What is interactive voice response (IVR)? How do you use it?

We know why you’re here. You want to know about interactive voice response: what it is, why you need it, and how to get it. So let us paint you a picture.

To really tell the story of what interactive voice response (aka IVR) is, we need to go back, back into the far reaches of recorded history.

Gather ‘round, young Millennials and Zoomers. It’s time to hear the tale… of Moviefone.

Once upon a time in the ’90s, the internet was still a sleeping giant. There was no Google, no GPS. If people wanted information about something, there were only a few ways to get it: maps, an encyclopedia, or the telephone. And in the age before Netflix, movie theaters were the place to be on the weekends. So popular, in fact, that the writer of this post might have watched Armageddon while sitting in the aisle because the theater was full.

For a Ben Affleck asteroid movie…

There is no explanation or excuse for this. It was just a different time, okay?

You can imagine how overwhelmed the cinema staff must have been back then, with thousands of calls rolling in about movie showings as Friday night approached. But then a hero rose from the sticky, popcorn-covered floors to save the day. That hero was Moviefone.

Moviefone was one of the first wildly successful examples of interactive voice response (IVR) software. The concept was simple: you’d dial a number and then use the keypad to type in your ZIP code and the first few letters of the film you wanted to see. The automated system would recognize the information and tell you—in a distinct voice you can still hear today if you were a Moviefone user—when and where The Blair Witch Project was playing.

In its heyday, the mid-1990s, Moviefone reportedly received over 3 million calls every week (and was even part of an iconic Seinfeld episode). The technology felt like magic, and it was just what the world needed in that moment. You were never put on hold, and you always got the information you needed, quickly and easily.

While Moviefone’s necessity came and went, interactive voice response software can still be pretty magical when done right. It’s come a long way since the ’90s—haven’t we all?—with major upgrades that make it more intuitive, user-friendly, and helpful. Plus, you know we wouldn’t be telling you any of this if we weren’t sure that IVR offers serious benefits to your business and customers.

Today, we’ll cover:

• What is interactive voice response? 
• The benefits of interactive voice response for small businesses
• 5 IVR best practices
• How to set up interactive voice response in 6 steps 
• The cost of an IVR system

What is interactive voice response?

The technical definition of interactive voice response (or IVR) is an automated phone system that interacts with callers through voice and/or touch-tone keypad selections. 

Basically, it’s a robot phone menu that helps customers get to the right department for their needs.

Even if you’ve never heard the term interactive voice response before, chances are good that you’ve used an IVR system as a customer. If you’re not sure that you have, here’s how an interactive voice response system works:

Let’s pretend the power just went out in your house. You’ve checked the fuse box: everything is normal. You look out your window, and all your neighbors’ houses are dark, too. It’s time to call the power company!

1. You call the company’s customer service number. (Hopefully they have a strategy set up to take these inbound calls.)
2. Before you talk to a real person, you hear a short message about power outages in your area. You feel relieved that they’re aware of the problem and are on the case.
3. At the end of the message, you’re given a menu to choose from. You press “1” as instructed to report an outage at your specific location.
4. The system then asks for a little information about you and your account, so it can pinpoint you on the outage map. You key in your account number so the system can find you easily.
5. You then answer some “Yes” or “No” questions, so the system can note if there are sparking wires or other hazards that need cleaning up.
6. At this point, you might hang up, satisfied that you’ve made your voice heard. But if there is something else you need to chat about while you’re on the phone (maybe an upcoming bill), you decide to go back to the main menu when prompted and select “4” for Billing.
7. When a human (aka the customer service rep) answers your call, they know your name and have your account pulled up, ready to take your questions.

If this type of interaction sounds familiar, you’ve experienced IVR as a customer!

You might think you have to be a Fortune 500 company to put this kind of software to work for you. But interactive voice response can actually be really affordable, and it’s a helpful solution for small businesses that are short on time and budget.

Build a more effective customer service strategy.

Benefits of interactive voice response for small businesses

There are lots of advantages to using an interactive voice response system. Here are a few of our favorites:

Make your customers happy.

This is the age of seamless self-service. With IVR, your customers can hear information about their own accounts—balance due, upcoming appointments, and more—without ever sitting on hold. Ease of use goes a long way toward improving customer experience and (your customer retention rate).

Make your employees happy.

Think about the kinds of calls your customer service team gets in a day or a week. How many of those calls could be answered with an automated menu? Using IVR cuts down on the high volume of calls your agents have to handle, which allows them to spend time on the more complex or high-importance issues that come their way. Your team will be less overwhelmed, and happy employees stick around.

Save your business time and money.

When customers can clarify their questions before talking to someone on your team, that means you can route their call to the right customer service agent instead of bouncing them from person to person. This improves first call resolution metrics and cuts down on your cost per call!

Free up your team.

Maybe you have someone answering and routing calls on staff, either full time or while juggling other tasks. Maybe that “someone”… is you.

If you’re managing a small business, you’re usually wearing multiple hats in a day, which can cut down on much-needed productivity. With interactive voice response, you’ll put valuable human resources back in your pocket that you can use to build your business.

Measure success and more.

IVR technology is evolving every day, taking this innovation beyond the standard automated menus we all know so well. Today, companies can customize their interactive voice response systems to conduct customer surveys, connect their sales team with new leads, and more!

5 IVR best practices

1. Anticipate your customers’ questions.

To get the most out of your interactive voice response system, don’t play the guessing game. Map your automated menu with the help of your customer service team to find out the real questions your customers are asking on a daily basis, and create the most logical flow for the menu based on their interactions.

IVR should be a tool that makes your customers’ lives easier. Keep them in mind as you build out your system’s options.

2. Always make human contact an option.

The problem could be really complex, or maybe you’ve been through the automated system and haven’t gotten the help you need. Whatever the case may be… sometimes, you just need to talk to someone.

Be sure to give your customers the choice to opt out of the phone tree and into a genuine, robot-free conversation. Each customer is unique, and the more channels you can offer them to reach you, the better.

3. Refresh your IVR prompts regularly.

As your customers journey through your IVR phone tree, look for opportunities to improve the experience. Check the metrics of calls and talk to your customer service team to see where callers are getting confused or ending up talking to the wrong agent.

For example, RingCentral’s interface makes it easy to adjust your different automated menus with a duplication tool and drag-and-drop editing. Just click to make changes in the flow:

RingCentral’s IVR interface makes it easy to edit any level of your automated menu, anytime.

4. Skip the introductions.

We’ve all been on “that call” with an IVR system. All you want to do is press a button or say what you need, but first you have to sit through a super-long welcome message that tells you the store’s hours, services, blood type… Okay, we’re exaggerating, but you know what we mean.

Our advice? Keep it simple with a warm “thank you for calling,” and then list the items on your automated menu. Try to only give information as a customer asks for it, unless there’s been an emergency change in hours or service.

5. Choose an IVR system that’s safe and secure.

As technology becomes more complex and more data is shared than ever before, security has never been more important! Whatever IVR system you choose, be sure it’s compliant with your industry’s privacy laws. (For example: HIPAA for healthcare providers and PCI for financial data, like credit cards.)

How to set up interactive voice response in 6 steps

1. Decide how you want to implement IVR.

There are a few big questions to think about before you can flip the switch and streamline your incoming calls:

In house or hosted?

What kind of IT muscle do you have in house? Depending on your resources, you should decide between buying your own IVR software and hardware to run in house or finding a third-party hosting service. Running your own IVR in house might give you more control, but is it worth the amount of time and troubleshooting that could pull your focus from building your company?

Single or multi-level?

How complex of a menu does your business need? Single-level IVR is the simpler option. Calls are answered with a warm, professional greeting by an “auto attendant,” who can connect them to a specific extension.

Multi-level IVR is just what it sounds like: an automated menu system with multiple levels to answer customer questions and do more specific call routing. Learn more about the difference between single- and multi-level IVR systems.

How much do I want to spend?

The exact pricing for in-house, multi-level IVR varies greatly. According to B2B Sherpa, “the price of interactive voice response for a four-line in-house system may be approximately $6,500” for small businesses.

You’ll pay less for a third-party host, which already has the functionality and security you need built in! Oh, and multi-level IVR comes with RingCentral Office®, so you won’t have to settle for less features just to save money.

🕹️ Get a hands-on look at how RingCentral works by booking a product tour:

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2. Map out your phone tree.

Time to brainstorm! What are the most frequent questions your customer support reps hear, and who can answer them best? Once you have these connections written down, decide if there are bigger buckets you can put questions into for the first layer of your menu.

Example: “For service requests, press 1.” This takes customers to the second layer of the menu, where they can decide what type of service they need and get connected to the right team member.

This is a good time to think of your own experiences with IVR. What did you like about systems you’ve used as a customer? What drove you crazy? Remember to keep things clear and simple for anyone who calls, so they keep calling back:

Lay out the paths of your IVR “phone tree,” or menu, with ease.

3. Record your prompts and key presses.

If you’re using a third-party service like RingCentral for IVR, you’ll record your prompts in the cloud portal, where they’re all stored and easy to arrange, edit, and implement.

Be sure to speak clearly and slowly, so everyone will understand their options and end up in the right place!

4. Test the IVR system before going live.

This is a big one! It can be hard to come back from a new-technology flop with your customers. Before the full rollout, take the time to test the system.

One fun way to do this that encourages customer engagement is to create an IVR “focus group,” with some of your internal service team and customers alike! Have them test the system by calling and checking that the different prompts take them where they’re supposed to go.

Sometimes, it’s hard to think of things you’ve missed unless you’re actively using the system. That’s why a focus group is a good time to ask both customers and service reps if they noticed any big holes in your automated menu.

5. Educate your team and customers.

Some of the educating will happen internally as you build. Some of it will happen as you ramp up to launching, both with your team and your customer base. Empower your community with the info they need ahead of launch time to have enthusiastic users on both ends!

One great benefit of a third-party IVR host is the personalized training and other helpful resources that come included in the package. For example, RingCentral has a whole training portal dedicated to help get your team up and running on all of their platforms.

6. Analyze calls and make adjustments.

Your work doesn’t end with the launch! An IVR system is only as good as its updates, so be sure to monitor calls, check metrics, and refresh the menu as you notice new trends in topics your customers care about. This is especially important if you’re a growing business, adding services and customers from new areas.

Interactive voice response: Is it time to take the plunge?

You know your team best! If your customer service reps are bogged down with a high volume of calls and not enough time to focus on high-priority customers or issues, it might be time to make the leap into interactive voice response.

And if you’re looking for a way to improve your customers’ experience with your service team, IVR could be a quick win.

With RingCentral Office, you get multi-level interactive voice response, plus lots of other automated customer service features that make for happier customers and employees.

Learn more and sign up for a free, personal demo.

Originally published Mar 16, 2020, updated Jan 07, 2024