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What is IVR? A Buying Guide for Business Owners

Mona Bushnell
Mona Bushnell
Staff Writer
Business News Daily Staff
Updated Aug 05, 2022

If you're looking to optimize your employees' time, investing in an interactive voice response system can help.

  • Interactive voice response systems help automate telephone calls to your business.
  • Ranging from touch-tone commands to artificial intelligence, there are different styles of IVR to fit different needs.
  • When in search of an IVR, consider the price, your business’s needs and the pros and cons of using such a system.
  • This article is for any small business owner who is considering implementing an IVR system and looking for more details on how it operates and the features to consider when choosing one.

If you’re a small business owner, odds are you’re always looking to optimize your employees’ time and your business’s money. IVR systems offer an affordable way to streamline the call process for your customers and employees. This guide will walk you through an IVR, from the basics of this communication technology, to features you should consider, to recommended services, so you can make an informed decision when choosing one.

What is IVR?

IVR stands for interactive voice response, but in business terms, it refers to a large umbrella of software-based communication solutions, also known as computer-telephone integration (CTI). Some IVR companies offer basic services that allow small businesses to record automated voicemail messages and route calls, while others offer website, database and CRM integration, as well as robust reporting and bill processing options.

In the past, IVR was limited to telephone calls. During an IVR call, an automated voice recording would interact with a client, and in return, the client would press corresponding buttons to navigate the system. Today, many IVR systems have speech recognition built in, so people can talk directly to the system rather than push buttons. However, there are still many low-cost IVR services that offer button-response systems.

Visual IVR is another term you’ll see on IVR company websites. Usually, companies that offer visual IVR also offer traditional phone IVR. Visual IVR essentially moves the first part of the customer interaction from the phone (e.g., listening to a recording and pushing buttons) to a device like a smartphone or a computer.

By allowing customers to enter their information online, as well as what type of customer service they need, calls can be routed instantly without going through a touchtone or voice-activated menu. Instead, customers can connect with a customer service rep directly on the website, receive a call from a qualified rep or receive a number to call that will connect them with the right individual.

Key takeaway: Interactive voice response is a customer-facing piece of business software that can manage incoming calls rather than requiring a team of people to do the same tasks.

Editor’s note: Looking for the right IVR for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.


How does an IVR work?

Since the early 1960s, telephones have relied on a digital touch-tone system to dial phone numbers. These tones, generated by each key press, emit a dual-tone multi-frequency (DTMF) signal. For a computer to understand those tones, most IVR technology requires the use of an additional telephony card installed on a computer’s motherboard. That add-on turns those signals into a trigger for IVR software to work.

That’s not to say, however, that modern solutions haven’t gotten with the times. Many providers have since moved on to voice recognition or artificial intelligence to have IVR respond to callers. In these instances, voice extensible markup language is used by IVR systems to handle a phone call. With this style of IVR, systems no longer need a caller to enter data like their credit card number using the keypad, since they can just say the number out loud to the system.

In response to a caller’s requests, the IVR can then use text-to-speech to automate messages. This saves time and effort, since taking time to record every potential response would be impossible. Basic information like minimum payments, due dates and account balances can be easily generated by the IVR and sent to the caller.

Key takeaway: IVR systems rely on a variety of technical components to listen and respond to caller requests.

Why businesses use IVR

The type of IVR system you choose depends primarily on call volume and the way you want to use IVR in your business. Here are a few common uses for IVR that may help you decide the type of system to implement:

Customer service

Rapidly expanding businesses often find themselves without adequate customer service or support staff. Since IVR systems can be deployed quickly and scale easily, they are able to reduce wait times for customers. Plus, they alleviate the need to hire employees to field questions and route calls. For general customer service needs, an inbound IVR system is usually sufficient, but if you foresee requiring outbound IVR in the future, choose an IVR company that offers comprehensive services.

Payment processing and collections

Automating payment transactions is a common use for IVR. In addition to outbound collections calls, IVR services make it possible for customers to call companies to obtain their billing information or account balances and then make payments themselves. IVR systems that offer payment processing are typically more expensive than those that don’t, but for many companies, the cost is still lower than hiring individual customer service representatives to process payments.

Marketing and communication

Outbound IVR can be used for marketing purposes, such as alerting potential customers about a new sale or product, as well as communicating with existing customers. For example, a dentistry office might use an outbound IVR system to make automated calls reminding customers of upcoming appointments, while a call center might use IVR to make sales pitches to potential clients. If marketing is the driving force behind your company adopting an IVR system, look for services that specialize in call-center IVR and predictive dialing.

Key takeaway: There are numerous reasons why a small business would choose to integrate an IVR into its customer service plans, including to help with payment processing and marketing needs.

IVR features to consider

When selecting an IVR, look carefully at the kinds of features being offered. The IVR solution you choose must fit your needs. Some of the kinds of features you can expect on the market today include:

Cloud or on-site

In hosted IVR, the system resides in the cloud, and the responsibility for the maintenance and management of telecommunications and servers falls on the vendor. On-site IVR, on the other hand, integrates with a business’s existing telephone systems, and the maintenance of those systems falls on the company using the system. Today, most companies offer cloud-hosted IVR, and unless your business has specific reasons for maintaining your system on-site, it’s probably best to opt for a hosted service.

Inbound and/or outbound

The two basic types of IVR services are inbound and outbound. Inbound IVR systems handle incoming call volume, while outbound IVR systems make calls on either a total or partially automated dialing basis. Many companies offer both inbound and outbound IVR services, but IVR services that are for inbound only tend to be less expensive.

Speech recognition

IVR systems that have built-in speech recognition allow users to speak aloud in response to questions rather than only use their phone’s keypad. If your company needs a basic IVR system to route calls in your office and give out basic information, like your location and hours of operation, odds are a simple touchtone system will serve your needs. Speech recognition systems are often pricier than basic touchtone systems, but they’re worth the cost if your IVR needs are more complex.


When an IVR company offers “self-service” IVR, it usually means the product/service is intended for basic use for inbound calling. Many companies offer comprehensive IVR services and then separate, lower-priced, self-service IVR options. If your business only requires simple call routing or bill paying, and you don’t need outbound calling, self-service is probably the way to go. It should be noted that many self-service options do not have speech recognition.

Text to talk

It’s always worthwhile to ask if your IVR fees include any text-to-talk services. Text to talk is exactly what it sounds like. To set up your IVR system prompts using text to talk, you simply type in the prompt (like “Please press 4”), and then you select from a menu of voices to say that prompt. This type of service gives your IVR system a professional and consistent sound and negates the need to hire a voice actor or do the recordings in-house. You should also ask if there are limitations to any included text-to-talk services and if there are limits on how many recordings you can make and how often you can change your menus.


Many IVR providers offer full integration with existing databases, websites and CRM systems. As you might expect, services that offer integration are often higher priced than those that don’t, but they bring a lot to the table.

In an IVR system that’s not integrated, a caller that’s routed through to a live person will have to relay to that individual who they are, what their customer ID is and other pertinent information. That customer service rep will then have to look up the customer’s history in the CRM or database. In integrated systems, a customer calling in could say (or type) their name or password, and the IVR system would instantly access their information.

Integration is essential for automated bill paying through IVR services. It’s also helpful for delivering a higher level of customer service in general, since it makes it easier for customers to access their information and easier for representatives to access information for the client they are speaking to.

Dashboard and analytics

Before signing up for an IVR service, ask for a demo of the software system’s dashboard and inquire about options for viewing analytics and pulling reports. Viewing the dashboard ahead of time should give you some idea of how easy it will be to operate your IVR system and change it as needed. Additionally, consider any data reports that might be useful for your company and inquire about those types of reports before making a final decision.

Key takeaway: Features like full integration, text-to-talk and speech recognition can help your company best leverage an IVR system.

IVR advantages

As a small business, having to juggle daily operations while managing the phones can be a struggle. By implementing an IVR, you can not only add a sense of professionalism to your operation, but you can welcome the following advantages into your company as well.

Can quickly lead to an agent

When people reach out to a small business with questions, they want answers as fast as possible. After going through an IVR, the computer system can quickly transfer a customer to the right individual in the company who can answer their questions if the system can’t handle the request itself.

Creates more efficient customer service

As a piece of technology, IVR helps customer service team members handle the questions that they’re best equipped to answer. By putting the right employees in front of customers’ requests and queries, IVR helps boost customer confidence in your service.

Helps cut costs

Rather than hire a customer service team member whose sole job is to transfer requests to the right people, you can implement an IVR solution that automatically handles that task. As a result, that’s less you have to pay in a salary and benefits for a person on staff.

Boosts customer satisfaction

Many companies rely on IVR systems to serve as a high-tech receptionist, opting to let the system greet callers before transferring them to the right employee. Since IVR systems are usually easy to navigate, customers can get where they need to go without much trouble.

Key takeaway: IVR is an efficient piece of technology that can handle some of the long-running problems that come with a customer service phone line.

IVR disadvantages

Even though IVR can address several telephone-related issues for small businesses, it also comes with some disadvantages.

Labyrinthine menus

How your IVR system is set up is important, to say the least. For many customers, one of the worst things that can happen is getting lost in an automated phone system’s menu. This can be mitigated by taking special care of how your menus are laid out.

Overwhelming information

By front-loading too much information in your IVR system, you run the risk of confusing and bewildering customers. Rather than hitting callers with as much information as you can in the initial moments of a call, only offer the higher-level information first. That way, they can decide how far down the rabbit hole they want to go.

People don’t want to talk to “robots”

This problem is a symptom of IVR technology itself. Though IVR can be a great tool for small businesses, many customers may find it off-putting or difficult to understand. Others just don’t want to deal with a digital system and would rather just speak to a human. If this is the case, you may want to have a way for people to bypass the system and just speak with the next available agent.

Key takeaway: No business system is without its faults and an IVR solution can come with some negatives as well including having IVR menus that are too complex and by providing too much information too quickly to callers.

IVR pricing and service contracts

Like many tech solutions, there is a vast price range for IVR systems. The most expensive IVR systems are on-premises telephony systems. The process of implementing an in-house system may include paying fees for installation, server and phone rentals, ongoing maintenance and software.

Systems such as these are often cost thousands of dollars in setup charges alone, in addition to high monthly charges. Most SMBs opt for hosted services because they’re less expensive and faster to implement. Even so, there is variety in terms of service charges and pricing structures among hosted IVR services.

The lowest-cost cloud services typically offer IVR for a monthly subscription fee, with rates starting at around $50 per-month per-user and going up to well more than $100 a month per-user. Pricing structures like these typically don’t have service contracts attached, so they can be terminated or changed at any time. The level of service you opt for typically correlates with how many features you receive and how many minutes of IVR time are included in your subscription (watch out for overage charges).

Higher-priced cloud services, which offer integration, analytics, speech recognition and other sophisticated features, are typically contract-based, and the prices and terms vary depending on features as well as the number of lines being provided. If you’re opting for a more comprehensive system, like one of these, the best option is to request a price quote on the company’s website.

Key takeaway: You must pay attention to your company’s budget when selecting an IVR solution. Prices vary widely, so be sure to select an option that fits your business’s needs and budget.

IVR service directory

AspectAspect offers everything from call center IVR services to Chatbots and interactive text response. Aspect’s products can be integrated with CRM systems, scaled to meet the needs of enterprise-level clients, and bundled to include detailed analytics and reporting. 

CallFireCallFire‘s IVR is comprehensive in scope, with options for inbound and outbound calls, surveys, polls, call routing, appointment reminders and payment processing. CallFire’s technology relies on keypad responses rather than verbal responses and their drag-and-drop menu makes it simple for users to set up their own systems. 

Five9 – Five9 is an established cloud contact center software company and one of the most reputable providers of inbound IVR services, call center services, and outbound services like predictive dialing. Five9’s small business targeted cloud solutions include integration with CRM packages, analytics, monthly or annual pricing and no long-term contracts.

FreshdeskFreshdesk‘s small-business-friendly IVR allows users to mask existing phone numbers with alternate numbers for IVR purposes, route calls, transfer calls, convert phone requests to work-order tickets and pay on a per-minute basis. 

GenesysGenesys provides clients with access to a variety of customer service software solutions, including IVR that’s comprehensive enough for enterprise-level call centers. Multichannel routing, voice self-service, CRM integration, outbound dialing and real-time reporting are just a few reasons to consider Genesys. 

NICE inContactNICE inContact‘s IVR software lets customers choose the type of help they want, such as self-service or speaking with an agent. The software supports both automated speech recognition and text to speech, and features automatic callback for customers who can’t wait to speak with a representative. NICE inContact’s IVR solution also integrates with popular CRM applications. 

Plum VoicePlum Voice offers both comprehensive cloud-based IVR services, complete with speech recognition, text to speech and hundreds of languages available as well as less-expensive, self-service, inbound IVR systems. 

PronexusPronexus provides self-service IVR that’s customizable and multilingual as well as text-to-speech services and predictive dialing for outbound calling. Pronexus also has built-in functionality for polling and specialties such as patient notifications (for the health care field). 

Smart ActionSmart Action offers state-of-the-art IVR that’s powered by AI. Smart Action offers self-service voice IVR and SMS texting as well as chatbot services, Facebook messenger and Skype communications. Smart Action is best for medium to large businesses rather than small or microbusinesses. 

SynclioSynclio claims its clients can get a business line in 30 seconds. It offers SMBs the ability to program their phone systems to answer routine questions and route calls and responses recognizing keypad prompts or voice responses. Synclio also offers live reception outsourcing. 

Talkdesk – With more than 25 prebuilt integrations and comprehensive reporting features, Talkdesk offers streamlined IVR solutions. Talkdesk’s products are ideal for enterprise-level businesses needing advanced analytics and highly customizable service options. 

TelzioTelzio offers business VoIP systems with IVR features like call routing, menus and custom recorded greetings. In addition, businesses have the option to automatically forward calls to an operator if a caller doesn’t respond to IVR prompts. 

UpwireUpwire offers affordable IVR, voice SMS and email communications solutions that don’t require any coding or IT experience to set up. Like other DIY type companies, Upwire offers a drag-and-drop interface to make launching your IVR system simple and quick.

VerascapeVerascape offers a range of cloud-based IVR solutions, including self-service IVR, text messaging, bill payment and order processing, call routing, outbound notification and more. Verascape also offers a 30-day free trial for self-service IVR and/or SMS without transaction or setup fees. 

VoiceGuide – For a low starting cost of $99 per-line, VoiceGuide offers on-premises or cloud IVR systems that are easy to integrate with existing systems. In addition, VoiceGuide provides clients a user-friendly interface for building out their IVR menus without coding. 

VoicentVoicent‘s IVR systems are built for marketing, communication and customer service. Their cloud pricing system starts with a base level cost of $19 a month and then increases as customers select their own plans and features, which means you only pay for what you need. 

Voicestamps – Voicestamps specializes in IVR systems that process secure telephone payments. Voicestamps services are compliant with the PCI, FTC and FCC guidelines, and are used broadly for bill collections companies and general payment processing. 

XO Communications – A Verizon company, XO Communicationss provides an array of business solutions, including hosted IVR services. XO Communications’ IVR services are comprehensive and include all the functionality a growing business could need, from call routing and customized messaging to call recording and speech recognition. 

8×8 – Primarily for large-scale businesses, 8×8 offers IVR systems that are specifically designed with call centers in mind. CRM integration, contact center analytics and multichannel communication (phone, web, email, chat) make 8×8 popular with large corporations. 

Additional reporting by Andrew Martins.


Image Credit:

fizkes / Getty Images

Mona Bushnell
Mona Bushnell
Business News Daily Staff
Mona Bushnell is a Philadelphia-based staff writer for and Business News Daily. She has a B.A. in writing, literature, and publishing from Emerson College and has previously worked as an IT technician, a copywriter, a software administrator, a scheduling manager, and an editorial writer. Mona began freelance writing full time in 2014 and joined the Business News Daily/ team in 2017. She covers business and technology.