Everything you need to know about IVR

“Press 1 for sales, press 2 for…” Although these automated phone menus feel like they’ve been around forever, it was only in the 1980s that a drop in cost made Interactive Voice Response (IVR) more mainstream in call centres. Since then, they have evolved significantly, but despite the efficiency they provide, they can also lead to customer frustration.

This article will explore the ins and outs of IVR technology, offering tips and tricks to help you understand and optimise their use.  

What is IVR?

Interactive Voice Response (IVR) is an automated telephony system that interacts with callers and in doing so can fulfil several functions in a call centre.  

As the name implies, IVR involves three key components: 

1. Interaction: Callers choose from menu options or provide responses to specific questions or prompts verbally or using their telephone keypad. 

2. Voice: The system provides vocal prompts or instructions that the caller hears over the phone. 

3. Response: As the caller responds to prompts the IVR system reacts by providing the next level of the menu, a new instruction or routing the call to an agent. 

Key uses of contact centre IVR

As an IVR can both provide and collect information, as well as guide customers through simple step-by-step processes it has a variety of uses: 

1. Call routing with automated call distribution (ACD): The most common use of IVR is as part of an ACD system, which automatically routes incoming calls to the most suitable agent or department based on predefined criteria, such as agent availability or caller priority.    

2. Advanced call routing: IVR can also be integrated into more complex routing strategies, such as skill-based, time-based, or geographic routing, ensuring that callers are directed to the best resource for their needs. 

3. Automated information lines: IVR systems can provide self-service for simple queries like “What’s my account balance?” or “Where’s my package?” without needing an agent. 

4. Automated payments: Customers can securely complete payments by following IVR prompts, providing a self-service option for transactions. 

5. Deflecting calls to other channels: IVRs can be used to offer customers alternative channels for interaction for example by sending links via a messaging channel.   

6. Scheduling call backs: Rather than waiting in a queue callers can use an IVR to request a live agent call to a more convenient time.  

These applications streamline operations, enabling businesses to handle higher call volumes and provide more efficient service through automation and self-service touchpoints. 

How does IVR work?

When a caller dials a service number, they are immediately connected to the IVR system. IVR systems have a much larger capacity to handle calls than traditional methods, reducing the need for customers to be placed on hold straight away. This capacity is determined by the system’s infrastructure, such as the number of available phone lines, servers, and processing capabilities. 

Once connected, the caller is presented with a pre-recorded menu or set of instructions, to which they can respond in several ways: 

• Selecting an option: For example, “Press 1 for sales.” 

• Entering information: Callers can use their phone’s keypad to input data (e.g., account numbers) through DTMF (Dual-tone multi-frequency) tones, which the system interprets.  

• Providing a verbal response: Spoken answers are analysed using Natural Language Understanding, AI or speech recognition technology. 

Through these interactions, callers can complete tasks such as making a payment, receiving important information, or being connected to the appropriate agent. If agent assistance is required, the caller may then be placed on hold, depending on availability. 

IVR components and infrastructure

To operate effectively, an IVR system relies on several key components: 

• Telephony system: The backbone that enables call connectivity, whether it’s a traditional system (PSTN) or a cloud-based telephony solution. 

• TCP/IP networks: These ensure fast, reliable data transmission between the IVR system and other integrated platforms, such as databases or external systems. 

• IVR technology: Can be deployed on-site or in the cloud. It may operate as a stand-alone system or be integrated into a larger interaction management platform, like a Contact Centre as a Service (CCaaS) solution. 

• Web/Application servers: These servers manage the backend operations of the IVR, supporting tasks like handling customer inputs, generating dynamic voice responses, and interacting with databases. 

• Support infrastructure: Systems like databases, CRMs, or CCaaS platforms provide essential data storage and access, enabling the IVR to retrieve or update customer information during interactions. 

Types of IVR system

IVR systems can be classified based on how they receive and process caller inputs or the specific function they serve: 

• Touch-tone or DTMF IVR: Callers use their phone’s keypad to input numbers, with the system interpreting these inputs via DTMF technology. 

• Speech recognition IVR: Callers respond verbally, and the system uses speech recognition software to interpret and process their responses. 

• Natural language IVR: A more advanced form of speech recognition, this system understands natural, conversational speech, allowing users to communicate without fixed phrases. 

• Visual IVR: Provides a visual interface (usually on smartphones) that works alongside or replaces voice prompts, allowing users to navigate menus visually. 

• Self-service IVR: Enables callers to complete tasks such as checking account balances or making appointments without speaking to an agent. 

• Conversational IVR: Uses AI-powered technology to engage in dynamic, free-flowing conversations with callers, making the experience feel more natural and human-like. 

Payment IVR: Allows secure payment processing over the phone by guiding customers through the transaction via prompts or keypad inputs.

Benefits of IVR

Improved customer experience: IVR systems allow callers to resolve their queries quickly, without waiting for a human agent, thus reducing wait times and frustration, helping to optimise customer experiences. 

2. Lower operational costs: By automating routine inquiries, businesses can achieve significant operational cost reductions. 

3. Error reduction: Automation reduces the likelihood of human errors in payment processes or standard technical answers to basic queries. 

4. Data collection: IVR systems gather valuable data on customer preferences and behaviours, which can be used to refine services. 

Increased security: IVR systems can authenticate users through data inputs like account numbers, caller IDs, and voice prints, enhancing security.

Challenges and limitations of IVR

Despite its advantages, IVR systems face several challenges that can impact the customer experience and contribute to high levels of call abandonment of some IVR systems. 

User experience challenges

CCaaS (Contact Centre as a Service) solutions offer a host of features and advantages tailored to contact centre operations: 

• Overly complex menus: Long or disorganised menus make it hard for customers to navigate, leading to frustration and abandonment. 
• Impersonal communication: IVR lacks the personal touch of a human agent, which can feel impersonal, especially in sensitive situations. 
• No clear path to a live agent: When customers cannot easily reach a human agent, they may feel trapped in the system, worsening frustration. 
• No callback option: Without an option to request a callback or see estimated wait times, customers are left waiting on hold indefinitely. 
• Lack of personalisation: Generic prompts and a one-size-fits-all approach fail to create a tailored experience, leaving customers feeling disconnected. 
• Out-of-hours incompatibilities: Some IVRs stop functioning after business hours, leaving customers unable to access even basic automated services, while others offer irrelevant menu options leading to dead ends when agents are unavailable. 
• Poor queue management: Without estimated wait times, customers are more likely to become frustrated, especially when subjected to irrelevant promotional messages while on hold.  

System design & performance challenges

• Poor voice recognition quality: Low-quality voice recognition can lead to misunderstandings, forcing customers to repeat themselves or press keys multiple times. 
• Ineffective call routing: Incorrect routing based on poorly designed logic can send customers to the wrong department, increasing the time to resolution. 
• Too many menu options: Presenting too many choices overwhelms users, making it hard for them to find the right option quickly. 
• Limited self-service options: When IVR systems offer too few self-service capabilities, customers are forced to speak to an agent even for simple tasks. 
• Poorly incorporated promotions: Unnecessary promotional messages or irrelevant information frustrate callers and increase wait times unnecessarily. 
• Lack of maintenance: Outdated or poorly maintained IVR systems lead to technical issues, such as broken menus, poor audio quality, or incorrect information. 

Best practices for IVR systems

A well-designed IVR system can go beyond just efficiency to enhance the overall customer experience and strengthen your brand identity. 

1. Create a welcoming experience: A friendly voice vs. Automated deflection 

All too often the primary goal of an IVR is call deflection and an automated voice immediately prompts users to go elsewhere: website, mobile app etc. With a short agent-like greeting recorded in a voice and tone that aligns with brand or institutional identity, customers can be reassured that they’ve reached a helpful and professional environment. 

2. Information architecture: Simplified menus and clear structure 

Great IVR systems begin with thoughtful information architecture. Understanding the primary reasons customers contact your business is crucial. The most frequently accessed options should be placed at the beginning of the menu to avoid overwhelming users. Simplified, intuitive menus ensure customers can easily navigate to the right department or service. 

3. Well-scripted IVRs: Maximise clarity, minimise jargon 

Well-designed IVR systems focus on clear, concise scripts. Just as an online user interface requires careful design, IVR scripts should be brief, avoiding unnecessary jargon or overly complex instructions.  

4. Optimised call routing: Data-driven decisions 

To maximise efficiency and customer satisfaction, call routing should be based on relevant customer data. Calls should be directed to the most appropriate agent or department based on the customer’s needs, the agent’s skills, and their availability. This ensures faster resolution and improves the first-contact resolution (FCR) rate. 

5. Ongoing optimisation and continuous improvement 

An IVR system is not a “set it and forget it” tool. Continuous monitoring and evaluation of performance metrics are essential to ensure your system remains efficient and effective. Regularly review menu structures, call routing logic, and customer feedback to identify opportunities for improvement. Adjust prompts and settings as needed to keep the system responsive to changing business and customer needs.   

Discover our solutions

Steps to implement an IVR system

Choose the right platform: Select an IVR platform that aligns with your business needs, ensuring it can handle anticipated call volumes, support your preferred call routing strategies, and integrate with existing systems (e.g., CRM, contact centre software). 

• Integrate with existing systems: Ensure the IVR system connects seamlessly with your CRM, call centre, and other operational systems, enabling efficient data sharing and context-aware interactions for customers. 
• Research contact drivers, FAQs, and Repetitive Tasks: Analyse the primary reasons customers contact your business to identify areas where a callbot could efficiently handle routine questions or repetitive tasks. Callbots can be particularly effective for providing automated responses to FAQs or completing standard processes without involving a live agent. This ensures that your IVR solution maximises functionality by offering the most relevant self-service options and saving valuable time for both agents and customers. 
• Configure and customise menus: Tailor the IVR menus to your business needs. Keep the options clear and concise to avoid overwhelming users, and ensure the most frequently accessed information is prioritised in the menu. 

Odigo CX Studio

Recognising the critical role of IVR in both customer experience and operational performance, Odigo developed CX Studio—an intuitive IVR scenario builder that simplifies configuration, administration, and optimisation. With CX Studio, contact centres gain visibility, control, and flexibility, allowing them to continuously adapt their IVR to evolving business needs and customer expectations. 

IVR Industry use cases

IVR systems, including callbots, are widely used across industries to route calls and streamline common processes, reducing agent workload and enhancing customer experiences. Below are some examples of how different sectors can leverage IVR technology: 

Public Sector 

Government institutions often deal with complex, multi-step processes. IVR can be used to provide status updates on applications, relay important deadlines (e.g., tax filings), and offer information on commonly used forms, reducing the need for in-person or agent-led interactions. 

Banking and Finance 

IVR systems enable banks to offer 24/7 self-service options, allowing customers to check account balances, transfer funds, and receive payment alerts without needing to speak to an agent, increasing efficiency and customer satisfaction. 

Healthcare 

Hospitals and clinics use IVR to send appointment reminders, facilitate prescription refills, and enable patients to access medical records. These systems improve service efficiency, reduce appointment no-shows, and enhance patient satisfaction. 

Retail and E-commerce 

IVR systems assist retail and e-commerce businesses by helping customers track orders, process returns, and access product details. This reduces the burden on customer service teams and provides timely assistance to customers. 

Hospitality and Travel 

IVR in the hospitality and travel industries can handle reservations, provide real-time information on bookings and flight statuses, and manage cancellations or reschedules without requiring agent intervention, improving customer convenience. 

Utilities 

Utilities can use IVR systems to handle bill payments, report outages, and provide information on usage. This reduces call volume for live agents while enabling customers to manage their accounts at any time. 

How is IVR evolving?

IVR technology continues to evolve to meet growing customer expectations and adapt to new technological advancements. 

Visual IVR is one of the latest innovations, allowing customers to interact with a visual interface on their smartphones instead of just voice prompts. This creates a more user-friendly experience, letting customers navigate menus, input information, or complete tasks like payments with ease, all while reducing miscommunication that can occur in voice-only interactions. 

Advanced IVR systems also offer personalised experiences, adjusting menus or prioritising calls based on customer profiles. For example, premium customers or those with specific needs (like vulnerable individuals) can be automatically routed to dedicated service teams or offered priority options to ensure their experience is smooth and responsive. 

In addition, advanced IVR systems now include callbots—automated agents that handle routine inquiries, guide customers through simple processes, and even use conversational AI to interact naturally with callers. Callbots help businesses deliver faster service for straightforward requests, while freeing up human agents to handle more complex cases. This advanced use of automation also allows for personalised interactions by identifying customer profiles and routing calls based on specific needs. 

Conclusion

An effective IVR system can significantly enhance customer service by offering self-service options, improving call routing, and reducing operational costs. By understanding the system’s benefits, limitations, and best practices, businesses can implement an IVR solution that meets both customer and operational needs while ensuring scalability and adaptability. 

Odigo’s CCaaS solution integrates IVR within its broader customer engagement platform, offering businesses the flexibility to implement tailored, efficient IVR systems that enhance the overall customer experience. With Odigo, companies can leverage IVR to not only manage high call volumes but also provide personalised, seamless interactions that build long-term customer loyalty.