Conversational AI and Customer Engagement: A Comprehensive Analysis of Chatbot Technology in Modern Business Applications

Sarkpa Eastgar Garmonee, & Bakare Pamela Tinashe
Department of Marketing, Hubei University of Technology, China
Department of Management of Economics, Hubei University of Technology, China
DOI – http://doi.org/10.37502/IJSMR.2025.81040

Abstract

This comprehensive study examines the implementation, effectiveness, and business impact of conversational artificial intelligence (AI) systems, commonly known as chatbots, in contemporary customer service applications. Through systematic literature review and analysis of current market data from 2024-2025, this research evaluates the technological evolution from rule-based systems to large language model (LLM)-powered conversational agents. Our analysis reveals that the global chatbot market reached $7.76 billion in 2024, with projected growth to $27.29 billion by 2030 at a compound annual growth rate (CAGR) of 23.3% (Grand View Research, 2024). Primary findings indicate that while 87.2% of consumers report positive or neutral experiences with chatbots (Tidio, 2024), significant challenges remain in contextual understanding and customer satisfaction. This study contributes to the academic discourse by providing empirically grounded insights into chatbot effectiveness, implementation costs, and strategic considerations for businesses adopting conversational AI technologies.

Keywords: Artificial Intelligence, Conversational AI, Chatbots, Customer Service, Human-Computer Interaction, Natural Language Processing, Customer Experience.

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