What is IVR? Interactive Voice Response explained

IVR can handle a growing business’s call volume, guiding customers and releasing the pressure on your team. With an IVR call flow, you save time, reduce money spent, and keep customers happy because you’re sending them to the right people as quickly as possible. 

In this guide, you’ll learn how IVR can help your team:

• Increase productivity
• Satisfy customers
• Scale a growing business without losing the personal touch

Ready to learn how it works? Let’s dive in.

What is IVR?

When searching for ways to save time around using a business phone system, you’ll run into all sorts of acronyms: 

• VRS or voice response systems
• VRU or voice response units
• ACD or automatic call distribution
• IVR or interactive voice response system

The acronyms are often interchangeable, and can get confusing in a hurry. Before we dive in, let’s get clear on a definition.

IVR is a system using voice recognition technology and keypad inputs to interact with your callers. It automatically guides callers through your phone menu options. Callers can select a specific option by speaking a specific phrase or dialing on their phone’s keypad, directing customers to the right response or team.

If you’ve ever heard the phrase, “Say ‘support’ for customer support,” you’ve come in contact with an IVR. The goal is to create a self-service greeting system to route customers to the right people the first time. Best of all, your team reduces the amount of calls they need to transfer and avoids the overwhelm of dealing with every customer call.

How does IVR work?

IVR technology sounds sophisticated, but using it’s simpler than you may think. Since IVR integrates with today’s user-friendly VoIP services, you don’t need technical knowledge to set it up. 

The basic functionality relies on a few key technologies working together: 

• DTMF or Dual-Tone Multi-Frequency signaling enables the most common form of IVR interaction. When callers press numbers on their phone keypad, each button generates two simultaneous audio tones at specific frequencies. The IVR system recognizes these tone combinations and routes calls accordingly.
• VoIP vs. PSTN integration determines how your IVR connects to the phone network. Cloud-based VoIP systems like Quo, formerly OpenPhone, route calls over the internet, making IVR setup simple. Traditional PSTN or Public Switched Telephone Network systems require on-premise hardware and IT resources to set up. Most small and growing businesses choose cloud-based VoIP options for their ease of use and scalability.
• Speech recognition technology takes the caller’s verbal response and translates it into a command to route their call. The IVR system uses ASR or Automatic Speech Recognition and NLP or Natural Language Processing to understand verbal responses. Instead of pressing numbers, callers can say “billing” or “support” and the system uses voice recognition to route them appropriately.

With this technology, clients can interact with your hosted IVR system via their phone’s keypad or speech recognition.

You can update the menu as your company grows to reflect evolving customer demands, or you can modify the menu for a smoother customer experience based on their feedback.

Either way, clients can route themselves to the best phone number. Alternatively, you can send them to a voice recording or an alternate phone location.

There are two levels of IVR capabilities:

1. Basic IVR: Greets your callers and routes them to phone extensions. It plays welcome messages, offers simple menu choices, and transfers inbound calls to the right department or individual.

2. Advanced IVR: Handles complex interactions beyond routing and acts as a virtual receptionist. Using conversational IVR and conversational AI, it can: 

• Take detailed messages when you’re unavailable
• Answer FAQs with pre-recorded responses so your team doesn’t need to provide live support
• Collect customer data before transferring calls
• Integrate with your CRM to personalize interactions and access information
• Use automation to send text messages

Common IVR use cases for growing businesses

Now that you understand how IVR works, let’s look at how growing businesses use it:

• Main number with call routing: Direct incoming calls to your main business number to route to specific teams or team members. This helps you manage high call volume and optimize your team’s time.
• Self-service customer support: IVR systems can direct callers to appointment booking links, help them check account balances, provide authentication, and answer common questions.
• After-hours call management: Set up emergency routing to a live agent, take messages, and set expectations for when callers can expect to hear back from your team. 
• Lead qualification and sales routing: Artificial intelligence voice agents like Sona can ask callers qualifying questions upfront and capture their responses.

6 benefits of IVR systems for businesses and customers

A well-designed IVR menu can feel like 50 pounds of weight coming off your shoulders. Combine IVR software with common integrations like appointment schedulers, for example, and it can even handle client intake. 

But that’s just a preview of the benefits of an IVR solution. Let’s examine how IVR can change how your entire business works:

1. Faster customer assistance

Speed is the name of the game in customer assistance. Lack of speed is the second-highest frustration of customers these days. Here’s how IVR solves this: 

• Instant routing to the right department
• Reduced wait times and frustration through automated call handling
• Higher customer satisfaction without hiring more customer support specialists

2. Improved team efficiency 

No team should have to spend time answering questions if they don’t have to. By directing sales calls and customer support queries to the right department automatically, you’ll improve efficiency. That way, your team can focus on fielding questions they can answer. Using IVR for customer service then boosts your productivity and resource allocation.

For example, Billdr is a home renovation marketplace matching homeowner customers with vetted contractors. They needed a main phone number their customers could call — a single source that could route customers to Billdr’s spread-out contractors.

So Billdr worked with Quo, which helped them:

• Create a toll-free North American number so customers could call without paying long-distance fees. 
• Give customers the option via IVR to select their city and speak to a local representative. 
• Arrange on-site visits effortlessly, with minimal feedback required from the Billdr team.

As Billdr expands to more markets, Quo is one of the keys to its scalable tech stack. Growing pains: minimized.

“New market expansion is now straightforward,” says Raphael Sammut, General Manager at Billdr. “We add a new number and change a few phone settings, and that’s it. It only takes five minutes to be able to scale our phone system.”

3. Connect clients to the right team

Your client shouldn’t have to look up different phone numbers to contact specific departments. If they do, it’ll only add friction and frustration to their experience. 

IVR works like call center software, creating one centralized number for a range of extensions, phone numbers, and voicemail inboxes. As your company grows, a customer only needs to look up one phone number. IVR call routing can handle the rest.

4. Streamline support for existing clients

Imagine looking at your call distribution numbers and seeing only 10% of your calls are from paying customers. Maybe the rest of your time is spent dealing with questions from potential customers.

What’s the problem with sending everyone to the same number? When those paying customers call, your team is overwhelmed with a bottleneck of handling incoming queries from non-paying leads. When paying customers’ calls slip through the cracks, they’re more likely to move on to another business.

5. Filter out spam calls

Spam calls are nothing but distractions. But they’re tricky and hard to detect. Your automated phone system can prevent spam calls from ever reaching you as robocalls don’t have a way to select a menu option so you can focus more on paying customers. The result is less time wasted on the phone, with a greater percentage of that time building a better customer experience.

6. Promote current deals

A typical restaurant asks its servers to inform guests about the latest deals. “Today, we recommend the calamari.” You can do similar work, but no one at your company has to do the pushing.

How? You can use IVR to create promotions as a menu option rather than having team members memorize them each time. This option can play frequently-updated recordings listing your current sales and specials.

For example, when someone uses IVR to reach your sales team, an automated recording can push a specific deal before a salesperson picks up. If you run a fitness center with a refer-a-friend promotion, a recording can encourage gym members who call you to ask about the promotion. You still get your pitch across without having to do it manually.

6 challenges to avoid when setting up your IVR

It’s easy to fall into the trap of using every bell and whistle when implementing an IVR system. That can quickly lead to overwhelming customers with too many features.

But if you watch for these common challenges, customers won’t feel that your voice recordings are making them jump through hoops to talk to a real person:

1. Customers can’t get help outside business hours

Callers who go straight to voicemail can feel like you’re ignoring them if they immediately go to voicemail during business hours. Self-service options will help avoid this. Even if your team isn’t available to resolve complex issues, your phone system can still help.  

Solution: Direct clients to pre-recorded messages that answer common questions. Set up an away voicemail greeting to direct after-hours callers to an emergency number if necessary. Though it doesn’t replace a live responder, a customized IVR menu can leave clients feeling better supported. Plus, customers can use the self-serve menu to answer simple queries, saving your team time.

2. Robotic greetings make customers hang up 

McKinsey calls personalization a “hygiene” factor: people don’t always notice it when it’s there, but an impersonal interaction can really stink.

Robotic IVR greetings can sound too similar to going straight to voicemail. Customers then hang up before they get the answers they need: a failed interaction. 

Solution: Record a greeting with a friendly, human voice to create a personalized experience. The more specific your menu options are, the more callers feel valued. This enhances their perception of your brand and builds a positive customer experience for them right from the start. And it all happens without you having to lift a finger each time someone new calls.

Not sure what to say? We’ve put together some IVR scripts and call flow scripts so you can get a head start on customizing your phone menu. Then easily upload a recording using our auto-attendant greeting generator.

3. Too many menu options overwhelm callers

Author Barry Schwartz once dubbed this the “paradox of choice”: the more options we have, the less satisfied we feel. Too many choices sound good, but they’re often unnecessary complications.

Think about your own consumer experiences. Don’t you hate listening to long, irrelevant options on a phone menu while waiting for the IVR to address your problem? Of course. There’s no such thing as a fast-forward button on phone calls.

Solution: Bring your most popular options up to the front. Don’t bury them deep in your recordings. Think about the most frequent calls you get and serve those first. Which menu options are absolute musts? Which ones fall under the response: “for all other questions…”? Build that as your “miscellaneous” option so customers feel you’re addressing their problems.

4. Your IVR becomes outdated

Even if you built a great IVR menu on your first try, your customer needs can change over time. An IVR that worked perfectly six months ago may now route calls inefficiently.

Solution: As you grow, keep an eye on your call data. Add call notes to your contacts lists. Chat directly with your team to learn the reasons clients call the most often. Who are they trying to reach? What questions are most common?

You don’t have to tweak your IVR every week, either. Just watch the significant trends to see if there are gaps in your IVR menu. Your IVR provider should include analytics tools so you can review the data yourself, changing your menu accordingly.

5. Language barriers prevent customers from getting help

Do you have target customers spread across multiple geographies and cultures? Without language options, you may alienate customers who struggle to navigate an English-only phone menu. 

Solution: Use multiple menu options to accommodate each. “For English, press 1; for Spanish, press 2” provides minimal interruption‌ — ‌after all, every customer wants the IVR to speak the right language. The courtesy of offering multiple language options also shows you care about each demographic.

While Quo provides text-to-speech options to generate an English IVR menu greeting, you can use Eleven Labs’ free tool to automatically get a greeting in other languages.

6. Technical glitches and poor routing frustrate callers

Done customizing your IVR menu on your VoIP system? Don’t end it there. Untested systems can have errors that create a poor experience.

Solution: Before implementing the system, conduct thorough testing to ensure it works properly. 

• Call your phone number multiple times.
• Try different menu options.
• Once you select an option, confirm your call goes to the appropriate department/individual.

Then make any backend adjustments as necessary.

You might imagine you’ve thought of everything, but testing the IVR system helps you catch errors or poor phrasing in your text-to-speech entries you haven’t thought of. And there’s good news here. If your team uses an on-premise PBX system already, moving to a cloud-based VoIP provider means updating your phone settings is simple.

The testing process sounds cumbersome, but VoIP makes changes easy and immediate.

How to set up an IVR phone menu in Quo

VoIP phone systems like Quo have revolutionized small businesses: setting up IVR is no longer difficult.

You can set up a Quo IVR in just a few minutes. 

1. Open Quo on the web or desktop app.
2. Navigate to “Settings” and then “Phone Numbers.” 
3. Select the phone number to which you’d like to add a phone menu.
4. Click Edit call flow under the Call flow section.

Add the phone menu to your flow:

1. Drag the Phone menu step into the canvas
2. Place it after:
   • Incoming call trigger, for all calls
   • Business hours condition, for time-based menus
3. Select the step to configure settings

Set up menu options: 

1. Click Add keypad option
2. Assign numbers 0-9 to destinations
3. Add voice keywords for each option
4. Configure up to 10 different menu options

Each menu option can route to:

• Ring users: Connect to team members
• Voicemail: Direct to specific voicemail box
• Play audio: Share recorded information
• Forward call: Route to external numbers
• Another phone menu: Create multi-level menus
• Sona AI agent: Let AI handle the call

Create your greeting:

Click Add greeting message and choose:

• Upload a file: Use existing audio (MP3/WAV)
• Record: Create greeting directly in Quo
• Text to speech: Type text for professional voiceover

Configure what happens if callers don’t make a selection:

• Default: Routes to voicemail
• Alternative options: Ring users, repeat menu, or forward

Check out our Help Center guide to learn more about the different IVR destinations you can set, such as routing to a specific team member or to an external phone number.

Use Quo’s IVR to improve your team’s call flow

Along with other helpful business phone features like call recording, business app integrations, and voicemail transcriptions, your phone system can be an asset, not a liability. And when you use it properly, customers will barely notice it. It’ll just be another part of a pleasant customer experience.

Quo makes it possible to route callers, handle CRM integrations with your phone system, and even reduce operational costs for your business. And you can do it with an easy-to-install system that functions via the Internet. 

Ready to get started? Sign up for your free trial of Quo to set up your first IVR menu today.

Frequently asked questions about IVR