What Is Interactive Voice Response?

What is IVR?

IVR is an automated business phone system technology that directs inbound callers to the right department or individual based on their responses to a prerecorded menu. These systems have become standard practice for businesses of all sizes. In fact, almost everyone has experienced an IVR menu that starts with a greeting before offering keypad or voice-command options. 

The technology is widespread, too: 85.8 percent of Fortune 500 companies use IVR, according to a 2025 UnitelVoice survey, and there are more than 1.38 million active IVR systems across the U.S. and Canada, based on Market Reports World data.

IVR systems (sometimes called virtual receptionists) can save businesses money by gathering a caller’s information, determining who is best equipped to help and routing the call to the right number or extension without requiring human intervention. This automation is especially valuable for growing businesses; in one case study, a modern IVR rollout cut call-handling time by 40 percent and improved first-call resolution by 30 percent, resulting in significant annual savings.

When implemented correctly, IVR systems can also boost customer satisfaction by reducing hold times and quickly connecting customers to a live agent who can resolve their issues.

How does IVR work?

Interactive voice technology was developed in the early 1970s, but it didn’t gain widespread use until the ’90s, when computer hard drives capable of reading and writing digitized voice data became more affordable. Early on-premises IVR systems used dual-tone multifrequency (DTMF) signals — the tones from a phone keypad — to let callers navigate menu options and reach the right destination.

Here’s the basic flow with today’s IVR tech: 

1. When someone calls your business number, the IVR answers automatically with a prerecorded greeting. 
2. Callers select what they need using keypad inputs or voice commands. 
3. The system captures those inputs, matches them to the right menu option and then routes the call to the appropriate department, queue or individual.

IVR accuracy

Today’s IVRs can interpret natural speech, recognize intent and learn from past interactions, making them far more accurate than traditional menu-based systems. Modern platforms use artificial intelligence, natural language processing and machine learning to understand caller intent and improve routing over time.

In one Genesys and Google Cloud deployment, the IVR bot achieved more than 75 percent intent-recognition accuracy and routed 90 percent of calls correctly on the first attempt — a strong example of what well-trained conversational IVR can do.

At the same time, accuracy isn’t one-size-fits-all. Real-world performance depends on audio quality, caller behavior, industry terminology and how much training the system has received. The Marketing Artificial Intelligence Institute recommends aiming for around 80 percent accuracy as a practical benchmark for conversational systems.

Advanced IVR features and capabilities today 

Modern IVR solutions can process multiple languages, detect emotional cues and prioritize urgent calls. Callers can usually bypass the menu and reach a live agent when their request is unclear or outside a standard workflow. While many providers offer prebuilt templates, most IVR menus and call flows are customized, and their quality depends largely on how simple and intuitive the design is.

Who uses IVR?

IVR technology is used by businesses of all sizes, from small startups handling a handful of daily calls to large enterprises managing thousands of interactions at once. Any organization that fields frequent inbound calls, wants to reduce manual workload or needs to offer 24/7 service can benefit from IVR.

Regulated industries, in particular, rely on IVR heavily. Companies that handle private or sensitive data, such as financial institutions and healthcare organizations, often use IVR systems to support HIPAA laws and other compliance requirements. Healthcare providers use IVR to securely deliver test results, send appointment reminders and route patients to the right department. Banks and credit unions use it to let customers check balances, make transfers and authenticate themselves without agent assistance.

IVR systems show up in everyday operations across almost every industry. Retailers and service providers use them to share order updates or store hours, SaaS companies lean on IVR for support triage, and sales teams run automated campaigns for promotions or customer outreach. Because the technology scales so easily, it’s a practical option for any business dealing with growing call volume or a small support staff.

What are the benefits of IVR?

IVR systems deliver measurable ROI by reducing operational costs, shortening handle times and helping to create a better customer experience. In one Teneo.ai case study, a large service organization saved an estimated $2 million annually after upgrading its IVR and achieved a 30 percent increase in first-call resolution, a shift that significantly boosted customer satisfaction.

IVR technology benefits both businesses and customers, often at the same time. By gathering key information upfront and routing callers accurately, IVR reduces repeat explanations, cuts down on unnecessary transfers and ensures agents receive calls they’re equipped to handle.

Business benefits of IVR

• Automatically collects valuable customer data
• Reduces the number of live agents needed during peak times
• Gives agents the context they need before answering
• Creates a more professional, consistent caller experience
• Reduces manual data-entry errors
• Provides 24/7 availability without additional staffing
• Generates data analytics on call patterns and customer behavior

Customer benefits of IVR

• Shorter hold times
• Fewer unnecessary transfers
• Faster connection to the right agent
• Easy self-service options for simple tasks
• 24/7 access to information and support
• More consistent service quality, even during busy times
• The ability to resolve routine issues without waiting for a live agent

How do you implement IVR?

Implementing IVR is far easier today than it used to be, as most cloud-based business phone systems let you launch a basic IVR in hours. But doing it well requires thoughtful planning. 

Here’s a practical, step-by-step approach:

1. Choose a phone system with built-in IVR. Start by selecting a cloud-based business phone provider that includes IVR in its plans. Modern systems eliminate the hardware and long setups of traditional on-premises IVR.
2. Map out your callers’ needs. To ensure the IVR solves real problems instead of adding friction, it’s important to map out your callers’ needs. Before opening any IVR builder, outline:
   1. Why people are calling
   2. What information they commonly need
   3. What issues require an agent vs. self-service
   4. Where callers often get stuck or transferred
3. Design your IVR menu and call flow. Keep menus simple — two to three layers max — to avoid frustrating callers. Most business phone systems offer a drag-and-drop visual builder (often called a “call tree”) to help you:
   1. Create menu options
   2. Add prompts and greetings
   3. Build branches for each scenario
   4. Route calls to queues, departments or individuals
4. Configure your routing rules. Every provider offers routing logic you can tailor to your team. Common options include:
   1. Longest idle
   2. Fixed order
   3. Round robin
   4. Skills-based routing
   5. Random selection

Advanced systems can use real-time data such as agent expertise, customer value scores or predicted handle times to determine the best route automatically. You can also set alternative routing options such as sending callers to voicemail, playing a message, transferring them to a specific department or forwarding calls externally.

5. Set business hours, after-hours and holiday routing. This step ensures callers always receive the right information, even when no one is available. Configure the IVR to behave differently depending on time and day:
   1. Normal business hours
   2. After-hours messages
   3. Holiday schedules
   4. Emergency or weather-related updates
6. Record (or upload) clear greetings and prompts. Strong IVR experiences rely on:
   • Friendly, concise prompts
     • Clear instructions
     • No jargon
     • A consistent voice across all messages

Many providers offer text-to-speech voices, but professional recordings can elevate the experience.

7. 7. Test your IVR thoroughly — then test again. Run through every path a caller might take:
      
      
      
      1. Is routing correct?
      
      
      2. Are menus intuitive?
      
      
      3. Are prompts easy to follow?
      
      
      4. Are wait times reasonable?
      
      
      5. Do callers end up in the right place the first time?
      
      
      
      

      Get feedback from your team and a few trusted customers before going live.

      
      
   8. Monitor performance and optimize regularly. Once your IVR is active, monitor:
      1. Abandonment rates
      2. Transfer frequency
      3. First-call resolution
      4. Menu choices callers select most
      5. Wait times

Use this data to adjust menu design, improve routing and eliminate unnecessary steps.

What does an IVR cost?

It’s important to note that IVR isn’t typically a standalone product. Instead, it’s usually included as part of a cloud-based business phone system or one of the best call center platforms, which means real-world pricing depends on the communication package you choose, not just the IVR feature itself.

Entry-level plans from major providers start around $15 to $20 per user monthly, but businesses should expect to budget $25 to $40 per user for stronger IVR capabilities, such as multi-level menus, skills-based routing, analytics and integrations.

Enterprise organizations with 100 or more users can often negotiate 20 to 30 percent lower per-user costs, along with perks like dedicated support, onboarding help and deeper customization options.

Best practices for using IVR

Poor IVR design remains a leading cause of customer frustration. According to Accenture’s 2025 report Customer Service on the Brink, 87 percent of consumers say they would likely avoid a company after just one bad support experience, including interactions with automated tools like IVR. That’s why it’s essential to follow a few best practices when setting up or refining your system.

Ultimately, building an effective IVR requires a clear understanding of why customers call, what they need most often and how your team can support them. With that in mind, here’s how to create a user-friendly IVR experience:

1. Keep it simple.

Simplicity is the most crucial element of an effective IVR system. According to the Market Reports World research cited earlier, 31 percent of users reported dissatisfaction with their IVR experience, citing overly long menu trees as a top annoyance. In more than 140,000 documented support cases, customers abandoned calls after encountering more than three input prompts.

And according to McKinsey, seven out of 10 companies report IVR containment rates of 30 percent or less. Containment rate simply measures how many calls the IVR can handle on its own without sending someone to a live agent. When that number is low, it usually means the menu is too long, too confusing or just not addressing what callers actually need. It’s a good reminder that clarity and brevity make all the difference.

Aim for no more than four choices per menu level, with prompts under 15 seconds to maintain caller engagement.

2. Don’t hide your agents.

A well-designed IVR should always make it easy for callers to reach a live agent. Many businesses use “Press 0” as a universal shortcut, and it’s a good standard to follow. The data backs this up: According to Ipsos, 88 percent of consumers want to speak to a human when they have a customer service issue, and Gartner reports that 64 percent of customers would prefer companies didn’t use AI for customer service at all.

Even the best IVR menus and the most advanced speech recognition can’t meet every caller’s needs. If someone feels stuck in your menu or can’t get to a real person quickly, frustration builds fast, and it often leads to a tougher support interaction once they finally reach your team. Giving callers a clear, easy path to a live agent helps prevent that and creates a much smoother overall experience.

3. Limit repetitive announcements.

Nothing frustrates callers faster than hearing the same message every 30 seconds, especially if it’s a generic reminder that their call is “important.” Most people don’t mind waiting if the experience feels respectful and informative. Aim for hold messages every 40 to 60 seconds, and use that time to share something genuinely helpful, like the caller’s queue position, estimated wait time or a quick note about self-service options they might want to try.

4. Consider a non-primary language.

Adding an option for an additional language, even if it’s placed at the end of your menu, shows customers that your business understands and respects their communication needs. In the U.S., for example, about 45 million people speak Spanish at home, according to Statista, making it one of the most valuable language options to include.

Multilingual IVR is also becoming the norm for growing companies. According to the Market Reports World data referenced earlier, 62 percent of enterprises upgraded their IVR systems in 2024 to support multilingual interactions, adding support for more than 38 languages and dialects. Even a single secondary language option can make your IVR more inclusive and improve the experience for a significant portion of your audience.

5. Note the information you gather.

Make sure the details your IVR collects don’t disappear into a black box. Agents should see the caller’s information, past interactions and the exact IVR path they took before reaching the queue. When your IVR is integrated with your CRM, that data appears automatically, giving agents a head start. It’s a win for both sides: callers don’t have to repeat themselves, and agents can jump straight into solving the issue.

Best business phone systems with IVR

If you’re switching providers or looking for a business phone system with IVR, consider the following well-respected options. 

Vonage

Vonage’s IVR system is called Virtual Receptionist, and it’s available on all plans, which start at $19.99 per month, per line (check the website for current promotions). The Virtual Receptionist includes:

• Custom greetings (including text-to-speech)
• Flexible call routing to agents or answering services
• Time-of-day and day-of-week routing
• After-hours handling options
• AI-powered speech recognition
• Multi-language support

Explore this platform’s features, pricing and real-world pros and cons in our comprehensive Vonage review.

Dialpad

IVR is included across all Dialpad plans, which start at $15 per user monthly when billed annually. Dialpad’s IVR tools are easy to configure and benefit from the company’s strong AI features. Highlights include:

• Priority call queues (so sales or support can be routed first)
• Custom messaging based on business hours
• Skills-based and idle-time routing
• Custom greetings and menu prompts
• AI-powered call transcription and routing
• Real-time sentiment analysis to gauge caller mood

Get the full feature rundown and pricing details in our in-depth Dialpad review.

Nextiva

Nextiva offers IVR across three tiers (Core, Engage and PowerSuite CX), starting at $15 per user, per month with annual billing. More advanced capabilities are available in the higher tiers and through optional add-ons. Key IVR-related features include:

• Priority and skills-based routing
• Voicemail with AI-powered transcription
• Touch-tone prompts that route callers to the best agent
• Inbound sales and call center add-ons for managing high call volumes

One standout feature is Nextiva’s conversational AI Voice Bot, which allows callers to speak naturally rather than navigate rigid menu options. The system analyzes intent, routes calls intelligently and can significantly reduce misroutes.

Our comprehensive NextivaONE review can help you see if this platform is the right fit for your business.

RingEX

RingEx (formerly RingCentral MVP) includes a built-in multi-level IVR — called the Virtual Receptionist — on all plans. Pricing starts at $20 per user, per month when billed annually. The standard IVR lets you create custom greetings, build menu options, set time-of-day routing and direct callers to the right agent or department.

RingEx also offers an optional AI Receptionist add-on, which uses conversational AI to understand natural speech, answer routine questions, route calls with context and handle tasks like FAQs or appointment scheduling. According to the company’s case studies, the AI Receptionist has helped some businesses handle more than 90 percent of inbound calls without a live agent.

Check out our full RingEx review for a breakdown of pricing, IVR tools and advanced AI capabilities.

Ooma

Ooma includes its Virtual Receptionist IVR feature across all subscription tiers, with plans starting at $19.95 per user monthly. The Virtual Receptionist lets you build straightforward, menu-driven call flows and manage routing without needing technical expertise.

Key IVR capabilities include:

• Custom greetings and messages
• Dial-by-name directory
• Time-of-day, day-of-week and language-based routing options
• Routing to ring groups, extensions or external numbers
• Easy configuration through the Ooma mobile and web apps
• Built-in holiday and after-hours scheduling

Want to see how Ooma compares on pricing, call quality and overall usability? Read our latest Ooma review.

Zoom

Zoom Phone supports auto attendants (sometimes called “Auto Receptionists”) and IVR-style call routing as part of its cloud phone plans, which start at $15 per user per month when billed annually. Key features include:

• Forward calls to users, common area phones, call queues or an auto-receptionist
• Pass calls to external numbers
• Dial-by-name directory
• Multi-level menus
• Integration with Zoom Meetings and transcription features

The depth of IVR options (voice commands, advanced menus) may depend on the plan you select. Our updated Zoom review has more information.

GoTo Connect

GoTo Connect includes IVR and auto-attendant capabilities across all its business phone system plans. Pricing isn’t published, so businesses will need to request a custom quote. However, every tier includes the core routing and menu-building tools most teams need.

GoTo’s IVR features include:

• Drag-and-drop visual call flow editor
• Time- and day-based routing
• Custom greetings and announcements
• Ring groups and call queues
• Customizable dial plans
• Real-time dashboards and call analytics
• CRM and help desk integrations

Check out our full GoTo Connect review for a deeper look at features, pricing and ideal use cases.

8×8

8×8 offers multi-level IVR across all four of its business communication plans, though pricing is available only through a custom quote. Every tier includes robust auto-attendant tools that let you build and manage call flows without technical complexity.

Key IVR features include:

• Configure IVR menus from any device
• Multiple customizable caller greetings
• Intelligent call routing based on caller history
• Call queues, call waiting and call pickup options
• Omnichannel integration for voice, chat and SMS
• Multi-level auto-attendant support

For a closer look at performance, scalability and user experience, explore our full 8×8 review.