business.com receives compensation from some of the companies listed on this page. Advertising Disclosure

What is Interactive Voice Response?

Updated Jan 26, 2024

Table of Contents

Open row

Interactive voice response (IVR) technology answers customers’ calls and connects them to the right person in your company faster. Done well, they increase customer satisfaction, speed up response time and lower business costs.

There are plenty of choices for companies wanting to implement an IVR system. Most VoIP providers bundle fully customizable IVRs with their telephone and communications packages.

In this article, we explain what IVR systems are and how they work. We also look at what they

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

What is IVR?

IVR is an automated type of business phone system technology that directs inbound callers to the right department or individual based on their responses to a prerecorded menu.

IVR systems are widely used. Most people have experienced an IVR menu that starts with an automated greeting followed by options to navigate further using keypad inputs or voice commands.

IVR systems can save businesses money by gathering a caller’s information, determining the best person or department to help resolve their issue, and then routing the call to the appropriate phone number or extension without the need for human intervention.

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

FYIDid you know

IVR is also an essential feature of call center systems, along with call recording, live call coaching and speech analytics.

How does IVR work?

Interactive voice technology was developed in the early 1970s. Still, it didn’t gain widespread use until the ’90s, when computer hard drives that could read and write digitized voice data reached an affordable price point. These early on-premises IVR systems utilized simple dual-tone multi-frequency (DTMF) signals through a standard phone keypad to let callers navigate the IVR software’s menu options to reach the appropriate destination or hear a vital piece of information.

>> Learn More: What Is a Virtual Phone Number?

Today’s IVRs are offered as a primary or advanced feature for companies to consider when choosing a business phone system. Modern IVRs utilize the numbers and corresponding tones on your phone’s keypad as well as speech recognition and natural language processing to identify keywords and terms for navigating the available options in your call tree.

The ability to bypass the IVR menu to speak with a live agent is often available when a caller’s request is difficult to understand or uncommon. While standard call flow templates are available from many providers, most IVR menus and call flows are highly customized for each business. Their quality is determined mainly by the simplicity of their design.

Did You Know?Did you know

A virtual answering service is another way to interact with callers. Virtual answering services often include IVR as a tool, call forwarding, appointment scheduling and order management.

Who uses IVR?

IVRs are great at helping companies manage their inbound call flows without having employees pick up the phone — saving time and money in the process. While you may expect to come across an auto-attendant and IVR menu when contacting a multinational bank or internet service provider through a large call center, businesses of all sizes and customer levels in nearly every industry can benefit from IVR.

>> Learn More: Benefits of VoIP Business Phone Systems

Companies that hold private or sensitive data, such as financial institutions and healthcare organizations, often implement IVR systems. [Related article: How HIPAA Laws Impact Employers]

These companies let customers check their account balances or hear important medical test results without having to share their personal information with anyone or agreeing that their call can be recorded for training purposes.

FYIDid you know

You’ll also find IVRs used to promote sales drives, share product update information, gather survey data and communicate business hours when customers are on hold.

What are the benefits of IVR?

IVR systems lower costs by reducing agents’ time gathering information and routing calls manually. However, IVR technology is mutually beneficial for businesses and customers. IVR helps companies to cut costs while providing customers with an efficient service or sales experience.

IVR automatically gathers pertinent data and ensures that a caller doesn’t have to keep repeating their inquiry. It increases the likelihood of giving agents problems they can solve while customers avoid being transferred to multiple departments. What’s great about IVR technology is that most of the problems it solves will positively impact businesses and customers simultaneously.

Business benefits of IVR

  • You can automatically collect valuable customer data.
  • You can deploy fewer live agents.
  • Agents can hit the ground running with callers.
  • It gives a professional impression of your company.
  • It reduces data-entry errors.

Customer benefits of IVR

  • It has shorter hold times.
  • They’ll go through fewer transfers.
  • They can reach a live agent who’s prepared to help on the first try.
  • It has self-service options.
  • It’s available 24/7.

How do you implement IVR?

To implement an IVR system, you’ll need to acquire the capability via a cloud-based business phone system. Many providers offer auto-attendant features that function as automated receptionists to greet callers and route them to the appropriate departments or employees to help resolve their issues.

You can usually configure IVR systems with a drag-and-drop “call tree” interface accessible through a web browser. This easy-to-use visual tool lets you design and customize an IVR menu and call flow to your exact specifications.

>> Learn More: Explore SIP Trunking

Other business phone providers make implementation manageable with preconfigured routing options that let you choose an agent to answer calls based on longest idle, fixed order, round robin, skills and random selection. This can be especially useful in sales scenarios.

You may also choose the “other routing options” feature to send calls to voicemail, use direct-to-message routing, transfer a call to a specific department or send a call anywhere else you’d like.

Many IVR systems include the ability to set call routing during and after business hours and amid special circumstances, such as holidays. While getting an IVR system up and running is relatively easy and inexpensive, implementing it effectively requires you to have a detailed understanding of your inbound callers’ needs as well as your team’s capabilities.

Bottom LineBottom line

Getting your IVR up and running efficiently requires a comprehensive understanding of your customers’ needs and your support team’s capabilities.

What does an IVR cost?

Older on-premises systems can cost upward of $1,500 per line, with additional fees for configuration, maintenance and software updates. You could theoretically implement a cloud-based IVR for as low as $10 per month, but how cloud-based phone systems are priced means it’s not quite that simple.

>> Learn More: Multi-Line Phone Systems For Your Business

IVR functionality is generally among the features included as part of business phone systems and the best call center services. Most of these cloud-based communication platforms are priced per user in monthly or annual terms. So, while you could technically implement an IVR system with a single user account for as low as $10 per month, your ability to route all your calls to a live agent who can take advantage of your modern phone system’s features would likely require additional users and associated user fees.

Custom enterprise-level pricing is typically available at a lower cost per user for companies with more than 100 subscribers.

Best practices for using IVR

An automated phone system that doesn’t seem to understand your simple requests or have the option to route you to a human is among the worst customer experiences possible. That’s why it’s important to consider some simple best practices when setting up and using a new IVR system.

Generally speaking, it takes a thorough understanding of your callers’ historical and future needs and your team’s capabilities to design and implement an efficient IVR system.

1. Keep it simple.

Simplicity is the most crucial aspect of an effective IVR system. That means keeping recorded messages brief and limiting menu options to those that can be easily understood and likely remembered by a caller who’s hearing the list for the first time.

TipBottom line

Remember that callers may not be sure which option is the best for their needs and will likely want to consider all available options before selecting the best one.

2. Don’t hide your agents.

A properly designed IVR menu will always include an option to reach a live agent. While you may be tempted to force your callers to self-select into your well-crafted IVR menu to provide the best support possible, you may be setting up people for frustration.

Even the most robust menu options and advanced voice recognition capabilities won’t serve every caller’s needs. Withholding the option to get callers to a live agent quickly can make them feel neglected, leading to a poor customer experience that may subsequently take additional time and resources for a live agent to help resolve.

3. Limit repetitive announcements.

It will be difficult for a customer to believe their call truly is your priority if they’re reminded about it every 30 seconds while on hold for extended periods. Try to keep your announcements limited to call transfers, letting callers who’ve been on hold prepare to connect with a human.

>> Learn More: What Is a Softphone for Your Business?

4. Consider a non-primary language.

Providing an additional or non-primary language option at the end of your menu recognizes the preferences and requirements of millions of potential customers. For example, the United States has the second-largest population of Spanish speakers in the world. In fact, 13 percent of the U.S. population speaks Spanish at home, and by 2050, as many as 1 in 3 people in the U.S. will speak Spanish.

5. Note the information you gather.

Ensure that the information you collect through your automated system is provided to your agents for a mutually beneficial experience. Otherwise, your IVR may come across as efficient for your business at the expense of your customers, who will have to repeat themselves multiple times.

Best business phone systems with IVR

We regularly update and refresh our list of reviews of the best business phone systems. Below, find eight providers that offer IVR as part of their service.

Vonage

Vonage’s IVR system is branded “Virtual Receptionist.” It’s available to Premium and Advanced subscribers. Fees drop the more users you have on your system — their current prices are $29.99 per user per month for the Premium plan and $39.99 for the Advanced plan. Please note that the company regularly makes offers to encourage new sign-ups, so bookmark their site to see when they launch their next time-limited deal.

Key features of Virtual Receptionist include:

  • Create custom greetings (including via text-to-speech)
  • Flexible call routing to agents and answering service
  • Change call routing and handling depending on time and day
  • Out-of-hours options

Read our comprehensive review of Vonage.

Dialpad

IVR is available for all Dialpad users. They have three plans: $15 per month for Standard, $25 for Pro and Enterprise for larger companies (contact Dialpad for a quote).

Dialpad’s IVR offers the following features:

  • Favored call queues (for example, sales or customer service calls get priority)
  • Custom messaging for different hours
  • Selective call routing (based on skill, idle time and more)
  • Custom greetings for callers

Read our in-depth review of Dialpad.

Nextiva

As with Vonage, Nextiva has three plans whose rates depend on how many users you have on the system.

A one-tier IVR option is available on the Essential tier ($18.95 per month). To access the multi-level IVR which offers sub-menus, you’ll need to be on the Professional tier whose price per month per user is $22.95 or Enterprise whose fees are $32.95 per month.

A conversational AI-powered advanced IVR is available for an additional charge. This allows users to speak to the IVR system in their natural language rather than go through an entire menu of options. AI then processes to direct them to the correct department.

Read our comprehensive NextivaONE review.

RingCentral

IVR functionality is available to RingCentral Phone System users on all tiers. Current prices are Core at $20 per user per month, Advanced at $25 and Ultra at $35. If you pay monthly, the fees are higher.

Key features include:

  • Multi-level menus
  • Up to 250 voice menus
  • Separate IVRs per location
  • Easy to manage via a graphical editor

Read our in-depth RingCentral review.

Ooma

Ooma’s general IVR feature is called “Virtual Receptionist” and is available on all three subscription tiers. They cost, at annual rates, $19.95 per user per month for Essential, $24.95 for Pro and $29.95 for Pro Plus.

Their Virtual Receptionist product includes the following:

  • Custom messages
  • Dial by name
  • Different options depending on the time of day/week and language
  • Calls routed to ring groups and extensions

Read our latest Ooma review.

Zoom

Zoom’s auto attendant facility is available on all three plans, currently priced at $10, $15 and $20 per user based on the types of outbound calls you want to make.

Zoom IVR features include:

  • Forward calls to users, common area phones, call queues or an auto-receptionist
  • Pass call to external number
  • Dial by name
  • Multi-level menus

Read our updated Zoom review.

GoTo Connect

GoTo Connect offers its IVR service on both of their plans, currently priced at $27 per user per month for the Basic tier and $32 for the Standard tier. Basic tier customers can only record one IVR greeting while standard clients can record unlimited greetings.

Features include:

  • Drag-and-drop visual editor
  • Routing for days and times
  • Call volume analytics
  • Route to specific departments

Read our latest review of GoTo Connect.

8×8

8×8 offers five plans, all of which include a multi-level auto attendant. There are two Unified Communications tiers (X2 and X4) and three Contact Center tiers (X6, X7 and X8). Annual fees range from $28 per month per user on X2 to $140 on X8.

Key IVR features include:

  • Configure IVR from anywhere
  • Multiple customized caller greetings
  • Call waiting
  • Call picking

Read our updated review of 8×8.

Jeff Hale contributed to this article.

Mark Fairlie
Mark Fairlie
Senior Analyst & Expert on Business Ownership
Mark Fairlie has written extensively on business finance, business development, M&A, accounting, tax, cybersecurity, sales and marketing, SEO, investments, and more for clients across the world for the past five years. Prior to that, Mark owned one of the largest independent managed B2B email and telephone outsourcing companies in the UK prior to selling up in 2015.
BDC Logo

Get Weekly 5-Minute Business Advice

B. newsletter is your digest of bite-sized news, thought & brand leadership, and entertainment. All in one email.

Back to top