What Is IVR (Interactive Voice Response) & How Does It Work? (2024)

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Updated: Jun 11, 2024, 7:59pm

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IVR is the first thing that customers will encounter when calling a contact center. The IVR will greet the caller with a prerecorded message, then provide them with several menu options. For example, users will be asked to press one or say “Service” to be directed to the service department, press two or say “Sales” if they want to speak with someone in the sales department, and so on.

IVR solutions support multilevel menus, so you can collect additional information before acting. For example, if a caller selects the service department, a sub-menu can ask about which particular product they are calling about. That way, the IVR can transfer the call to a specific team that deals with that product.

IVR is commonly used in conjunction with automatic call distribution (ACD) solutions. ACDs use information collected from the IVR, along with call metadata, to place callers in a queue and prioritize their call before routing the caller to the next available agent who is best suited to help the customer as quickly as possible. Together, these tools can slash wait times and increase how many calls your agents can take each day.

Traditionally, IVR served as a primitive ACD. It would present callers with options, and route the call based on their input. Nowadays, IVR is being used to do a lot more, from handling inquiries and providing access to account information to taking surveys and accepting payment information.

Self-Service

A lot of the time, customers call contact centers to get the answer to simple questions. “Where is my package? What’s the balance in my account? When are you open?” IVR enables businesses to answer these simple questions without any human intervention, enabling agents at busy call centers to focus on bigger problems that require the human touch.

The self-service capabilities of IVR aren’t limited to answering a question; IVR can also be used to let callers take actions that traditionally required help from another human. For example, IVR can be used to change a PIN code, activate an account or accept orders from customers.

Payments

Reading payment information over the phone is frustrating, especially when some of that information gets lost in translation. According to a report from Zendesk, customers dislike repeating themselves. Over 40% said that having to repeat themselves was the most frustrating aspect of bad customer service, the third most popular response.

IVR payment capabilities remove this frustrating task of reading payment information to an agent, who then enters that information into the payment system. Instead, the IVR links up with a payment gateway, and the caller enters the payment information. This eliminates the need for customers to repeat themselves, and decreases the odds that information will be entered incorrectly.

Contact centers and businesses that experience high call volumes would benefit from an IVR the most. In fact, they probably wouldn’t function without an IVR—especially during peak calling hours. Ultimately, IVR is great for any business that wants to reduce wait times, expedite service and offload tasks onto the IVR so agents can focus on the problems that require some human intervention.

Call volumes are having less and less to do with whether or not you should have an IVR or not. According to a report from Zendesk, 68% of customers are annoyed when they are transferred between departments. The report also found that over half of all respondents said they’d switch to a competitor after one bad experience. IVR directs calls to the right person the first time, so agents don’t have to transfer calls multiple times and slow your churn rate.

In the old days, IVR was a very complicated piece of technology to deal with. You’d have to purchase additional IT infrastructure to support the IVR, along with a highly paid IT professional to manage it all. This demands scaling the solution as your business grows, too, because more users require more equipment, which costs more money and takes more time to set up.

These days, things are a bit simpler. Cloud phone systems don’t require any additional infrastructure, so you don’t need to invest in additional infrastructure or head count to deploy and manage it. These solutions are also much easier to scale (up or down), as you don’t need to deploy more equipment—you simply purchase more licenses and set up those users’ accounts.

Setting up modern IVR is as easy as purchasing the requisite licenses, and configuring its behavior. You don’t need to know anything about coding or development to configure your IVR. Most VoIP providers—such as Nextiva and RingCentral—enable users to configure IVR menus and logic in a GUI environment or fill in forms.

But if that’s too much work for you, then you’re in luck. There are even more hands-off approaches to leveraging IVR—managed service providers (MSPs). Many MSPs that offer VoIP as a service will host, set up and maintain the solution—including your IVR—so that you can focus on running your business.