Live Chat refers to the little messenger windows that tend to slide in from the bottom of the screen and are particularly popular on ecommerce websites. They allow the user to chat directly to customer service teams and ask questions about things they may not understand. They are much like a phone helpline but can be turned on and off by the company at will (and when no-one is operating it from the company side they become email message boxes).
They offer a useful insight into the problems that real customers have as users tend to turn to them when they are stuck (although not always, see below). You should be able to spot if things like shipping costs or sign up instructions are not clear and are preventing some users from converting by themselves. Just the fact that they are turning to help rather than completing the task by themselves is a good indicator that something can be improved.
By looking at what users say on live chat you can also get a sense of whether they understand broader things, like what the company actually offers, or if they have found themselves on a site that isn't suitable for them. This can help you identify whether your marketing efforts are working to bring in the right kind of users.
You'll need to get the live chat function set up on your site. Luckily there are lots of third party services, which makes it just a case of putting a snippet of code in the pages that you want the live chat to appear on. If you have a big site you don't need to put it everywhere; focus on landing pages or key conversion pages.
You'll then need someone to staff the live chat from the company's side. If you are a small startup this could be your job but at a company with a customer service team, it should probably be them. It's best if it is someone who knows the product well and is used to answering customer queries so they can promptly respond without having to constantly find out what they should say! It tends not to be as intense as answering help lines as users only ask a question or two and can be quite slow in their responses. In my experience customer service teams can usually handle three or four users at a time.
It's not something you have to commit to for a long time, as live chats can easily be turned off. You might only have it on for a few hours per day or you might want to only gather feedback for a week and then assess it before running another week a few months later. It's a flexible tool.
If you're not the one answering the queries then you should study the transcripts later on. Going through written feedback can be time-consuming but if you dedicate a bit of time every week it shouldn’t be too hard. It’s a good idea to do a first pass to weed out any chats that are irrelevant or don't go anywhere (which can be quite common) and then a second one to categorise the feedback you get.
With this document you can keep track of the most common issues that users have and have a record of which areas of your site are causing the most problems. The transcripts may immediately tell you what is required to make or fix or it could be a starting point to gather more evidence. Not all users will be able to identify why they are having a problem but if you see repeated live chats being triggered on a landing page (for example) it suggests something on there isn't working as well as it could be.
Time wasters. When you give users a window into which they can type anything you can get some odd comments in there from people who have no intention of using your site. Everything from 'what is this site?' to 'what are you wearing?' Hence why it's worth filtering out the chaff...
You can also find lazy users who don't want to work anything out themselves and effectively just ask for someone to find products for them. These might be ones to ignore but if you're getting a lot of them it could tell you that your search isn't intuitive or that it could be worth investing in a phone line.
You should think about how and when your live chat appears to users. Be careful of having it automatically pop up and potentially hassle everyone, which like any pop-up can cause them to immediately close it. It's better to have it there for the user to choose to interact with and maybe only popping it up when someone has spent a long time on a particular page.
There are a whole host of tools offering live chat from the expensive like Bold Chat (from $599/year) which offer video chat and other features. As well as the simpler and more startup-friendly like Olark (from $15/mo) and Zopim (from $11.20/mo) and even tawk.to (from free).
Set up should be a very quick dev task. You should then gather feedback for at least week before spending a few hours sorting through it.
Note: the examples in this guide are for website design, but most of the content is also applicable for native apps and software.