing harmful gender stereotypes and could lead to the dehumanization of people, according to Wiles and Fotheringham.

"It will be important to examine how interactions with anthropomorphized chatbots may spill over and affect customer attitudes and expectations related to human service agents," they write.

They speculate that existing technology may soon allow consumers to customize a chatbot's appearance and other traits, such as emotional expressiveness, and the authors recommend future research into this as well.

Wiles teaches a PhD seminar, an undergraduate capstone class on marketing strategy, and an applied projects class in marketing. His previous research has examined investor response to product placement in movies, how investors respond to reports of deceptive marketing, and how investors react to brand acquisition and disposal decisions.

Other notable papers by Wiles published in the Journal of Marketing include The Effect of Brand Acquisition and Disposal on Stock Returns and When Do Marketing Ideation Crowdsourcing Contests Create Shareholder Value? The Effect of Contest Design and Marketing Resource Factors.

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