What Is Conversational Commerce? Everything You Need to Know

Woman using a mobile phone at home.

Businesses are constantly looking for new ways to get in front of customers, improve customer satisfaction, and expand sales. And to do it, many have adopted new methods of technology to help them stand out from competitors and create a more engaging experience for shoppers — anywhere and everywhere.

Whether that’s reaching customers through chat, text message, or AI assistants, a growing trend of conversational commerce has allowed brands to communicate more directly with customers at all stages of the purchasing journey and provide them with a more personalized experience.

Here’s everything you need to know about conversational commerce, from how it works to why it matters to your bottom line.

Table of contents

What is conversational commerce?

Conversational commerce is a form of eCommerce in which brands communicate directly with customers via text or voice in real time. By using messaging apps, personalized texts, push notifications, and chatbots — or AI assistants — to interface with customers and answer their questions, brands can deliver a helpful, convenient customer experience.

Conversational commerce is a hot topic for businesses because real-time communication has never been more important to a brand’s ability to satisfy customers. When consumers have questions about a brand’s products or need to resolve issues with their orders, brands need to handle it right away — or risk leaving customers with a less-than-great experience.

How does conversational commerce work?

Conversational commerce allows businesses to directly communicate with and assist customers at each step in their purchasing journey, usually through automated technology. By leveraging multiple channels to connect with customers, businesses can improve customer satisfaction, guide customers through their purchases, introduce customers to new products, and even help boost customer retention.

“There are a lot of cases for conversational commerce that are emerging, like a scenario where you need to reschedule your appointment or, for retailers, where you’re looking to do a return or a refund,” says David Rusenko, head of eCommerce at Square.

“I think there’s a lot of opportunity for conversational commerce to handle customer service–type inquiries for small businesses, which can help them offload the burden of having to pick up the phone or have a receptionist answer those inquiries.” In times when staffing is a challenge, offloading such tasks can be incredibly cost-effective for businesses.

Not only is conversational commerce a mobile-friendly way to move customers through the sales funnel (or resolve their issues), but it can also provide uniquely customized service to each individual shopper: Chatbots, for example, are capable of using customer data, product data, and interaction data to shape their communications with customers, leading to improved service and reduced wait times for customers (due to chatbots’ always-on accessibility). According to Salesforce data, there was a 67% increase in business chatbot usage between 2018 and 2020.

Types of conversational commerce

The most common types of conversational commerce include live chat software, chatbots, messaging apps, and voice assistance software. Live chat and chatbots can help answer customer questions, while tools like messaging apps and voice assistants can help connect and direct customers.

Some examples of conversational commerce in action include:

  • A website-based chatbot that pops up with live greetings, perhaps offering browsing site visitors a promo code to help facilitate their purchases.
  • A messenger app–based chatbot that answers customer service inquiries or that contacts customers who have ordered from the brand in the past (and reminds them to reorder).
  • A voice assistant that helps customers quickly book or reschedule appointments or search for desired products.
  • An automated text message that reminds customers about their appointment or shares updates about the appointment.
Focus on what you do best

Square Messages puts texts and emails between you and your customers
in one place.

What are the advantages of conversational commerce?

Since conversational commerce allows businesses to meet customers where they are in their purchasing journey, it can help create an experience that benefits both the consumer and the business itself.

Conversational commerce methods can be used to help the following:

  • Improve customer experience: By offering user-friendly, personalized assistance, you can get customers what they want quickly and boost customer satisfaction.

  • Lessen the service burden on employees: Automating certain customer service tasks can free up time for employees so they can focus on tasks that need to be handled in the moment.

  • Increase customer engagement and loyalty: With personalized recommendations, cross-selling, and reaching out to customers at the right time, you can increase customer engagement and build a relationship with customers that you might not be able to do otherwise.

  • Grow revenue by reducing customer churn: As you better move customers through the purchasing journey, you can also win back customers and prevent abandoned carts.

  • Be more available to customers: By automating some aspects of your customer service, you can be “available” to customers at all times.

  • Gather valuable feedback: Customer communication through chat or messages can offer valuable information about what’s working, what’s not working, and what you should change.

  • Attract new customers: Leveraging technology can help win new customers. Square’s Future of Commerce report found that 25% of Gen Z consumers are interested in shopping through chat or text messages, compared to 18% of retail customers overall.

Who is using conversational commerce?

Conversational commerce has gained popularity because it sits at the intersection of two booming areas of digital activity among consumers: mobile shopping and messaging (both text and voice).

Data shows that consumers are indeed using messaging platforms to communicate with businesses. According to Facebook research commissioned by Boston Consulting Group, common reasons customers around the world message brands include: seeking out product or pricing information (45%), getting instant responses at any time (35%), finding it an easy way to shop (33%), getting personalized advice (31%), or using it to negotiate prices or offers (30%).

In 2025, more than 10% of all retail sales in the U.S. are expected to be generated through mobile commerce. Messaging apps like WhatsApp, Facebook Messenger, and WeChat, meanwhile, now have over 5 billion monthly active users, and people use them even more than social networks.

Brands recognize that they need to go where their customers are spending time in order to meet their needs. According to HubSpot, 71% of people are willing to use messaging apps to get customer assistance — many of whom want to get their problem solved quickly. Retail sales from chatbot-based interactions are forecast to reach $112 billion by 2023 (per an estimate by Juniper Research.)

What is the future of conversational commerce?

According to most projections, conversational commerce is poised for significant growth. Gartner research estimates that in 2022, 70% of customer interactions will involve emerging technologies, such as machine learning (ML) applications, chatbots, and mobile messaging (up from 15% in 2018).

Sales made via conversational commerce channels like chatbots, digital voice assistants, and messaging will grow more than sevenfold from $41 billion in 2021 to $290 billion by 2025, according to Juniper Research.

There are some limitations to certain aspects of conversational commerce, however.

“I can ask a chatbot to show me three blue sweatshirts, for example, but that’s not the same as browsing and finding exactly what I like,” said Rusenko. “And I need to look at an item like that before I purchase it, so I can’t just do it by voice.”

While consumers might need a few more interactions with a brand before buying clothing and jewelry off of chat or voice, conversational commerce does offer the convenience of allowing customers to quickly order items they don’t need to see, such as cleaning products or groceries, or to reorder items they are already familiar with.

In China, conversational commerce is already ubiquitous, thanks largely to the staggeringly popular WeChat app, which enables users to complete day-to-day tasks like booking appointments, hailing cabs, and paying rent and utility bills, as well as messaging friends and family. As of 2021, Statista reported that 25% of WeChat’s users spent more than four hours on the app each day.

Getting started with conversational commerce

The need and demand for real-time communication with customers is likely here to stay, and conversational commerce can help businesses drive those real-time interactions.

Before getting started with conversational commerce, think about what you’re trying to accomplish. Do you want to improve customer experience? Lessen the service burden on employees? Grow revenue by reducing customer churn? Increase customer engagement and loyalty?

Next, think about which methods of conversational commerce could align best with your marketing and sales goals. It’s smart to consider your budget, what your competitors are doing, and how you’ll measure the success of your conversational commerce strategy.

With an objective in place, you can then determine how to best integrate conversational commerce into your own marketing strategy to position your business for future growth.