What Is an IVR and Why Does Your Business Need It?

Armen Karaoghlanian
14 minute read
Armen Karaoghlanian
14 minute read

Interactive Voice Response, or IVR for short, traces its origin back to 1930. In the past, IVRs were incredibly frustrating and weren’t designed around customer experience. Luckily, times have changed, and so has the role of IVR marketing technology. 

More on that later, but first, it’s essential to know what an IVR is, how it works, and the major benefits of using one.

What Is an IVR? 

IVR is believed to be one of the most valuable tools for large enterprises, mid-sized firms, and small businesses operating in customer-facing industries that rely heavily on calls. 

While the technology is well-known for reducing the burden on employees, decreasing expenses, and mitigating long wait times, opinions vary on its long-term effect and importance. 

So what is an IVR, and why is it important?


An IVR is a menu system that you can interact with via keypad selections or voice responses. If you have ever called a business and navigated a short menu that asked you for information to direct your call correctly, you have had firsthand experience with an IVR.

The technology allows callers to access information via an IVR voice response system of pre-recorded messages without speaking to an agent. Callers can also utilize menu options via touch-tone keypad selection or IVR speech recognition to route their call to specific departments or call agents.

What Is an IVR Number?

An IVR number is an integrated and fully operational contact phone with an IVR menu system. You can set one up in a cloud system to perform automatic call routing, and it can be used together with standard IVR features, including self-service options, custom messages and notifications, caller ID, and more.

How IVR Works

Interactive Voice Response allows callers to interact with automated voice messages before they are connected to a human operator. This technology works hand in hand with DTMF tones, i.e., telephone touch tones. 

Some IVR technologies can recognize caller voices and have built-in artificial intelligence that allows them to provide appropriate answers to a given response. 

IVR speech recognition is also compatible with DTMF tones and makes it possible for callers to communicate using their native language when responding to a prompt. On top of that, phone trees integrated with an IVR system enable call centers to attend to more calls.

Artificial intelligence for call IVR has started making its way to contact centers, eliminating the need for callers to juggle long menus. With AI in the picture, it has become possible for IVR to direct callers to the section of the calling center that they need information from and even directly to live agents that are available at the time.

IVR setups can be modified and customized depending on the brand’s needs. Here is an example of a simple single-level setup where the system presents three options to callers. 

What Is an IVR and Why Does Your Business Need It? - 1

Source: Zoom

There’s no denying that businesses looking to manage many callers can no longer entirely rely on receptionists or even call centers. 

Implementing the appropriate marketing automation solutions is the only way to personalize conversations, capture all the essential call data, elevate customer experience, and fine-tune sales funnels. Therefore, they look for comprehensive solutions that include interactive voice response software. 

Phonexa offers IVR software as part of Call Logic — its call tracking, distribution, and intelligence platform — making every caller happier and more likely to convert. Here’s what Phonexa’s interactive voice response tool enables companies to do:

  • Improve customer service: Businesses can rest assured that every caller will be connected to the IVR immediately, offering only helpful information while improving the overall call experience.
  • Enhance call capacity: Phonexa’s IVR system can shorten the length of every conversation, making it possible to handle more calls and convert more prospective clients.
  • Create a credible brand image: Businesses equipped with Phonexa’s IVR constructor can gain access to a variety of IVR voice professionals ready to customize and represent their brand voice.
  • Refine call flows: Brands can use IVR to identify the issues in the IVR call flow through surveys and captured information. With Phonexa’s IVR tool, brands can optimize call flows and, as a result, reshape customer experience, elevate the performance of support services, and monitor customer satisfaction rates.
  • Optimize sales funnel: Phonexa enables businesses to look at the customer journey, identify leaks, and optimize IVRs to fine-tune their sales funnels.

Why Do Businesses Need IVR Technology?

Modern brands and contact centers use cloud-based interactive voice response systems not only for the sake of flexibility, decreased costs, and comfort. 

Companies can scale up or down, as does the call volume. Cloud-based IVR marketing tools and automation solutions allow businesses to adjust specific features and capabilities and address customer pain points on time.

Did you miss our article on maximizing the value of IVR surveys? Check it out here to see why you should add it to your marketing mix.

Here are some of the specific customer pain points that businesses can solve with the help of an interactive voice response system: 

  • The greeting in IVR is the company’s calling card: A positive and understandable voice message immediately attracts the attention of new customers and increases their confidence in the company, and the loyalty of regular customers grows.
  • Reducing the burden on workers: IVR allows businesses to reduce the number of calls through a single employee and independently transfer the call to a suitable specialist to resolve the issue.
  • Informing customers: In the case of waiting for an answer in the call queue, the customer may listen to the company’s advertising messages: information about new products and services and special offers.
  • Handling calls after hours: Businesses can configure IVR settings to respond to callers’ needs and inquiries, depending on the company’s work schedule.

Why Implement IVR Software

It’s no secret that using an advanced, multi-level IVR marketing tool offers numerous benefits to businesses. Here’s what companies can do with the right IVR system in place:

  • Increase customer service efficiency
  • Increase overall customer satisfaction
  • Gather the information you need from the customer
  • Create a much more efficient workflow

Businesses often need a sophisticated IVR system that can handle both keypads and voice to keep everything flowing smoothly. 

Some marketers have dealt with the inefficient IVRs of the past; these old technologies failed to understand the caller’s commands and led to a frustrating caller experience. Today’s advancements in IVR technology have made these systems much better for consumers and businesses.

Although IVR is the surefire way to increase the efficiency of your call centers, some customers still believe IVR may negatively impact their experience with the company.

Let’s examine in more detail the pros and cons of using an interactive voice response.

Benefits of IVR

Here are several significant upsides to implementing an interactive voice response system.

    • Resolution time: IVR speeds up problem resolution. Your consumers call in, explain their needs to the system, and instantly receive the required information. You can configure your IVR system to divide calls into several groups or categories and assign different agents to each category if you’re dealing with an unusually high call volume. IVR shortens hold times and accelerates the speed at which the issues are resolved.
    • Efficiency: Often, people face the fact that when they call the company, they are transferred from operator to operator. That takes valuable time for both the caller and the company. An effective IVR system will quickly direct the client to the right specialist.
    • Self-service: The customer does not waste time waiting: there is no need to wait for a live operator to resolve the issue. Sometimes a person just wants to know the working hours or payment methods, and there is no need to transfer such a customer to a live person as the automated system may solve the questions.
    • 24/7 working hours: A crucial component of providing excellent customer service is 24/7 assistance. However, only some companies have the staffing capacity to offer round-the-clock support. With the set up of unique FAQs, the IVR can help customers to resolve the issue even after hours. That’s also a plus for businesses: fewer calls and reduced waiting times during business hours.
    • Customer experience metrics: Most IVR systems ask the caller to answer a quality of service (QoS) question at the end of a call. And this further helps to improve the service.
  • Team productivity: High call volumes often put call center employees under mental strain, leading to increased wait times for misrouted users, which may negatively impact customer care services. The chance of making a mistake when leading a consumer to their destination is significantly decreased by the automated routing provided by the IVR system.

What Is an IVR and Why Does Your Business Need It? - 2

Source: Yeastar

Who Benefits Most from Using an IVR?


Instead of visiting a local bank, a customer can simply call and interact with the automated system.

The system, in turn, will accurately determine the customer’s needs through a series of prompts and menus. For those who need access to information such as account balances or transactions outside business hours, IVRs provide real value to both banks and customers.

Call Centers

With a versatile IVR system that can handle multiple commands, customers can communicate quickly and pleasantly over the phone. Good interactive voice response services will direct the customer to the needed department or right person or resolve the issue purely through automation, ensuring customer satisfaction.

Medical Institutions

Administrators will no longer need to call clients to remind them about an appointment with a doctor, clarify the time of an appointment, or reschedule the date – a voice robot will do all this. He will also answer questions about the location and working hours of the institution and will survey patients about the quality of service.

Common Mistakes When Setting Up the IVR

IVR systems can be excellent tools for accurately routing customer calls to suitable operators. However, when working with these systems, it is easy to make mistakes and drive customers away.

  • Monotony: Endless menus are leading to submenus and so infuriating customers. That often leads to customers wanting to switch to a live operator as soon as possible, ignoring the self-service system. To avoid this, try to keep the menu concise.
  • Updates: When your business needs change, the IVR must change too. A common mistake is that the company expands and changes, but the IVR menu remains the same. As a result, the menu becomes outdated: it does not offer suitable options or, in the worst case, provides options that are no longer available.
  • No customer experience metrics: Add polls at the end of the call so customers can rate the quality of service and provide feedback. That will allow your business to improve the quality of service.
  • Complete automation: Some companies are trying to replace operators entirely with artificial intelligence. Without rigorous testing, such a complex IVR system is likely to fail. It’s best to create a simple design that can handle some queries and gradually increase the complexity.
  • Long wait times: The more customers are satisfied with the self-service system, the better. That will result in fewer customers needing operator assistance and reduce the average wait time.
  • Overwhelming menu: Brands must avoid creating unnecessary extra options in the menu. Remove the duplicate paths if multiple options or branches lead to the exact location.
  • Locking clients inside IVR without a callback option: There is no need to make an IVR a locked cage with no way out. You still won’t service all calls, so you should always allow customers to contact a live operator or order a callback.
  • Redirecting customers to the website: It’s never a good idea to send customers back to where they came from. However, if that is necessary to redirect them, the marketing messages should be well thought out and correctly placed.

Voice Recognition in IVR

Voice recognition is a pretty new IVR feature. This IVR technology enables callers to respond to particular prompts by speaking, and this process is more accessible than navigating through a menu.

When implemented correctly, voice recognition can help callers identify the zones where their questions will be adequately addressed. The result? Fewer disappointments.

Using the native language to answer callers’ queries offers an incredible customer experience compared to touch tones.

Advantages of IVR System with Voice Recognition

  • Speech-to-text: Any identified voice can be translated into text and stored. Then, a variety of new uses for this text storage are possible. A caller can use natural speech to communicate with the system, which can then be recorded as text in a variable and used to search databases and other data structures.
  • Text-to-speech: By operating this technology, a computer can use text to create a voice that sounds like a human. It can be used to produce prompts that callers will hear on the spot rather than pre-record them, which is valuable in addition to being part of a translation method. Besides, it significantly increases the flexibility, simplicity, and ease of implementation of contact center modification.

Disadvantages of Voice Recognition in IVR

The level of the interactive voice recognition software, the caller’s phone line connection, and the caller’s diction affect how accurately the system can identify the speaker.

An interactive voice recognition system has its work cut out if your target market is anticipated to have a diverse range of accents. Recognition can frequently go wrong if your consumers call from mobile phones with iffy connectivity. 

If the system consistently fails to comprehend your callers, you can discover that many more calls than before the usage of this technology will be forwarded to a human agent to be served.

Combining Artificial Intelligence with IVR Speech Recognition

Artificial intelligence is the latest addition to Interactive Voice Response. This IVR technology takes native language comprehension to the call center to streamline and improve the customer experience.

Check out this article and learn more about effective customer communication and creating IVR scripts that convert.

AI integrates with speech recognition technology through advanced processing and account status or call history. AI and IVR can accurately establish the intention of a caller and provide the appropriate response.

AI can also be used to direct callers to an intended destination in the absence of a phone menu. That saves the callers’ time and is more effective for call centers. The technology reduces the workload on live agents and spares callers from possible frustrations.

Ultimately, it’s essential to know that not all IVRs are created equal.

Personalized IVRs

Why would a company want to create a custom greeting with its IVR? What’s the point if you just want to direct the call as quickly as possible? 

You may want to do this for branding and identity purposes. There are also great branding benefits from consumers calling a company and hearing a custom message. This extra touch can offer a lot of value, giving your callers a personalized experience so they don’t feel like they are taking orders from a machine.

Here are several benefits of using personalized IVRs as part of an all-in-one marketing automation solution:

  • Improved call distribution: IVRs can help you prioritize calls. They enable brands to navigate the process and offer their consumers customized IVRs that allow speaking with a live agent or opting for the self-service option. With a customized IVR, a company can specifically categorize calls and distribute customers between the automated IVR sections and live customer service over the phone. From the company’s perspective, you can ensure that your best agents get the right calls, guaranteeing that the most skilled agents receive priority.
  • Call prioritization: Companies can prioritize their daily incoming calls using customized IVRs. Every inbound call offers companies an opportunity to convert and improve the value of leads. Customized IVR can identify specific customers and prioritize their service requests. In other words, brands can create customer tiers, such as repeat buyers or club members, consumers with prior brand experience, or even customers with strategic value.
  • Satisfied customers: The most significant advantage of IVRs is improved customer service. Once they have made a purchase, satisfied customers frequently return to a company when they have a comparable need in the future. Customers will have a better calling experience when businesses use customized IVRs that effectively segment and prioritize incoming calls based on specific criteria. Callers receive the assistance they require when they do, without delay, saving them time and leaving them satisfied.
  • Collecting crucial information: IVRs collect information about your customers. They also redirect calls to the most appropriate agent or department. If your IVR doesn’t send that gathered information to the agent handling the call, and the caller is expected to repeat it back to them, that could be incredibly frustrating. Ultimately, the goal is to make the caller’s experience as pleasant as possible.

Wrapping Up

The most valuable element of any phone system is its IVR functionality. With dynamic and comprehensive IVR technology, larger companies no longer need to manually route their calls, eliminating the time-consuming and impractical aspects.

Phonexa’s Call Logic solution offers a fully customizable voice interaction system that helps you acquire customer information and route calls to the appropriate department.

Learn how Phonexa’s interactive voice response can help you create customizable journeys, boost call capacity, and elevate the customer experience by scheduling a consultation with one of our experts.

Got Questions?

Get in touch! We are available 24/7.

Armen Karaoghlanian avatar
Armen Karaoghlanian
Armen Karaoghlanian is the Chief Marketing Officer of Phonexa. He is a member of the CMO Council and has been featured on Complex, Fast Company, and Business Insider.
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