Interactive voice response (IVR): Everything you need to know

If you’ve ever contacted a brand’s contact center, you’ve probably interacted with an IVR system. These systems typically greet customers with pre-recorded messages like, “Thank you for calling. Please tell me in a few words why you’re calling today.”

When IVR systems were first introduced, they promised to reduce high call volumes and long wait times and improve overall call center efficiency. However, many systems have introduced more hurdles, such as confusing navigation, complicated menus, limited options, and frequent misunderstandings that only frustrate customers and call center agents.

As contact centers continue to face staff shortages and overworked customer support teams, there is growing pressure to improve IVR systems. So, what exactly is IVR, and how has it evolved to meet these demands?

What is IVR?

An interactive voice response system is an automated phone system that interacts with callers using pre-recorded voice messages and touch-tone keypad inputs or voice responses. It helps direct calls using menu options, provide information, or complete transactions without needing a live person on the line.

How IVR works

IVRs were a breakthrough technology in the 70s and 80s. The system allowed callers to use Dual-Tone Multi-Frequency (DTMF) or “Touch Tone” (e.g., press 1 for this, press 2 for that) IVR menus to respond to prompts spoken by the IVR.

By the 90s, IVR began to support limited speech recognition and natural language processing (NLP), allowing callers to use spoken keywords instead of touch-tone to respond to IVR prompts.

By the early 2000s, improving automatic speech recognition (ASR) and natural language understanding (NLU) led to a wave of keyword-driven IVR systems to move the caller interface further way from touch-tone towards more language-driven interactions that empowered customers to self-serve.

These modern IVR systems took advantage of several technologies, such as the increased power and standardization of speech and voice systems. They could also deploy an integrated system into existing contact center software to manage incoming calls. Callback options have also become an essential feature, allowing customers to request a return call at their convenience, reducing frustration during peak call volumes.

How IVR is commonly used

IVR systems are widely used in customer service to improve the efficiency of customer interactions and streamline processes. Here are some come IVR use cases:

• Automate high-volume, routine queries
• Check account balances
• Provide 24/7 support outside of business hours
• Route callers to specific customer service teams
• Outbound notifications and reminders
• Basic identification and verification

Why IVR systems are popular

The repetitive nature of an agent’s role, combined with a lack of development, high pressure, low pay, and unpleasant calls, are just some of the reasons the employee turnover rate in contact centers remains 30-45% above the average of other occupations.

While many IVR solutions are built on legacy technology, they continue to offer important ways to reduce the burden on agents. Here are some key benefits of IVR systems:

Saves on costs

When IVR technology emerged in the 1970s, it was revolutionary because it automated simple, routine tasks, reducing the need for live agents to handle basic calls. This led to lower costs per call, since fewer agents were needed.

Today, IVRs still help businesses handle high call volumes, serving more customers without increasing staff. However, customer issues can be complex and lead to unpredictable phrasing, which can be challenging for these technologies to interpret accurately because they rely on older ASR and NLU technologies.

As brands try to accommodate more complex queries through self-service channels, the restrictive nature of these systems may not be the best fit for the future as customer expectations continue to change.

Improves customer experience

IVR systems allow customers to access information and services 24/7, reducing hold times, offering convenience, and improving customer satisfaction. They’re also designed to help customers resolve issues faster by navigating to the correct department or finding information quickly without waiting on hold.

However, this experience doesn’t always meet expectations, and many customers will be familiar with the scripted response, “I’m sorry, I didn’t catch that. Please say that again.”

Customers use non-technical language, may need to describe their issue in detail or have accents that the IVR doesn’t understand. This can lead to routing mistakes and disrupted call flows, leading to further frustration.

Boosts efficiency

By routing calls to the right agent from the start, IVR systems can improve First Contact Resolution and reduce unnecessary transfers. Advanced call routing also helps optimize workflow by matching calls with the best available agents, improving efficiency, and reducing wait times.

Provides data insights and analytics

IVR systems collect customer data on caller behavior and interaction trends, which can help improve service strategies. They also track key performance metrics, like call volume and resolution rates, to identify high-volume calls where customer service teams need more support. These insights can help brands to refine and enhance customer service.

Where traditional IVR systems fall short

Cognitive Load Theory tells us that our working memory can only handle so much at once. When we’re faced with too much information or complicated tasks, it becomes harder to learn, make decisions, or solve problems.

Cognitive load comes in three forms:

• Intrinsic (the difficulty of the task itself);
• Extraneous (distractions or unnecessary information);
• Germane (useful info that aids learning).

If IVR software is overly complex, with too many options or confusing menus, it can overwhelm callers. Customers feel frustrated or lost when they can’t easily navigate the system or remember what to do next. This mental strain makes getting help harder and creates a negative experience as it fails to meet customer needs.

An ideal IVR system should be simple and user-friendly to make the process smoother and improve customer satisfaction.

Potential negative impact on customer service

IVR systems can irritate customers by forcing them to deal with complicated menus that don’t always address their needs. The lack of personal interaction compared to speaking with a human agent can be off-putting, leaving callers dissatisfied. In some cases, customers might even give up before they complete their call, resulting in increased abandonment rate, missed opportunities, and lower satisfaction levels.

Limited functionality, which turns into a bottleneck

Customers aren’t always sure where their inquiry fits, and IVRs are infamous for responses such as, “Please listen to the options and choose the one that best matches your reason for calling.” This approach only forces customers to dive deeper and deeper into the menu, where they often get lost, hang up, and start again, or abandon the call completely.

Error-prone technology

Many companies have turned to speech recognition to allow callers to speak their inquiries instead of pressing a certain key. But many of these conversational IVRs cause the same problems they aim to solve. Requiring a caller to say a specific keyword or phrase again assumes that they think in your language, leaving customers asking which keyword is the right keyword.

When a robotic IVR greets customers with, “Which option can I help you with?” it immediately gives callers the impression that you have limited capacity to understand them, making them feel like they have to resort back to using keywords to get an answer.

Potentially leads to business loss

Letting customers describe their problems and reacting appropriately is critical to building trust. Customers who trust the system are more likely to engage further. Since IVR systems are generally limited to handling basic tasks and straightforward information, they often struggle with more complex requests that require empathy and understanding.

A poorly designed IVR experience can drive customers away, highlighting how important thoughtful design and implementation are to customer satisfaction and retention.

Is IVR still the best option for a great customer experience?

IVRs have helped customers handle simple requests, but they often fall short when issues become complex. Instead of making things easier, IVRs can create more hurdles due to long menus, repeated requests, and frustrating transfers. This can lead to wasted time, unhappy customers, and higher business costs.

The repercussions of the “doom loop”

One major issue with traditional IVRs is the “doom loop.” This happens when customers get trapped in an endless cycle of unhelpful prompts and rigid options that don’t address their needs. It leaves customers feeling annoyed and dissatisfied and makes them more likely to give up or escalate their issues to a live agent. This not only increases wait times and costs but also damages customer loyalty.

“Time is Money” Initiative

The need to improve customer service has even caught the attention of the U.S. government. The “Time is Money” initiative focuses on making sure businesses respect customers’ time and deliver faster, more effective service. This initiative makes it clear that outdated systems like IVRs can’t continue to fall short of meeting modern customer expectations for speed, accuracy, and personalized care.

A truly customer-led experience must empower callers to drive conversations how they want and efficiently resolve their issues. Creating these conversations requires unique technology using voice recognition, machine learning, and text-to-speech developed explicitly for spoken interactions.

Why conversational AI leads to better customer experiences

Conversational AI has revolutionized how customers engage with brands. The introduction of AI-driven voice assistants lets customers interact naturally, just like they would with a human agent. Using a variety of tech components, including ASR, NLU, dialogue management, and speech synthesis, conversational AI can listen to customers, understand the context of their requests, and respond effectively to handle a variety of inputs, including voice and text.

Advances in conversational AI now enable multi-turn conversations, accurate recording of names and account numbers, and the freedom for users to speak openly, which has opened new possibilities for automating tasks, improving self-service options, and boosting efficiency across your organization.

Make every call count with PolyAI

Implementing conversational AI in your contact center is an essential step to staying competitive and delivering effortless customer experience at scale.

PolyAI offers the world’s most lifelike voice assistants for enterprise customer service and delivers high-quality, human-like conversations optimized for customer engagement at scale. We help enterprises be the best versions of themselves in every customer call by consistently delivering the best brand experience, achieving accurate resolution, and uncovering data-driven business opportunities.

With advantages spanning operational efficiency, proactive issue resolution, and revenue generation, the implementation of this technology is a crucial step toward optimizing contact center performance.

Join our monthly live demo to find out more about how PolyAI can help you answer every call immediately, improve loyalty, resolve over 50% of calls, and deliver effortless CX at scale.

Expect to learn more about:

• The ROI of voice AI
• The best way to design voice experiences for customer engagement
• How other companies have successfully deployed voice AI
• How to begin your voice AI journey

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