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Grow Your Business Technology

Choosing an Interactive Voice Response System Right for Your Business

IVRs allows computers to respond to customer calls and try to provide them with answers to the questions they have. / Credit: SaleIVR image via Shutterstock

Employing people to sit around and answer phones all day can be a costly undertaking for small businesses.

To make sure their staff is productive as possible, many businesses of all sizes automate their phone-answering system with interactive voice response (IVR) technology. IVRs allow computers to respond to customer calls by providing them with answers to their questions.

"Anytime I am talking to a computer or a computer system is talking to me is technically an IVR," said Ian Hunter, principal architect of emerging channels for IVR provider USAN. "The IVR is acting as that first line agent." [How to Design an IVR Phone System That Doesn't Annoy Your Customers]

The goal of most IVR systems is to allow customers to serve themselves by automating the calling process. The technology uses either touch-tone or speech-recognition technology to answer customer questions, handle their requests or point them in the right direction, all without having an employee speak with them directly.

"An IVR system is an automated phone system that greets and directs callers based on the callers' responses," Diana Chu, chief executive offer of VoIP services provider Telzio, told Business News Daily.

While systems like these were once only used by large companies that received massive amounts of calls on a daily basis, small businesses are now jumping on board and seeing just as many benefits. Forecasts from Global Industry Analysts Inc. project that based on the demand from small and medium-size businesses the global market for IVR systems will reach nearly $2.8 billion by 2017.

Rayomond Chinoy, owner of IVR Lab, said nearly any size or type of business can benefit from IVR technology.

"If you have a phone system that you want to interact with your customers, some sort of IVR can be useful," Chinoy said.

What's making IVR technology more accessible to small businesses is that many services are now cloud-based. Rather than having to pay for expensive equipment and numerous dedicated phone lines for their own IVR hardware, small businesses can hire a Web-based service that will host the equipment for them.

Editor’s Note: Considering an interactive voice response system for your business? If you’re looking for information to help you choose the one that’s right for you, use the questionnaire below to have our sister site, Buyer Zone, provide you with information from a variety of vendors for free:


"With physical IVRs, you are limited by the number of ports you put into the phone lines," Chinoy said. "With the cloud-based system, everything is typically VoIP based, so there are no limitations."

In addition to saving money by not having to buy the IVR hardware themselves, Chu said the cloud-based systems also benefit business owners by allowing them to easily set up and update the system on their own.

"Basic [cloud-based] IVR systems do not require any hardware or IT expertise to set up and manage," she said.

There are two types of IVR systems: inbound and outbound. Inbound IVR systems are used to automate the calling-answering process. The most common use for inbound IVRs is call routing, according to Hunter. For example, when calling a business the IVR might direct the customer to push 1 for a company directory, 2 for the billing department, 3 for the sales department, etc.

"They can basically roll you to the right phone or put you in the right voice mail," he said.

However, depending on a business's need, IVRs can help conduct much more complex transactions.

Chinoy said more and more companies are now using the system to accept payments over the phone for things like outstanding bills.

"We are currently working with an insurance company that is setting up the system so customers can pay their premiums [over the phone]," he said.

Chinoy said the inbound IVRs have become so sophisticated that they can now connect with a third-party payment gateway service so transactions can occur in real time.

Other examples of inbound IVR uses include financial institutions that allow customers to conduct telephone banking or fill out loan applications, health care firms that let patients access admittance or discharge records, and retailers that want to accept product or service orders automatically over the phone.

In addition to inbound IVRs, many businesses are now taking advantage of outbound IVR technology. Outbound IVRs allow businesses to have their systems call customers for things like conducting surveys or reminding them of upcoming appointments.

Chinoy said there are huge cost savings involved with sending out automated messages to customers versus having an employee try to handle those calls. He said most workers would be able to make only about 30 or 40 calls an hour before they tired out.

"You can make the same calls with an automated system and do one hundred a minute," he said. "Think about the cost savings right there."

A number of businesses are now using outbound IVR technology to survey customers about their experience after visiting their store. He said the system can call the customer to ask them if they were pleased with their product or the service they received.

"They can say "press 1 if you are satisfied or press 2 if you are not satisfied," Chinoy said. "It can be as simple as that."

Other uses for outbound IVR services include notifying customers of pending events, such as order status, shipment status or payment received. They can also be used by retailers to contact customers to see if they want to reorder products or online pharmacies to see if a customer needs a prescription refilled.

"[Outbound IVR] can be really, really valuable," Hunter said.

There are a number of benefits that both businesses and their customers can get from IVR systems.

When effectively designed, inbound IVR systems can greatly improve the way businesses handle calls from their customers. Instead of having to train numerous employees how to answer calls and where to find information customers are asking for, IVR systems complete those tasks automatically.

"IVR systems streamline and unify business communications," Chu said. "It can also improve customer service and sales when used properly."

In addition to simplifying the way businesses answer customer calls, IVR systems also save companies money by not having to pay employees to do the work the system is automatically taking care of.

"If they can answer your questions without transferring you to an agent, they just saved themselves a significant amount of money," Hunter said of IVR systems. "It is much more expensive to have an agent take those calls."

In addition to the cost savings, Chinoy said IVRs also increase productivity because employees aren't spending hour after hour answering the phone. Instead, the same employees can work on their main responsibilities and only deal with customers whose concerns can't be handled by the system.

"Instead of having three people answer phones and look up information on the computer and then relay it to the customer, this makes for a pathway for them to get the information automatically," Chinoy said. "Then your staff is free to handle specific concerns of customers."

The key in making sure the system is benefiting both the business and customer. While the business may be saving money and increasing productivity, the IVR system is only advantageous to customers if they are able to easily get the information they are searching for.

Hunter said, for example, if the menu options don't cover what the callers need or are hard to understand, customers are going to get quickly frustrated, which ends up making the IVR a disservice to everyone involved.

"Make sure you aren't alienating your customers," Hunter said. "If they are cleverly designed, they can benefit in more ways that you would think."

Chinoy said the way to not anger customers is by analyzing why people are calling to ensure the system is giving them answers they need. For example, he said if numerous callers every day are asking for the business's address so they can send in their payment, then an option for the business's address should be one of the first menu items presented to customers when they call in.

"The trick is to modify it as you get feedback from your customers," he said. "If you don't, they are going to figure out a way to bypass the system to get back to customer service."

Chinoy said the calls must be analyzed and those employees who do end up having to take calls from customers whose questions or concerns aren't being handled by the system need to relay that information on.

"Make sure the people taking the calls understand what the frustration is and what the feedback is," Chinoy said. "Getting the feedback and making the changes is critical."

To really know if an IVR system will benefit your business, it is critical to understand how many calls a day you are receiving and what those calls are for.

"Just because and IVR system makes sense for you, doesn't mean it makes sense for your customers," Chinoy said. " If you get 10 calls a day, An IVR system is probably not going to work for you because of the cost factor and you are probably going to [anger] your customers."

Chad Brooks

Chad Brooks is a Chicago-based freelance writer who has nearly 15 years experience in the media business. A graduate of Indiana University, he spent nearly a decade as a staff reporter for the Daily Herald in suburban Chicago, covering a wide array of topics including, local and state government, crime, the legal system and education. Following his years at the newspaper Chad worked in public relations, helping promote small businesses throughout the U.S. Follow him on Twitter.