What is Interactive Voice Response [2024 Guide]

Learn about interactive voice response (IVR) technology, features and benefits with a step-by-step guide to deploy it for your business.

Aksheeta Tyagi
July 8, 2024
5 min read

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What is IVR

Interactive Voice Response (IVR) is an automated phone technology that enables callers to access information and troubleshoot basic issues through a set of pre-recorded menu options without interacting with a live agent.   

IVR technology began in the 1970s with basic phone systems using touch-tone keypad input. Over the decades, advancements in computing and telephony have led to more sophisticated systems, with IVR now capable of initiating and holding natural conversations through customer service NLP and speech analytics.

How does IVR work 

Here are the broad steps a typical IVR system would take:  

  1. Call initiation: A customer dials the service number and the call is received by the IVR system. 

  2. Menu presentation: The system presents the caller with a menu of options. This can be simple or multi-layered (e.g., "Press 1 for Sales, Press 2 for Support"). 

  3. Input collection: The caller interacts with the menu using their phone keypad (dual-tone multi-frequency signaling or DTMF) or voice input (speech recognition technology). 

  4. Input recognition: The IVR system processes the caller's input to identify the selected option. For example, pressing "3" for accounts or saying "accounts." 

  5. Routing decision: Based on the input, the IVR determines whether the query can be handled through self-service or needs to be handed over to a live agent. 

  6. Self-service: For straightforward requests, the IVR retrieves information from a contact center CRM and conveys it using pre-recorded messages. It also allows customers to complete simple transactions (e.g., making payments) directly, without agent intervention. 

  7. Call routing: For more complex issues, the IVR system uses Automated Call Distribution (ACD) to route the call along with all gathered context to the appropriate department or agent, based on skills and availability. 

  8. Error handling and escalation: If a caller needs further assistance, the IVR can repeat the menu, offer options to speak to an agent, or automatically escalate the call to a human agent.  

IVR process

Key features and capabilities of interactive voice response  

The proficiency of an IVR system depends on its various capabilities. An IVR should offer the following features.  

Basic features:   

  • Automated greetings: Greets callers with pre-recorded messages that can be customized based on time of day or caller ID, setting clear expectations for the call flow and providing relevant information from the start. 

  • Touch-tone navigation: Navigates callers through the menu using their phone keypad, which generates DTMF signals. This universally compatible method allows users to select options without needing advanced technology, making the system accessible to all callers. 

  • Pre-recorded responses: Employs a library of carefully curated audio messages to offer guidance, relay information or address frequent inquiries. 

   Advanced features: 

  • Callback scheduling: Allows customers to request a callback rather than waiting on hold. The IVR system records their details and schedules the callback during less busy periods, improving the call-connect ratio and reducing wait times. 

Sprinklr callback scheduling IVR
  • Call filtering: Screens and categorizes incoming calls to prioritize urgent issues. By filtering calls based on keywords or caller input, the IVR system ensures that high-priority calls are addressed first. 

  • Speech recognition: Utilizes natural language processing (NLP) to understand and respond to spoken commands. This feature reduces the need for manual keypad input, enabling more intuitive and efficient interactions with the IVR system. 

  • Contextual call routing: Analyzes caller data, including previous interactions and the current query, to route calls to agents with the appropriate expertise. Machine learning algorithms match caller needs with agent skills, improving the accuracy and speed of call resolutions. 

Skill-based routing through sentiment analysis - Voice analytics
  • Robust integrations: Integrates with CRM, ERP and other data systems to access detailed customer information. This enables the IVR to provide personalized responses, such as recent transactions or account details, directly from integrated databases. Continuous two-way interactions with callers also help keep your CRM data up to date.

Complete rundown of customer context on Sprinklr IVR
  • AI-driven analytics: Uses artificial intelligence to analyze calls in real-time, offering insights into metrics like call duration and agent performance. This information not only helps to identify trends and optimize call flows, it also supports targeted training for agents. 

  • Cloud computing: Uses distributed online servers to dynamically handle more calls when needed without local servers. IVR used in cloud contact centers stays online without interruption, helping you handle system capacity while reducing downtime. 

  • Outbound campaigning: Initiates calls for marketing and ad campaigns, reminders or follow-ups targeting specific customer groups. Besides delivering targeted messaging, IVR can also capture and log responses from each interaction in real time to personalize your outreach in the future. 

Top 4 benefits of interactive voice system in customer service 

The IVR market is booming — with North America fueling 40% of its growth in the coming years. Here are four potential benefits of using an IVR system. 

  1. 24/7 availability: IVR systems allow customers to access information and services anytime. They manage routine inquiries with pre-recorded messages and real-time data retrieval, reducing wait times and giving agents leeway for more complex tasks. 

  2. Cost savings: IVR automates basic queries such as account inquiries and store policies, thus reducing over-reliance on contact center agents. In fact, a single IVR transaction can cost as little as $0.25 per minute. This automation lowers labor costs and improves the utilization of existing resources. 

  3. Emotional decoding: IVR systems use sentiment analysis to interpret caller emotions through voice tone and language. This technology provides insights into how customers feel during interactions, allowing companies to adjust responses accordingly. 

  4. Regulatory compliance: IVR systems with voice analytics monitor calls for contact center compliance by detecting specific keywords and phrases. This ensures agents follow industry regulations and protocols, reducing the risk of violations. 

Sprinklr IVR ensures regulatory compliance

More Details: What Do You Really Stand to Gain from an IVR System?   

How to deploy IVR system to enhance customer interactions 

While the efficiency of your IVR depends on the provider you choose, here are five broad steps you must take to make IVR deployment a breeze.  

Step #1: Design call flow 

Designing the call flow involves mapping out the entire customer interaction process from start to finish. Create a detailed plan that includes the initial greeting, menu options and potential routing paths. Develop comprehensive scripts for each menu option, incorporating clear prompts, responses and error-handling procedures. For more complex systems, design multi-level menus that allow for logical and intuitive navigation, so users can easily find the information they need.

💡 Think about your caller's journey like a roadmap.  

Customer journey mapping helps you plot out each step they’ll take, from the moment they dial in, all the way to resolving their issue. This helps you spot any confusing points or unnecessary steps. And always have a safety net — if a caller hits a dead end or gets frustrated, have a quick way to transfer them to a live agent. 

Example of how call flows through an IVR system


Step #2: Develop voice prompts 

High-quality voice prompts are essential for a professional IVR system. Record these prompts with clarity and consistency. Tailor the prompts to match the company’s brand voice and tone. If your customer base includes speakers of different languages, provide multilingual prompts to accommodate them. Update these prompts regularly to keep the information accurate.

💡 Avoid recording prompts yourself

Hire professional voice actors to do that for you to bring consistency and a refined feel to your IVR’s personality. You may also consider implementing dynamic prompts that change based on the time of day or specific caller information. An advanced IVR system will empower you with customizations with a user-friendly, drag-and-drop interface. 

Step #3: Implement call routing logic 

Your call routing logic needs to have rules to direct calls based on menu selections, caller data and business rules. Configure the system to use skill-based routing, which matches callers with agents who have the relevant expertise. This process includes creating fallback options to handle routing errors or unrecognized inputs, and ensuring calls are always directed appropriately. 

IVR Flow

💡You Might Want to: Try using AI-driven predictive routing.  

It dynamically adjusts routing rules based on patterns and trends, predicting which agent is most likely to resolve the issue efficiently. Imagine a telecom company using an AI-driven IVR. A customer calls about recurring billing issues. The IVR instantly analyzes their history and then routes them to an available billing specialist. This precise match reduces call transfers and speeds up resolution. 

We’ve written an eBook that might help you with all you need to know about how an AI-powered routing strategy can flip your IVR’s efficiency. Download it here

Further reading: How Sprinklr’s Smart Pairing Works

Step #4: Test the IVR system 

Thoroughly test the IVR system before full deployment. Conduct functionality tests to ensure all features work as expected, stress tests to evaluate performance under heavy load, and user acceptance tests to gather feedback from real users. Simulate various customer service scenarios to identify and resolve practical issues. 

 Step #5: Monitor, optimize, update 

Continuously monitor your IVR system using call analytics to review logs and track performance metrics like first call resolution and average handle time. Ensure your prompts are regularly refreshed and the IVR system you use conducts regular system updates. 

💡Pro-Tip: Roll out the IVR system in a controlled manner, starting with a pilot phase, if possible, before you go headlong into blanket deployment. 

3 use cases of interactive voice response technology for businesses 

Let’s look at various industries and how they deploy IVR to solve their many use cases.  

1. Financial institutions 

Banks and other financial institutions use IVR systems for tasks like account inquiries, transactions and card activations. Customers can activate new cards by calling in, following the relevant workflow and entering their card details. IVRs also let customers check balances, arrange overdrafts or modify account details using unique identifiers, and complete these tasks without needing a human representative.   

Since security is critical in the finance sector, IVR systems can set up guardrails and strengthen your processes with voice biometrics and multi-factor authentication before granting callers access to account details. This helps reduce the risk of fraud while ensuring customers can securely manage their accounts.  

✨ A Success Story 

HDFC Bank, with over 70 million customers and 7,183 branches, wanted to unify its customer experience across all channels, with a spotlight on their IVR system. They teamed up with Sprinklr to make this happen. 

Sprinklr’s platform helped HDFC Bank replace more than ten separate systems with one unified solution. Now, their IVR handles over 15 million voice calls every month, automating tasks like account inquiries and transactions. This makes everything faster and more secure for customers. 

Their IVR, boosted by AI, efficiently manages most queries without needing human agents, hitting close to a 70% resolution rate. Dig into more details here

2. Travel and hospitality 

In the travel and hospitality industry, IVR systems empower brands to manage bookings, cancellations and often time-sensitive customer inquiries without requiring agent involvement. Travelers can confirm, change or cancel reservations without waiting for an agent by simply following the IVR prompts.  

IVRs also provide real-time updates on flight delays or cancellations, allowing travelers to adjust their plans accordingly. For example, if a flight is delayed, the system can guide customers through updating their hotel or car rental reservations. Such flexibility helps them take autonomous control of their travel plans. 

3. Retail and commerce 

In retail and e-commerce, IVR systems make customer service much smoother. Customers needing to check their order status or track a shipment can get instant updates through the IVR pulling real-time data from logistics databases, instead of waiting for an agent. If they want to inquire about product availability, the IVR can check inventory systems and inform them right away. During busy shopping seasons, IVRs can handle the rush and avoid customer anger by providing them with the quick help they need. 

A prime example of the use of outbound IVR is Amazon. The brand uses IVR outbound campaigns to update customers on order status via unique tracking numbers. The IVR system automates calls to notify customers of key milestones, including order processing, shipping and delivery. By integrating their system with their logistics and shipping partners, Amazon allows the IVR to access real-time data, providing instant alerts for any delays.

On a customer call, where every second counts, having an IVR that listens, understands, and responds uniquely to each caller changes everything.  

Sprinklr Conversational IVR goes beyond simply automating your calls --- it brings conversations with your customers to life. Pulling critical information from every previous interaction, every response uttered to the customer is rich in context and relevance. And when one of your live agents needs to step in, it smoothly transfers the calls too. 

You can avoid customer frustration at having to repeat details. Sprinklr’s conversational IVR remembers every interaction, so your customers don’t have to start over each time. If a call drops, it’s not lost — the IVR schedules a callback, so you reconnect smoothly. Moreover, it can shift calls to digital channels for even quicker resolutions.

In fact, you can customize your IVR with Sprinklr and get started in minutes! Catch a demo with us today. 


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What is Conversational IVR & How Does it WorkHow Artificial Intelligence is Beneficial in IVR SystemsTop 15 benefits of IVR systems in call centers

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