Texas Tech University

Rawls Research Spotlight: The Effect of Chatbot Customer Service on Stock Returns

AI chatbots offer customers three primary benefits: faster service, personalization and seamless experiences.

Jacob Gordon | September 25, 2023

Story Spotlights

  • The researchers completed an event study on 153 chatbot announcements over a four-year period (2016-2019).
  • Companies' stock prices rose an average of .22% after announcing the implementation of customer service chatbots.
  • Business-to-business companies saw significant gains from investor responses after announcing the use of customer service chatbots.

Perhaps you have been on a website and saw a little popup message appear asking if you need help with anything. There may be an image of a person and even a familiar name like Hal, Ava or Samantha. Suddenly, a question pops into your head: Is this an actual human or an Artificial Intelligence (AI) chatbot?

AI chatbots have become increasingly popular over the last several years, and their use in customer service and the stock returns a company can see as they implement chatbots are at the heart of a research paper co-authored by Darima Fotheringham, assistant professor of marketing and supply chain management at the Jerry S. Rawls College of Business.

In “The Effect of Implementing Chatbot Customer Service on Stock Returns: An Event Study Analysis,” Fotheringham and her co-author, Michael Wiles, associate professor of marketing at Arizona State University, conducted an event study on 153 chatbot announcements over a four-year period between 2016 and 2019. Event study methodology is a technique that isolates the effect of particular news – in this case the announcements of AI chatbot use —from other market factors. 

“This idea of how digital tools can expand and strengthen consumer-firm connections rather than create a barrier sparked my interest in this research,” said Fotheringham. 

The researchers noted that while firms are continuously spending more in the area of AI chatbots, little research has been done on the effect they may have on a firm value or investor response to the use of AI chatbots.

Fotheringham and Wiles found that investors responded favorably when firms announced the rollout of an AI chatbot, especially in customer service applications. The researchers found that firms' stock prices rose an average of .22%, which equated to an increase of more than $170 million in value.

In particular, the researchers found that B2B (business-to-business) firms had more to substantially gain from using AI chatbots than B2C (business-to-consumer) firms. 

“When B2B companies introduce customer service chatbots, the investors are especially impressed,” said Fotheringham. “Such service innovation signals to investors that the company is at the forefront of embracing new technologies that focus on creating value for its customers.”

To support their findings, the researchers also conducted two supplemental experiments: an experiment examining customers' perspectives on chatbots and an investor survey. Their findings in these two studies echoed the event study. Namely that investors' responses to AI chatbots are driven by expected customer value.

Benefits of AI Chatbots

Fotheringham and Wiles identify three main benefits AI chatbots offer customers: faster service, personalization and seamless experiences.

“Customers increasingly expect to have frictionless and immediate experiences,” wrote the researchers, “and chatbots can fulfill this need by offering speed and convenience to meet the expectations of connected consumers.”

Customers want questions answered and needs addressed as soon as possible, and this oftentimes extends beyond normal business operating hours. AI chatbots provide firms with a cost-effective option that ensures customers can access a “representative” at any time. 

A major difference between B2B and B2C firms is with the implementation of anthropomorphized AI chatbots. Anthropomorphized chatbots are engineered with human-like characteristics. They may have a name, assigned gender, display emotions and other uniquely human qualities or skills. The researchers noted a dampened positive effect of AI chatbots when B2B firms utilized anthropomorphized chatbots, whereas BC2 firms saw a more positive response to their anthropomorphized chatbots.

Future Direction

For the future path of this research, Fotheringham has two main questions that could build on this research.

The first is how more humanized chatbots affect human-human service interactions.

“There is research suggesting that after interacting with anthropomorphized technology, people are more likely to dehumanize people,” said Fotheringham. 

The second is the role of gender representation in the physical and digital worlds.

“Firms are more likely to adopt stereotypical gender for their chatbots, as a “safer” choice,” said Fotheringham.

She noted that digital assistants are typically female (e.g. Alexa by Amazon) and chat- or voice-bots that project expertise are male (e.g. Spotify DJ). 

“Considering the rapid growth and prevalence of chatbots, would such gender representation in the digital world have an impact on gender perceptions in the physical world?”

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