How To Build AI Chatbot? Chatbot development life cycle

How To Build AI Chatbot? Chatbot development life cycle

ChatGPT shatters the public's pre-existing perceptions of chatbots. It also inspires businesses to learn how to create their own AI chatbot. ChatGPT, unlike its predecessors, offers near-human-like intelligence capable of doing more than just answering simple queries. It also raises the bar for AI chatbots in general, specifically their capacity to grasp and reply coherently to a variety of language styles and nuances.

Fueled by an optimistic outlook, the global chatbot market is projected to soar to a staggering $1.25 trillion by 2025, a monumental leap from $190.8 billion in 2016. Organizations are delving into the realm of generative AI technologies, akin to the prowess showcased by ChatGPT, experimenting with applications across various business scenarios.

As a CTO at Lomray, I've led initiatives where advanced AI capabilities were harnessed to enhance user experiences through applications like This mobile application was developed to store a complete medical history. Its AI chatbot analyzes all medical records, regardless of structure or complexity, and provides users with timely and relevant information based on them.

What is AI Chatbot

AI chatbots, such as ChatGPT, are artificial intelligence-enabled software tools that engage with users via text or voice communications. This sort of chatbot understands and interprets user inquiries by utilizing artificial intelligence technologies and methods such as machine learning and Natural Language Processing (NLP).

An AI chatbot can do a variety of things, including:

Answering Questions:

Using a database or predetermined algorithms, chatbots can deliver information and react to user queries.

Assisting with Task Resolution:

Some chatbots are designed to assist with specific activities such as booking tickets, ordering merchandise, or organizing doctor visits.


Chatbots built on machine learning technology can learn from fresh information and update their skills over time.


An AI chatbot can converse with users, comprehending context and promoting more natural conversation.

AI Chatbot Market Size and Trends

Chatbot market size

According to Stratview research,the chatbot market is expected to grow from USD 5.27 billion in 2023 to USD billion by 2028, growing at a CAGRE of 23.28% between 2023 and 2028.

Chatbot market size

Apps promoting AI functionality rose to prominence in the mobile app market in Q1 2023. Apps in this category are rapidly growing, boasting sophisticated image editing capabilities and lifelike interactive chat functionality. AI Chatbot by Vulcan Labs was the top app in terms of both downloads and revenue in Q1, with 9.5 million downloads and $3.3 million in gross revenue. The Bing: Chat With AI app, which was released in early February, quickly became popular, with 7.3 million downloads in the first quarter. With the release of the official OpenAI ChatGPT app on the App Store, competition in this space will heat up, with new entrants having to compete with much larger, well-funded publishers who have a vested interest in their success.

Examples of the use of AI chat bots in various business industries and cases


You can integrate a personalized virtual assistant for your clients using an AI chatbot. It is available 24 hours a day, seven days a week, with a response time of about one second, and can help with a significant portion of user questions and issues.

Integration is also possible in the form of a financial educational assistant, for example. It will not only provide useful materials but will also ask questions to assess comprehension.


A personalized virtual sales assistant will not only provide relevant information, but will also help the user find the right product, share trends, and offer a personalized discount when it is required in specific scenarios.

Healthcare, a previously mentioned mobile application, is an excellent example. It includes an integrated chatbot that, based on uploaded documents, always provides information such as your most recent blood test results, doctor's recommendations, last examination date, and so on.

Furthermore, AI chatbots can be used to streamline doctor appointments. They can assist in selecting available slots, providing additional information about the doctor, and addressing other concerns.


In emergency situations, your clients can turn to a personal assistant who will, within seconds, provide information on where to seek assistance based on the insurance case. In some critical scenarios, response speed is crucial like never before.


Some of your clients may be reluctant to search for suitable plane tickets or book a tour for their upcoming vacation. A personal AI assistant will prepare unique options for them based on custom preferences.

Transportation and logistics

For logistics and transportation professionals, AI Chatbots can be extremely useful. It provides real-time assistance, knowledge of ELD rules, legal nuances, and much more. Whether you're a newbie or a seasoned driver, your personal AI bot provides tailored assistance to elevate your driving experience.


A personal tutor that never gets tired. Based on the information about the material being studied, it can ask various questions, create tests, and assist with explanations of complex topics.

Integration in ERP systems

The chatbot can be programmed with the entire company database and will not only provide employees with the necessary information, but it will also learn and improve based on various cases and questions.

Using AI Chatbots to Gain Competitive Advantage

Companies face cost and time constraints across multiple markets in today's fiercely competitive business landscape. Companies like Starbucks, British Airways, and eBay continue to use chatbots for operational support and efficiency. Surprisingly, 57% of business executives report significant financial returns from chatbots, demonstrating their efficacy while requiring minimal implementation effort.

What are the advantages of having an AI chatbot for your team, customers, and overall profitability?

AI chatbots provide prompt customer service around the clock, improving brand perception and encouraging repeat purchases without the need to scale the human support team.

Simplified Processes:

By guiding users through seamless processes, intelligent chatbots assist users in navigating digital stores, fostering customer retention, satisfaction, and loyalty.

Personalized Engagement:

AI chatbots can deliver personalized recommendations by analyzing customers' previous interactions, preferences, and purchases, providing a human-like touch through digital interfaces.

Improved Interactions and Conversions:

AI chatbots respond quickly, accurately, and human-like, resulting in happier customers. They also serve as funnels for connecting with email lists or CRM software, allowing you to build long-term relationships with visitors and convert them into leads.

Multilingual Response:

When you build your AI chatbot, you can expand into different regions while maintaining a consistent user experience, eliminating the need for large support teams in different countries.

Routine Inquiries Automation:

AI chatbots handle common questions, allowing the support team to focus on more complex issues that require personal attention.

Improved Customer Experience:

AI chatbots improve customer experience by remaining omnipresent across multiple channels, personalizing customer journeys, and recommending relevant products.

Cost and time savings:

Using an AI chatbot not only reduces the costs of hiring and scaling customer service personnel, but it also improves the efficiency of manual customer query responses.


AI chatbots provide a layer of privacy for users who are hesitant to interact with human personnel, which is especially important in sensitive situations such as medical consultations.

Customer Data Collection:

AI chatbots are skilled information gatherers, extracting useful information from conversations for backend analysis and actionable insights.

Increased Session Duration:

AI chatbots help retain users' interest by actively engaging them, for example, by greeting new visitors or intervening when a user is about to leave a website, offering promotions or free gifts.

What APIs can be used to create a custom chat bot?

You can certainly write your chatbot from scratch, but it would be so time-consuming and expensive that it is far more efficient to use something that is already ready. To create a chatbot, there are several alternative platforms and tools besides ChatGPT. Here are a few of them:

Dialogflow (by Google):

Provides the ability to create chatbots using Natural Language Processing (NLP). Integrated with Google Cloud and other platforms.

Microsoft Bot Framework:

Allows the development and deployment of chatbots for various communication channels. Supports various programming languages.

IBM Watson Assistant:

Uses artificial intelligence to create chatbots and virtual assistants. Provides multiple model training capabilities.


Open-source framework for creating chatbots with machine learning support. Ensures a higher level of control over the model and data. (by Facebook):

Cloud platform for building applications with natural language functionality. Has a simple interface for creating and training chatbots.


Open-source platform for creating and managing chatbots. Provides flexible tools for development and functionality extension.

Amazon Lex:

Allows integrating natural language processing functionality into applications. Easily integrates with other Amazon Web Services (AWS) services.


Platform for creating and deploying chatbots using AIML (Artificial Intelligence Markup Language). The choice depends on your specific requirements, level of expertise, and preferences in using technologies.

Six Steps to Creating an AI Chatbot

Now, let's get into the nuts and bolts of building your AI chatbot, based on Lomray's experiences:

Step 1: Establish Your Use Case

Make it clear what your chatbot's purpose is, whether it's to help with customer service or to drive sales. Your development strategy is guided by an understanding of the desired outcomes.

Step 2: Select an Appropriate Technology Stack

Match the complexity and requirements of your use case to the technology stack you've chosen. For simpler applications, use commercial chatbots, and for bespoke solutions, look into low-level machine learning libraries.

Step 3: Create a Chatbot Conversation

Customize the conversation flow so that the chatbot understands the user's intent for proactive engagement. Create a base model, prompts, and responses to create human-like interactions.

Step 4: Create a Knowledge Base

Integrate a knowledge base to support continuous context refinement. Save FAQs, chat histories, and other relevant information to improve the chatbot's comprehension and responsiveness.

Step 5: Connect to the App

Integrate and test the chatbot's functionality within your application with ease. Streamline the UI/UX flow to ensure a consistent user experience while also addressing backend concerns such as data flow, security, and monitoring.

Step 6: Fine-tune the Chatbot

Put the chatbot through user testing, collect feedback, and refine the model based on the results. Ascertain that the chatbot responds as expected and that conversations can be seamlessly escalated to human agents if necessary. Once satisfied, make the AI chatbot available to the public.

Tips for Creating an AI Chatbot

Navigating the complex landscape of AI chatbot development necessitates strategic insight:

Avoid Generic Development:

Avoid creating a generic chatbot like ChatGPT. To avoid prohibitive costs and suboptimal performance, tailor your approach to context-specific requirements.

Prioritize Quality Data:

To ensure accurate and meaningful responses, invest in designing a robust conversation flow, establishing a knowledge base, and training language models with high-quality datasets.

Continuous Fine-Tuning:

Expect performance variations during the initial release. Spend time fine-tuning the model, using conversation data to reduce biases and inappropriate responses.

How Lomray Can Be Your Partner in AI Chatbot Development

Lomray stands as a global app development provider, catering to startups and enterprises worldwide. Our expertise lies in helping businesses embrace emerging technologies, with a specific focus on chatbots and generative AI. Our seasoned team, comprising app developers, software experts, data analysts, and machine learning engineers, excels in crafting AI-powered applications.

Our approach centers on understanding the core problems businesses aim to solve. Through close collaboration with clients, we ensure deliverables align seamlessly with the target market, a commitment that has garnered us recognition, including being listed among Clutch's Top 100 App Development Companies.

When you choose Lomray, you can expect:

  • A team of multidisciplinary software professionals aligning tech requirements with business goals.
  • Transparent communication channels to keep you informed and provide prompt feedback.
  • Cost-effective chatbot development from a preferred outsourcing destination.
  • Consistent quality and professionalism endorsed by positive client reviews.
  • Your very own AI chatbot designed to engage customers akin to a human support team.
  • Estimating the Cost of Your AI Chatbot Journey

The investment required for building an AI chatbot is variable, contingent on factors such as use case complexity, integrations, and tech requirements. Data security, hosting infrastructure, storage, and support further contribute to the overall development fees. Additionally, rates charged by AI developers across different countries can vary.

A ballpark figure for developing an AI chatbot within $30,000 and delivering a Proof of Concept (PoC) in 3 months is feasible. For a more precise estimate, consulting with an AI development team and providing specific requirements is advisable.


Generative AI is reshaping the landscape of chatbots, elevating their significance for both customers and businesses. The intricate interplay of technology and strategy in developing AI chatbots demands a comprehensive understanding of user needs and market dynamics.

In this discourse, we've unraveled the key technologies and steps employed by Lomray to develop and integrate AI chatbots into business applications. Whether you're embarking on building your chatbots or seeking a collaborative partner, we hope this insight equips you with a better understanding of the transformative potential within your grasp.

Should you desire a tailored AI chatbot solution or further guidance, our team at Lomray is ready to engage in a conversation. Let's embark on this transformative journey together, creating an AI chatbot that resonates with your business goals and user expectations.

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