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What is IVR (Interactive Voice Response) and how does it work?

August 31, 2022
phone system for small business

83% of consumers consider good customer service as the most crucial factor —outside of product and price— when deciding what to buy.

Anyone who's called a business phone number has probably heard a pre-recorded greeting and menu listing the different ways in which the call can be transferred. This is courtesy of an IVR.

Let's dive into what IVRs are, how they work, the range of IVR features and of course, how they can help your company.

Table Of Content
  • What is an IVR or Interactive Voice Response?
  • Top IVR features for your business
  • What benefits does an IVR provide to a company?
  • What are the different types of IVR?

What is an IVR or Interactive Voice Response?

IVR definition

IVRs are automated phone systems that present callers with a pre-recorded message and a menu. Callers can interact with this menu through the telephone keypad or by voice.

Depending on the IVR choice, the caller may be provided with recorded information, he or she may submit information or have the call directed to a human agent.

What is the difference between IVR and auto-attendant?

An IVR and auto-attendant are similar but not the same. The latter is a much simpler application of IVR technology. The key functionality here is to redirect incoming calls.

This is an example of an auto-attendant.

“Thanks for calling [company].For customer service, please dial 1.For sales, please dial 2.For locations and hours, please dial 3.To speak to an agent at any time during this call, please press 0, or stay on the line.”

An IVR is capable of much more. It provides a more tailored experience and can route calls as well as collect and share information directly with the caller. Here's an example.

“Hello and welcome to [Company]Dial 1 if you are an existing customer or dial 2 if you are a new customer(in the case of existing customers) Please enter your customer IDHello [customer's name]To know your account balance, please dial 1.For customer support regarding Order number [xxxxx], please dial 2.To leave a voicemail, please dial 3.”

As you can see, the IVR personalizes the call. If the call needs to be transferred to a person, the caller's details will automatically be shared with him/her for a better experience.

How does IVR work

A good IVR helps callers and the agents handling the calls. Callers are routed to agents best suited to answer their queries and agents are left free to handle specialized cases. Here's what happens:

  • Calls are answered with a pre-recorded greeting and the caller is presented with a menu
  • Callers interact with the menu through the phone's keypad or voice responses
  • Certain queries like scheduling a maintenance visit may be resolved through the IVR self-service process. Queries that cannot be solved in this way are further routed to agents from the concerned department.

Old vs New IVR systems

In the past, setting this system up was a harrowing process involving separate IVR software, servers and more. The software had to be installed on a separate computer with a telephony card and configured in its proprietary programming language by a specialist.

Today, with the advent of cloud technology, the setting up and functioning of an IVR has been greatly simplified. All the components of this system – the servers, database and telephony are now handled by the cloud. There's no need for specialists anymore.

IVR technologies

Modern IVR systems are built on Dual-Tone Multi-Frequency (DTMF) tones and leverage cloud technology and AI.

DTMF tones refer to the sound created by different numbers of the phone's keypad. The IVR uses these tones to get the caller's input.

The simplest example – “dial 1 for English or dial 2 for Hindi”

In addition, IVR may also use speech recognition. This allows the caller to respond to prompts with spoken words. It eases navigation and gives specially-abled callers a better experience.

Going a step further, IVR may employ AI to determine the caller's intent and simplify navigation. For example, rather than wait for the caller to use DTMF inputs and navigate to the point of checking account balance, the caller can ask for his/ her balance immediately by saying “check account balance”.

Common uses of IVR

Any business that fields a high volume of calls can benefit from using an IVR system. Call centers are the biggest users of an IVR system. Callers are typically given a choice between an automated service, requesting a callback and waiting in queue until an agent is available. Let's take a look at some of the industries that are reliant on IVR systems.

Customer Service for any size of business

IVR helps customers get in touch with companies. For large companies, it allows customer support teams to distribute calls to members of the team. For smaller companies, it's also very important in order to give the impression to callers that they are calling a real installed business with professional greetings and custom IVR options.

Retails, E-Commerce

IVR helps companies in the retail segment stay connected to their customers and improve the shopping experience. Customers can call and find out the status of an order, delivery timelines or place a request to return a product.


IVR helps banks extend their business hours and cater to customer needs 24 x 7. For example, IVR on telebanking services allows customers to check their balance, their last few transactions and even make payments.


Insurance companies can use IVR to replace and help human operators. They can be used to play out product information, give bill reminders and apply for changes in address, etc.


Governments use IVR to communicate with employees and citizens. IVR systems can be utilized to give information on license and tax regulations and let citizens access government services.

Hospitals and Clinics

IVR systems make hospitals and clinics more accessible to patients and their caregivers. They can be used to schedule and access test results or to make requests for inpatient care.

Pharmaceutical companies

IVR systems can be used by pharmaceutical companies to conduct surveys and research. They can also help manage large volumes of data for clinical trials.

Utility service providers

IVR can play multiple roles for businesses in the utility service section. Phone companies can use this service to serve bill reminders, share information on plans and record responses to customer surveys.

What is the future of IVR?

Every industry that has started using IVR has found that it streamlines communication and helps call agents use their time more efficiently. As IVR technology evolves, it can potentially give companies an edge over competitors by improving the overall customer experience. For example, the switch over from using DTMF tones to speech recognition lets the caller ask direct questions rather than navigate through a long menu. This also makes the experience more organic and relatable.

Top IVR features for your business

IVR is more than just a way to answer calls. The range of features available can bring unique benefits with them. The top IVR features to look for include:

Custom greetings

Rather than have callers listen to a prolonged ringing, callers can be greeted with a custom pre-recorded message. This can be used to introduce the company or share promotional messages.

Discover Quicktalk custom greetings feature

On-Hold music with online studio

While a call is being routed to the concerned department, the hold music can be customized or a recorded message may be played to build brand awareness and provide answers to frequently asked questions.

Business hours

An IVR can be set up to play different messages during and after business hours. After business hours, the system could be configured to gather information from the caller to schedule a callback. features/opening-hours

Discover Quicktalk business hours feature


In the case of high incoming call volumes, calls may be routed to allow callers to leave voicemail with their details and requests.

Call recording

Recording conversations provide important material for quality control and training. In extreme cases, it can also be useful in litigation.

Discover Quicktalk call recording feature


Along with dispensing information, IVR can also be used to collect data in the form of surveys and polls. This is often preferred by customers over questionnaires as it is quicker and simpler.


The IVR can maintain a call log for all incoming calls with details such as call duration, where the call was routed, etc.

CRM and helpdesk integration

Easy integration with an existing CRM gives your support team an instant view of the caller's customer profile. Having this information easily accessible helps personalize the call and improve the customer service offered.

Discover Quicktalk ecommerce integration

Multi-language phone message

An IVR can be set up to interact with callers in multiple languages. This makes the system useful to a wider audience.

Different types of call routing

Calls can be routed in many different ways:

  • Fixed order: The caller waits in line for an agent to be available
  • Simultaneous: Calls are forwarded to the next available number in case the line is busy or unavailable. The first agent available can handle the call.
  • Sequential call cascading: Call queues may be optimized with sequenced call forwarding
  • At regular intervals: Calls are routed to different agents at regular intervals.
  • Rotary: Calls are forwarded to agents on rotation so that everyone has an equal workload.
  • Talk-time: Calls are forwarded to the agent with the least talk-time to balance the team's workload
  • Skills-based routing: Calls are prioritized based on scores awarded to agents for language proficiency, expertise, efficiency and response time.
  • Percentage routing: Call routing rules can be modified in real-time to take care of volume spikes and outages.
  • Time-based routing: Calls are routed to only those agents who are available at the time. If none are available, the call is routed to voicemail.

What benefits does an IVR provide to a company?

IVRs liberate businesses and help them improve customer support and experience offered without increasing the cost to the company. Here are some of the key benefits.

Happier customers

By lowering the length of time, callers are kept waiting and routing calls to agents with skills relevant to their requirements, it becomes easier to meet expectations and keep them happy.

Better use of resources

IVR allows callers to handle certain tasks on their own or get information without having to talk to a human agent. Only calls that cannot be handled by chatbots can be routed to live agents. This allows human resources to be better utilized.

Improves lead conversion

IVR makes it easier to reach out to prospective clients and gather information. Qualified prospects can then be routed to call agents.

Helps the business grow

The robustness and flexibility of IVR systems help companies cater to growing demand and, in turn, help the business scale.

Improved costs

The efficiency with which IVR systems can handle calls reduces dependency on people and allows a company to handle more incoming calls. Thus, it improves the cost per lead.

Better availability

IVR increases the number of calls that can be handled each day and thus makes the company more accessible to existing and prospective customers.

What are the different types of IVR?

There are many different types of IVR. The 6 main categories are:

Standard IVR

Standard IVR is a system wherein callees are presented with a menu that they can interact with through the phone's touchpad.

Conversational IVR

Conversational IVR is powered by Machine Learning and AI to allow callers to interact with the IVR menu through voice commands. This offers a more organic conversation and shortens the time taken to get the answers they need.

Outbound IVR System

Outbound IVR refers to a system for outgoing calls. These calls deliver customized messages to a selected list of numbers. It can be used to remind customers of unpaid bills, announce new promotions, etc.

What is a Self-Service IVR System

A self-service IVR aims at allowing customers to get certain types of information directly by interacting with the IVR menu. For example, banks may use this type of IVR to tell customers their account balances.

What is a Visual IVR System?

Visual IVR offers callers a web-based support experience. They can choose self-service options or connect with an agent directly through a web interface.

What is payment IVR?

IVR payments are configured to allow callers to make payments through an automated system. They may complete the transaction independently or be assisted by agents.