IVR (Interactive Voice Response) – The Ultimate Guide

IVR (Interactive Voice Response)

The Internet and digitization have enabled the consumers in such a way that they want instant responses to their queries and problems. To enable them, businesses are adopting various technologies and one of them is IVR. The IVR full form is the Interactive Voice Response System. This system responds to the queries 24/7 and automatically without any manual intervention.

We’re going to dig deep into IVRS, but feel free to jump to any section that interests you:

What is an Interactive Voice Response (IVR system)?


The IVR is a system that helps businesses interact with their customers or prospects. It is an automated telephone menu system that gathers the needed information from the customers and routes the calls to the appropriate department.

IVR has been a customer service tool for many years now and it has catered to resolving simple queries over the phone. But today, the IVR system is not just used to respond to queries but also for surveys, brand awareness, promotions, etc. The modern system has become more sophisticated with it being able to gather information through spoken words using voice recognition and route calls.

How does IVR work?

How IVR Work

To explain how the IVR works in simple terms;

  • From the perspective of the end-user, the IVR system allows navigating through the various options provided by the contact center to quickly find the solution they are looking for. The phone’s dial pad or the keypad is used to select the options.
  • For the contact center, it means the customer will choose the appropriate department to solve their queries.

Technically, the IVR system uses computer-telephony integration, CTI. The most popular way of communication between a computer and a telephone is through tones. That tone is called the dual-tone multifrequency signals. These tones are generated by the press of each key on the dial pad. For these signals to be understood by the computer it needs hardware called a telephony board or card.

How to set up an IVR?

A simple IVR system will have a computer installed with a telephony board connected to a phone line. It also needs an IVR software to be installed on the computer to present the menu options and other pre-recorded messages for the user.

When the caller makes a call to the contact center, IVR software will present pre-recorded messages and asks the user to enter and select from the menu. Based on the selection made, it routes the calls. Advanced IVR systems allow the user to provide spoken commands. A speech recognition software will interpret it and communicate with the computer.



Difference between hosted IVR and cloud IVR

The IVR systems for a company can be set up either as a hosted IVR or as a cloud IVR.

  • In a hosted deployment setup, the business owns the hardware and the software systems needed for IVR. The company itself is responsible for the upkeep and maintenance of the entire IVR system. It also needs to buy the necessary licenses and software needed for running IVR call center. They can also hire a third-party to maintain the deployment.


  • Cloud IVR on the other hand, is available as a service and is called the IVR as a Service, IVRaaS. It uses cloud-based technologies to offer a modern IVR platform which is based on consumption.

The cloud IVR gives the business an opportunity to not only improve the customer service but also to optimize the agent interactions. Moreover, cloud-based IVR solutions are scalable. It will help you to have as many as or as few agents needed by the business. It can also handle peaks when there is a huge demand.

What is a multi-level IVR or Single Level IVR?

IVR can be divided into two parts and they are single level and multi-level IVR:

Single-level IVR: It is the most basic level of IVR and adds only one layer of it to the call flow. It is useful for cases where there is only one input needed to connect to an agent.

An example of single-level IVR is the automated call for feedback. This call can be anything, for example, feedback on the executive who answered the user’s query. The user enters the rating using the IVR menu options which are then stored in a CRM for further purposes.


Multi-level IVR: It is a system that acts as an automatic receptionist by providing many self-help features to the user. It can help in creating highly complicated flow easily. It takes numerous inputs from the callers and then reaches the desired department without the need for a call forwarding option.

This type of IVR system gives the business a great competitive edge in this market. It is best for companies that offer many products and services and has many departments. The multi-level IVR is advantageous to both the customer and the business.

Benefits of Using the IVR system

In the ever-changing business environment, there are two constant things: business wants to provide better customer service by using cost-effective methods and customers want to be self-sufficient. The IVR system satisfies both of these and also provides various other benefits too.

  • Saves time and money: One of the biggest advantages of using an IVR system is it can help the companies to save money as well as time. Not all phone calls made by users needs the attention of trained executives. By using an IVR system, most frequently asked questions that the company gets can be answered thereby allowing the specialists time to concentrate on the more important tasks. A large company can save a lot of money even if a few seconds of the phone call with a live executive is shaved.
  • Customers can access anytime: The IVR systems are available 24/7 and that means customers can use it at their convenience. Since these are available all the time even on holidays, out of office hours, etc the customers can call at any time as it is at their disposal. The customers get unlimited access to the information making it more appealing.
  • Offers more personalization: IVR systems offer great personalization and that helps in creating a better relationship with the users. It can be programmed to provide personalized greetings as they are intelligent to gather information from the caller ID or from the previous calls made. These systems also come with many language options and that ensures the customers get the information needed in the language they are comfortable with.
  • Improves lead conversion: The IVR system for long has been used for customer service. But the IVR of modern times is used for more than that. It is used for sales, telemarketing, support, etc. Since the IVR is an automated process it is a simple and effective way to convert the interest into leads. Interested prospects can then be pursued by the sales agents to convert into sales.
  • Increase brand image: IVR system for small businesses creates an illusion to the world that the company is big, hence they have a voice system. It creates an image of an established brand and hence can lead to better business for the company. For the bigger companies, it not only helps in handling the call volumes it also creates an image of a professional company that has a good customer service center.
  • Better customer relationship: The IVR is the first contact with your business for a client. When you have an automated system in place with various menus and prompts it adds to the engagement strategy. Also when the business logic is embedded in these systems in such a way it improves the customer experience and leads to better interaction.
  • Makes the business scalable: The IVR solution that you choose should be such that it is robust and scalable. There are many cloud-based IVR solutions that offer intelligent routing, multichannel support and are multilingual. Also, these solutions are highly scalable and can peak when their demand is high and when the call volume is low. It offers the business great flexibility in terms of consumption.
  • They are error-free: Compared to a manual process that involves human interaction the IVR system is error-free. Especially when the call volume is high, the receptionist can make mistakes and route to the wrong destination. Moreover, when the process is all automated the waiting time is less adding to the list of advantages.


IVR solutions for various industries

IVRs are used in different ways in different industries, some of them are listed below:


Auto industry: The automobile companies can use the IVR system in various ways and one of them is by getting automated feedback. This can be triggered after the purchase of a new car, after a service, repair, etc. The customers can choose the rating based on their experience using the DTMP option on their mobiles. This data is in sync with the CRM.


Banking and Insurance: These are extremely useful in the banking and finance sector. These sectors receive a lot of calls and to answer all these queries for a human agent is exhausting and time-consuming. But having an IVR system in place, the callers can use it for account information, portfolio updates, loan application status, product information, complaints, etc.


Healthcare: The IVR system is a great tool that improves patient-hospital communication. The patients can input using the phone and the system will deliver information to patients. It is also helpful to expand the business hours to 24/7, improve patient satisfaction and also enable payments.


Education-University, College, School: It is essential to have IVR in education sectors like schools, colleges, and universities. It can aid in improving the student count, help the student and also create a better image among the students. It can be used for event announcements, registration and admission process, inquiries, providing information on course details, declaring results, etc.


Real-estate: This system is an effective tool to capture all calls without missing any of them. The IVR system can help in answering phones, transferring calls, recording information, etc. It can also send an email or text notification about the calls which can come in handy to the real estate agent or company. They can use the phone number and the time of the call to interact with the prospects.


NGO: Raising funds and ensuring the sustained flow of cash is essential for an NGO to be operational. Though there are various ways to raise funds one of the effective ways is through the IVR campaign. It can be used to collect information from a large section of the audience in a short time. You can use the missed call support to generate votes for your support campaign, use IVR to generate more leads, etc.


Travel: The travel industry is growing and with that, every traveler has queries and concerns which the agent has to attend. Having an IVR solution in place will ensure that the queries and concerns are answered and the live agents do other productive work. It is a win-win for both the customer and the travel company.


Hospitality: In this industry, there is regular interaction with the clients and having an IVR solution in place makes it possible quickly and easily. While the IVR system answers the queries of the clients, the hotel staff can work on other operations.


IVR has revolutionized the way voice communication works and has become an essential element for all companies big and small. It is cost-effective and saves a lot of time helping the business grow.