Interactive Voice Response (IVR): What It Is and Benefits & Best Practices

According to a top digital marketing strategist and entrepreneur, Mitch Joel, “In a world of automation, IVR represents the delicate balance between human-like interaction and machine efficiency, enhancing both productivity and customer satisfaction.”

IVR systems, when deployed correctly, highly enhance customer interactions and create positive experiences with the brand. They also boost business status in the market and ensure sustainability.

So, in this article, we will learn more about an IVR system, its advantages, and how one can use it effectively for their benefit. 

What Is IVR? 

Interactive Voice Response (IVR) is an automated telephony system that interacts with callers through pre-recorded prompts and touch-tone keypad inputs. It acts as a virtual receptionist and provides callers with an automated menu navigation. 

Callers can either solve their problems themselves with the support of an IVR or have their calls routed to an appropriate department.

There are many types of IVR. Some are as follows:

1. Basic IVR
2. Speech-enabled IVR
3. Visual IVR
4. Outreach IVR
5. Multilingual IVR
6. Payment IVR
7. Survey IVR
8. Emergency IVR
9. Cloud-based IVR
10.  Hybrid IVR

All kinds of businesses, big or small, use IVR systems to aid customer support and effectively manage communications across all channels.

IVR Menu

An IVR menu is a structured, pre-recorded system that provides callers with a step-by-step guide to navigate the IVR experience. It is also known as an IVR phone tree because it has multiple levels of prompts that direct the caller to the required department and information.

A most common use case of an IVR menu is when a pre-recorded message asks the user to use their phone’s keypad to dial, let’s say, 1 for customer support and 2 for billing. These options on the IVR sub-menus are based on the most common inquiries.

On the basis of the input received, IVR menu routes the callers to a specific department or completes tasks automatically without any human assistance. If the IVR itself cannot meet the caller’s needs, it offers the option to speak with a live agent.

Thus, a simple and well-designed IVR menu can handle communications very efficiently while providing self-service options for the callers.

How Does Interactive Voice Response (IVR) Work?

Here is a step-by-step breakdown of how an IVR works.

1. Call initiation and menu navigation

When a customer calls, the call is picked up by the IVR system. Initially, no live agents are involved.

The system then plays a series of pre-recorded voice prompts to greet the caller and present them with a menu of options. For example: “Press 0 for operator service, Press 1 for administration”.

The caller responds to the prompts using their phone’s keypad (DTMF tones) or speaking on command.

2. Processing input

The IVR system then processes the caller’s input and determines the next steps based on the pre-programmed rules. The next step can be call routing or completing a task.

3. Call routing

Depending on the processed output, the call is routed to either one of the following:

• A live agent
• An appropriate department
• Self-service options

4. Handling issues

Advanced IVR systems enable customers to perform tasks independently, such as making payments, checking balances, etc. If the customer is unable to solve any issue themselves, then the IVR transfers the call to a live agent to avoid customer frustration. 

IVR also tracks customer interactions to provide valuable insights into call volume and customer satisfaction rates.

5. Call termination

Once the caller’s needs are met, the system offers additional options such as “Would you like me to help you with something else?” or it automatically ends the call.

What are the Benefits of an IVR?

An IVR system is mainly used by business owners, decision-makers, and customer service managers to enhance customer communication, reduce costs, and streamline operations.

Some major benefits of IVR are:

1. Highly cost saving

IVR is an extremely cost-effective automation solution for marketers and SMEs looking to implement and manage business communication systems. IVR reduces the need for more live agents and automates basic queries and tasks. Thus, it saves a lot of money on staffing and operations.

2. 24/7 availability

IVR overcomes the unavailability of live agents after business hours by operating 24/7, thus providing information and services to customers worldwide.

3. Enhanced customer experience

IVR automates tasks and responses based on customer inputs. Customers can get their problems addressed by the system itself without having to wait on hold for a live agent. Further, the calls are efficiently routed to the appropriate department or company professionals based on the caller’s input.

Multilingual IVR also offers menu options and prompts in multiple languages, catering to diverse customer bases. Hence, it ensures that customers receive help quickly, leading to more satisfied customers.

4. Scalability and flexibility

As the company grows, IVR can be scaled up or down accordingly without any significant increase in costs. Further, the existing systems can be customized to fit specific business needs, allowing for the menu options to be tailored and aligned with the company’s objectives. 

5. Data collection

IVR systems collect data on all customer interactions. This data can provide valuable insights into areas of improvement, recent business trends, and consumer preferences.

IVR Pricing

The pricing of IVR can vary based on the following factors:

1. Selected providers
2. Included features
3. Volume of calls
4. Complexity of menus

Based on the industry observations, market trends, and available knowledge about the costs associated with implementing IVR systems in larger enterprises, the price seems to be as follows:

Setup fees:

Setting up an IVR infrastructure, configuring it, and training the staff can cost between $100 and $5,000.

Type of model selected:

The monthly subscription model requires users to pay $50 to $1000 per month. These models offer call handling capacity, call support, and access to various IVR software.

A pay-as-you-go model can cost about $0.01$ to $0.10 per minute per call.

Type of business:

IVR is comparatively cheaper for small businesses. However, highly customized IVRs can cost up to $5,000 to $100,000 for large businesses.

Integrated features:

Adding features to existing systems can cost $20 to $200 extra. Features must be added as the business grows, and their functionalities must be tailored accordingly. 

What is IVR’s role in Different Sectors?

IVR is a highly functional and efficient resource for boosting enterprise communications. Thus, it is used across multiple industries. Let’s take a look at some common uses of IVR in popular sectors.

Healthcare

IVR systems can greatly assist in providing basic health care services to patients. Patients can interact with an IVR system to schedule appointments and request prescription refills without speaking to a pharmacy representative.

Patients can also access their lab results as soon as they get notifications, receive appointment reminders, and get basic healthcare information through automated menus. 

Banking and Finance

IVR is a great resource for banking businesses. Users can easily check their account balances, recent transactions, and loan details directly through IVR. A user needs to only enter their personal pin or password and pass the two-factor authentication to access their accounts.

For example: When a user calls a bank, a bank’s IVR might answer with: “Welcome to MNO Bank. Press 1 to check your balance; press 2 to speak with a representative.” If the caller presses 1, the IVR retrieves the account balance from the bank’s system and provides it without involving an agent.

Shipping and logistics

IVR enables customers to track their shipments and deliveries in real-time. Customers can also schedule pickups, present queries, and file complaints.

If there is a delay in shipment dispatch, then customers can be informed through IVR-generated calls.

Education

IVR can be used to monitor a student’s daily performance and inform the parents about a student’s attendance records. Students can also access exam scores via IVR. For example, students check their university acceptance test results.

Students can also receive information and updates about events, holidays, and closures through IVR.

Travel and hospitality

Hospitality industries make IVRs more user-friendly so that they can be more polite to their customers. Travelers can book flights and hotel rooms, rent cars, and receive real-time updates on flight status and room availability.

IVR also keeps track of customer records so that chosen customers can receive loyalty rewards and special offers. 

Government

IVR systems enable government agencies to send out emergency alerts such as weather and safety alerts. Citizens can also fill out basic forms and put in requests for official documents.

Citizens can also receive information on their taxes, social services, and employment opportunities through IVR systems.

Top Challenges with Interactive Voice Response (IVR)

Although IVR can effectively streamline business communications, IT tech teams can still face many challenges during its implementation and operation. Some most commonly faced challenges are:

1. Inability to handle complex queries

IVR systems are usually designed to handle the most common and straightforward queries. So when callers have complex questions or fail to communicate with a proper prompt, the IVR system fails to understand the caller and provide the necessary help. Thus, customers may find it difficult to get help without a live agent.

2. Technical glitches

IVR systems can experience technical difficulties and malfunctions at times. This can cause the calls to be cut and dropped, result in slow response time, and fail to integrate with the backend systems. This greatly impacts the promised service quality.

3. High abandonment rates

If the IVR system proves to be too complex to navigate or fails to meet the caller’s expectations, callers may quickly hang up the call before they receive a response. This leads to increased frustration and a negative brand reputation.

4. Inaccurate call routing

Due to ineffective communication between the caller and the system, calls might be routed to the wrong department or agent, due to which callers have to explain their queries again and again. This lowers overall trust and customer experience.

5. Maintenance and updates

IVR systems must be regularly updated to keep it aligned with the business objectives. Keeping the system updated and maintained can be quite costly and time-consuming.

Outbound Vs. Inbound IVR

The differences between outbound IVR and inbound IVR are as follows:

Designing an effective IVR system

An IVR system must be designed in such a way that it aligns with the business goals, meets user needs, and delivers a satisfying experience for both customers and organizations. 

Here is a list of 5 main things that a developer should focus on while designing an effective IVR system.

1. Easy navigation

The IVR menu must be kept short, straightforward, and easy-to-follow making it easier for the users to navigate the system without any frustration. 

2. Personalization

IVR must be made more inclusive and accessible to customers worldwide by making it more personalized based on user preferences. For example, the system can greet a person by his name.

Multilingual options must be included so that users can express themselves more effectively and efficiently. 

3. Natural language processing (NLP)

Natural language processing and AI must be incorporated into new IVR systems. NLP encourages users to speak their requests in their own accents or languages instead of making them solely rely on sending inputs through their keypads. This makes user interaction more smooth and hassle-free.

4. Self-service options

IVR systems must be able to automate common and simple tasks for the users without the involvement of a live agent. The tasks can include tracking online orders, guiding customers with pre-recorded tutorials, resetting passwords, and checking balances.

5. Error handling and backup

The customer’s calls must be routed to the correct department or professional. In case an IVR can’t solve complex problems, it must automatically direct the call to a live agent.

Final Words

In this age of digitization, technologies like IVR greatly assist businesses in maintaining strong customer engagement. Without IVR, companies will have to hire more live agents to handle calls manually. Also, employees might find the work unproductive due to having to answer the same question again and again. This increases the operational cost for the companies as well as higher employee dissatisfaction. 

Businesses will also miss the golden opportunity to collect large customer data and improve their services, products, and customer satisfaction. Thus, using IVR is highly beneficial for businesses.

FAQs

1. How does the IVR respond to the caller?

IVR responds to the caller by routing their calls to the right department and providing the caller with pre-recorded voice prompts before they get connected to a live agent. Based on the caller’s input, an IVR provides solutions or completes tasks like processing payments or making updates to their services. 

2. What is the difference between AI and IVR?

An Artificial Intelligence (AI) system is capable of learning, adapting, and performing numerous kinds of complex tasks through data analysis and natural language processing. Whereas, an IVR is a rule-based system that interacts with its users using predefined menus and performs only specific tasks without learning or adapting.

3. What are the top 3 disadvantages of IVR?

Although IVR is time-saving and can greatly enhance customer experience, it can still be disadvantageous if not used correctly.

1. IVRs can have menus that are highly complex or poorly designed. This leads to more frustration among the customers and higher dissatisfaction.
2. IVR is an automated system that is capable of providing solutions within seconds. But it still lacks the human essence. Customers may not feel satisfied talking to an IVR when it fails to understand human sentiments.
3. Speech recognition and tone-detection features in IVR systems can misinterpret customer inputs due to background noises, different accents, and unclear pronunciations. This makes interactions more time-consuming and frustrating as the customers have to repeat themselves again and again.

4. Is Siri an IVR?

No, Siri is not an IVR. Although both Siri and IVR use voice interaction, they serve different purposes based on their functionalities. Siri is an AI-driven virtual assistant that is capable of learning and improving over time. Whereas, IVR is pre-programmed and has limited adaptability due to its pre-set rules. 

5. What is the difference between voice assistant and IVR?

Voice assistants such as Siri, Alexa, and Google Assistant differ from IVR in the way that voice assistants use AI and Natural Language Processing (NLP) tools to understand human speech and perform dynamic tasks, whereas, IVRs are highly rule-based and less flexible and are only used for guiding phone interactions through pre-defined menus.