From today within a click you can change your friends contact name and that should be from your Chat Box. When you click on some of your friends name and automatically name edit field will be open and you can make a desired name of your and hit enter to save it. After that your contact list also updated automatically. Currently, the Gmail’s new version supporting this edit features
Just an example, your friends email address is hikingfan[at]gmail.com and some people using directly their email address without using their own name or using a tough name. But, its tough to remember all of your friends email address or tough words. But, if you search your friends name with your desired selected name it’s easy to get and easy to chat instantly.