What’s better for your business—IVR or conversational AI?

IVR systems have been a reliable tool for customer support for years, helping businesses manage calls efficiently. While they still have their uses, they’re no longer the most advanced option available.

Today’s customers are more tech-savvy, expect faster and more personalized service, and often try to avoid navigating through IVR menus whenever they can. That’s why many businesses are turning to conversational AI, a more modern solution that meets these expectations.

Understanding the key differences between IVR and conversational AI can help businesses make the right choice to stay competitive and deliver exceptional customer experiences.

What is interactive voice response?

IVR automation involves using automated systems in call centers to handle both inbound and outbound calls. These systems address various caller needs by delivering pre-recorded messages or using text-to-speech technology, allowing users to engage through voice commands or keypad selections.

What is conversational AI?

Conversational AI encompasses a range of technologies that use artificial intelligence to enable communication between machines and humans.

At its core, it functions by interpreting the meaning of written or spoken input and responding naturally to maintain the flow of conversation. Recent advancements in conversational AI have enabled machines to engage in conversations that are both intelligent and lifelike.

Solutions like chatbots and AI-powered voice assistants are designed to interact with users through natural language. They encourage open-ended responses and let customers explain their needs in their own words, whether with short, simple phrases or long, detailed explanations.

IVR vs conversational AI: Which way should you go?

IVR systems have been useful for handling common contact center use cases like call routing, simple inquiries, and customer authentication. However, they often provide a restrictive experience through rigid menus. This outdated experience no longer meets the expectations of today’s customers, who demand intuitive self-service options.

As customers look for faster, easier, and more personalized interactions, businesses are reconsidering whether IVRs are still the best option. If you’re in two minds about whether IVR or conversational AI is right for your business, we’ll answer your questions about each technology below.

Does it have structured menus or real conversations?

IVRs are built around structured, menu-driven interactions. You’ve likely encountered the familiar touch-tone prompts: “Press 1 for sales, press 2 for support” or even keyword-driven options where you can say something like “billing” to direct your call. These systems rely on predefined choices that can feel rigid and limit how customers express their needs.

Conversational AI, on the other hand, transforms this experience by removing the constraints of menus altogether. With natural language capabilities, solutions like voice assistants open the dialogue with questions like “Hi, how can I help?” This approach encourages free-flowing, intuitive conversations where customers can explain their needs in their own words—creating a more engaging and efficient interaction.

Can it handle full sentences or just basic commands?

IVRs typically use basic speech recognition, which means they’re limited to handling simple commands like “yes” or “billing.” While functional, this approach often falls short when customers need to explain their issues in more detail. If a customer’s response doesn’t fit the preset options, they risk being misrouted, which can lead to longer resolution times, higher average handle times, and increased frustration.

Conversational AI, on the other hand, uses advanced natural language processing (NLP) to understand full sentences and even context. Customers aren’t confined to single-word answers or rigid scripts like:

• What is your name?
• What time would you like to book?
• How many people are you booking for?

Instead, they can say something like, “Hi, I’d like to book a table for two tonight,” and the system will capture the relevant details. If additional information is needed, the voice assistant can ask clarifying questions, making the interaction feel more fluid.

Does it offer canned replies or dynamic responses?

IVRs that follow rigid, preset paths often struggle when customers ask unexpected questions or go off-script. This leads to frustration, as callers are forced to stay within the narrow options provided, often prompting them to escalate to a customer service representative.

In natural conversations, people don’t always follow a straight line. They add details, ask questions, or shift the topic unexpectedly. For example, when making a table reservation, a caller might interrupt the conversation to ask whether the restaurant is family-friendly, if there’s seating in the garden, or if they have disabled access.

Conversational AI, however, is designed to handle these shifts. It enables multi-turn conversations, allowing customers to ask follow-up questions, make interruptions, or change their minds mid-interaction. This flexibility creates a smoother, more engaging experience, allowing businesses to better meet customer needs without causing frustration.

How does it feel for the customer?

Anyone who has used an IVR system knows how frustrating it can be to repeat information, like your account number or date of birth, only to be met with, “Sorry, I didn’t quite get that. Could you please repeat?” IVRs often feel impersonal, and when issues get more complicated, the process can become frustrating.

Conversational AI creates a more engaging experience. Solutions like voice assistants allow customers to speak freely, have more natural, back-and-forth conversations, and understand long or complex queries. Voice assistants powered by conversational AI are also designed to sound more human, making the interaction feel less robotic.

Unlike IVRs, which struggle when queries get more complex, Conversational AI adapts to the customer’s needs, guiding them smoothly through their issues with a more intuitive, customer-led experience.

Is it static or self-improving?

IVR systems are generally static, meaning they require manual updates whenever there’s a need to change or add options. If a business introduces a new service or adjusts its processes, an IVR will need to be reprogrammed to reflect those changes.

Conversational AI, however, is designed to learn and improve over time. Using machine learning, it adapts based on interactions with customers, becoming smarter and more responsive with each conversation. This ability to self-improve allows conversational AI to better handle diverse customer queries and deliver more accurate, personalized responses without constant manual updates.

Which is more efficient?

Because IVRs often rely on basic speech recognition, the chances of misunderstanding customers increase. Misunderstandings can lead to misrouted calls, longer wait times, and agents spending additional time figuring out the customer’s issue and which department should handle it.

Conversational AI improves efficiency by handling a broader range of queries faster. It understands full sentences and context, allowing customers to explain their issues more naturally.

For more complex issues, conversational AI can ask clarifying questions. By providing helpful, contextual responses, conversational AI builds trust with customers, encouraging them to engage with the system rather than insist on speaking to an agent.

If a customer would prefer to speak to an agent, a voice assistant can gather relevant information, which can be handed to an agent and reduce the need for customers to explain their issue again when they are transferred. This speeds up the resolution process and increases the overall efficiency of your contact center.

What’s the cost and value over time?

IVRs have a reputation for frustrating customers, often pushing them to bypass the pre-set menu options in favor of speaking with a live agent. This leads to agents spending more time handling low-value calls—like password resets, order tracking, or simple FAQs—that could be resolved through more cost-effective channels.

Given that phone support is the most expensive channel, with a 3–4 minute call costing $2.70 to $5.60, it’s crucial to maximize the value of every customer interaction. That’s why it’s so important to ensure every call delivers real value. By allowing customers to explain their issues naturally and respond appropriately, conversational AI builds trust, encourages engagement, and optimizes resource allocation.

Automating routine tasks like password resets or identity verification using conversational AI can reduce key metrics like average handle times (AHTs) by 20–30%, freeing agents to focus on more complex, high-value customer calls. This not only enhances operational efficiency but also adds capacity without increasing costs.

Can it be personalized for each customer?

Today, 71% of consumers expect personalized interactions, and 76% feel frustrated when those expectations aren’t met. The unmistakably robotic voice of IVRs can feel impersonal to customers. Callers who are upset or have complex queries expect a more empathetic and personable experience. Being blocked by an IVR often only increases their frustration.

Conversational AI can use customer data—like past interactions and preferences—to provide responses that fit the situation. For example, it can recognize patterns, such as a customer frequently asking about a specific service, and respond accordingly.

By letting customers ask open-ended questions, conversational AI also captures valuable insights from customer interactions at a scale that wasn’t possible before — helping businesses improve their service, better understand their customers, and improve customer satisfaction.

Why conversational AI is better for business

Conversational AI is transforming customer service by providing faster, smarter, and more flexible solutions. Here’s why it’s a better choice for modern businesses:

1. Always available, anytime

Conversational AI answers calls 24/7, ensuring customers get help whenever they need it. Unlike call centers that require costly staffing for round-the-clock service, voice assistants handle calls at any hour without extra expense. Whether resolving issues or passing details to agents, they keep things running smoothly even outside of business hours.

2. Frees up your team

By taking care of routine and repetitive calls, conversational AI gives staff more time to focus on complex or high-priority tasks. This means agents can spend their energy on what matters most—delivering real value to customers.

3. Scales without extra costs

Voice assistants can handle thousands of calls at once, making them perfect for busy periods. During slower times, they sit idle without adding to your costs. This eliminates the need to overstaff for unpredictable peaks while ensuring no customer is left waiting.

4. Consistent and personal interactions

Conversational AI provides the same high level of service for every call. It remembers details shared earlier, personalizes responses for repeat customers, and ensures a seamless experience. When an issue requires an agent, it hands over the conversation with all the context, so customers don’t have to repeat themselves.

5. Spot issues early

Voice assistants don’t just answer calls—they help you identify problems quickly. By analyzing real-time data, they can highlight trends, like a sudden spike in calls about a product or issue. This allows you to address problems before they escalate, improving both service and operations.

6. Valuable insights from every call

Conversational AI automatically collects data from every call, such as common customer questions or issues. This data helps managers improve training, refine processes, and make customer service more effective. Unlike human agents, voice assistants ensure no detail is missed, even during busy times.

Speak to our team today about how PolyAI can help you deploy a customer-led voice assistant that transforms your contact center and delivers effortless customer experience at scale.