What is AI IVR? The Benefits of AI-Powered Call Handling

For decades, Interactive Voice Response (IVR) has been the main technology for managing calls in contact centers.

But conventional IVR systems often fall short of meeting modern consumer expectations.

Clunky menu options, outdated technology, and impersonal interactions often lead to a poor user experience.

These pain points have led to widespread hostility towards IVR systems.

In fact, 51% of customers will abandon a call entirely simply to avoid navigating an IVR menu.

This is a significant challenge for call centres that rely on IVR to automate routing and call handling.

Without these systems, managing high call volumes efficiently would be an impossible task.

Advancements in artificial intelligence offer a solution to this problem.

AI transforms conventional IVR from a rigid and robotic system to a dynamic, conversational assistant.

But what exactly is AI IVR, and how does it enhance traditional call handling?

What do businesses and call centers stand to gain from upgrading their IVR system with AI?

In this article, we’ll answer these questions and more. We’ll cover...

• What is Interactive Voice Response?
• The limitations of traditional IVR
• What is AI-powered conversational IVR?
• Benefits of AI-enhanced IVR for contact centers & callers

TL;DR:

AI IVR is an intelligent call-handling system that leverages artificial intelligence to improve the capabilities and user experience of traditional IVR. Key benefits...

1. Better language understanding: Handles nuanced, conversational language for better self-service, faster resolutions, and a humanised CX.
2. Improved call routing: Highly accurate and efficient routing reduces misdirected calls and wait times.
3. Multilingual capabilities: Real-time language detection and support for diverse linguistic needs.
4. Increased customer satisfaction: Faster and more efficient service, empathetic interactions, and increased accessibility boost CSAT and customer loyalty.
5. Lower operating costs: Automation reduces agent dependency, labour costs, and call handling time.
6. Advanced analytics: Deeper insights from AI analytics/reporting, sentiment analysis, real-time monitoring, and more.

What is Interactive Voice Response (IVR)?

IVR is a telephony technology used by businesses and contact centers to automate customer interactions and call handling.

Traditional IVR typically uses pre-recorded voice prompts and options to guide callers through a set menu of choices.

These menus are navigated using the caller’s phone keypad or basic voice commands.

Each menu option is predefined, and callers are guided through the system step by step.

Standard IVR systems are designed to answer simple queries, direct calls to the appropriate department, and provide basic information without human assistance.

For example, in a customer service scenario, a caller might be prompted to "Press 1 for billing queries, Press 2 for technical support," and so on.

While traditional IVR can be useful for basic automation and tasks, it’s become a very outdated technology that often feels rigid and cumbersome to customers.

Limitations of traditional IVR systems

As we’ve covered, although standard IVR systems have long been a staple in customer service, they’re not without pitfalls.

As technology advances and customer expectations increase, these limitations become increasingly problematic – and harder to overlook.

Below, we’ll explore the disadvantages associated with traditional IVR in more detail.

1. Static nature

Conventional IVR systems are inherently static, relying on set menus that can't adapt to the dynamic needs of callers.

The rigid structure of IVR menus often requires callers to manoeuvre through layers of prompts to find the right service.

This lack of flexibility leads to customer frustration as they struggle to navigate limited options that may not even cover their specific request.

Moreover, the inability to accommodate diverse or complex queries highlights a significant gap in the functionality of traditional IVR.

2. Limited language understanding

Most traditional IVRs rely on touch-tone inputs or very basic speech recognition.

While functional for simple commands, these systems often falter when faced with nuanced or conversational language.

The inability to process natural speech often leads to misinterpretations or a complete failure to understand the user’s request.

This can cause a lot of friction in the customer experience, leaving callers feeling exasperated and dissatisfied.

3. Routing errors

Call misdirection is a frequent pain point in legacy IVR systems.

Customers can find themselves stuck in endless loops or routed to the wrong department.

This is usually due to rigid menu options, poor design/usability, or the inherent lack of flexibility and language understanding.

The result is longer handling times that keep customers stuck on calls for far longer than necessary.

Poor routing efficiency not only undermines the customer experience but also places additional strain on live agents.

4. Impersonal & robotic interactions

Without conversational capabilities, interactions with traditional IVRs tend to be mechanical in nature.

These systems also struggle to adapt to individual customer needs or preferences.

Instead, they typically operate on a one-size-fits-all framework, offering little flexibility.

As a result, customer interactions with IVR feel transactional and robotic instead of supportive and engaging.

This can be particularly problematic for sensitive or urgent customer queries where empathy is key.

It’s also alienating for modern consumers who expect more humanised and personable service.

5. Frustrating customer experience

The cumulative effect of the above limitations frequently results in a negative customer experience.

Case in point, 55% of customers are frustrated with traditional IVR because they feel it makes them jump through hoops to get support.

What’s more, customers using basic IVR systems often have to repeat information multiple times or endure lengthy wait times to reach a human agent.

This inefficiency not only erodes customer satisfaction but also impacts brand reputation.

What is AI-powered IVR?

While traditional IVR served a purpose in previous decades, its growing limitations and inability to meet evolving expectations highlight the need for modernisation.

This is where AI-powered IVR solutions come into play.

AI IVR (also referred to as conversational IVR) represents the next evolution of automated call handling.

It integrates artificial intelligence into IVR systems to improve their capabilities and functionality.

This creates a smarter, more efficient, and customer-friendly solution.

AI IVR leverages technologies such as generative AI, natural language processing (NLP), conversational AI, and machine learning.

These technologies have the power to transform call management, efficiency, and the call center experience.

Benefits of an AI-driven approach to IVR

By leveraging voice AI-driven customer service, businesses can mitigate the limitations of traditional IVR while providing superior service to their customers.

Let’s explore the key benefits of enhancing IVR with AI.

1. Natural language understanding

Unlike traditional IVR, AI IVR uses natural language processing (NLP), natural language understanding (NLU), and generative AI.

This technology means that AI IVR can understand, interpret, and respond to customer inquiries in a way that feels conversational and human-like rather than robotic or scripted.

It also means that callers aren’t limited to rigid prompts or a strict menu of options.

Instead, they can ask questions or make requests in their own words.

In turn, the system can either answer the customer’s query or route the call accordingly.

The language capabilities of AI voicebots enable IVR to go beyond simple commands and recognise the nuances of natural language, such as context, intent, and even sentiment.

This allows the IVR to understand and handle more complex queries or requests.

The result is better self-service as well as improved call management, empowering customers to resolve many issues themselves without agent intervention.

In fact, AI-powered conversational IVR can handle up to 90% of customer calls autonomously.

The combination of natural language understanding and advanced AI customer service creates a superior user experience.

This reduces frustration by enabling fast resolutions for a wider range of customer issues.

2. Improved call routing accuracy

Accurate call routing is crucial for call center efficiency and performance.

When customers are connected with the right agent or department from the start, the chance of a first-call resolution and a positive customer experience is much more likely.

However, the routing process with legacy IVR systems is a key pain point for customers.

Traditional IVR routing requires callers to navigate through multiple layers of menus with very limited or restrictive options.

This frequently causes confusion or friction, extended wait times, and a generally poor user experience.

AI-powered IVR systems, by contrast, can analyse natural language and use intent recognition to determine the purpose of a call with high accuracy.

This streamlines the process and ensures...

• Precise routing: Directing customers to the most appropriate department or agent without delays or errors, reducing misrouted calls. In fact, conversational IVR can increase correct transfers by 25%.
• Reduced wait/handling times: Fewer transfers or re-routings improve operational efficiency and service speed, minimising customer frustration.
• Support for complex queries: AI can distinguish between nuanced intents (e.g., differentiating “I want to cancel my subscription” from “I want to pause my subscription”) to ensure the right resolution path.

The accuracy of AI-driven call routing helps you optimise agent workloads and address customer issues faster and more effectively.

3. Multilingual capability

Being able to support consumers in multiple languages is essential for accessibility.

Especially for international brands or those with a diverse customer base.

To achieve this with traditional IVR, you’d have to record all the voice prompts multiple times, in different languages.

With AI-powered IVR, the system can automatically detect a caller’s language and seamlessly switch to it without requiring multiple sets of pre-recorded prompts.

Advanced AI technologies enable conversational IVR systems to understand and respond to a wide range of languages, accents, and even regional dialects in real time.

This saves time and resources during setup while ensuring that customers feel understood and valued, no matter where they are or what language they speak.

It also eliminates language barriers and reduces miscommunication, ensuring inclusive and seamless AI customer support.

With AI IVR, you can maximise accessibility by catering to diverse linguistic needs and minimise the complexity of managing multilingual interactions.

4. Increased customer satisfaction

Many of the benefits of AI-driven IVR contribute to a significant increase in customer satisfaction.

This is due to the following factors...

• Increased support efficiency: AI IVR can quickly identify and understand the caller’s meaning/intent and route them correctly from the start, cutting down on hold times and handling times.
• Faster resolutions: Enhanced self-service options and increased routing accuracy minimise the time needed to resolve customer issues.
• Humanised automation: Natural language processing, conversational interactions, and custom voices create a more personable and enjoyable user experience.
• Multilingual capabilities: AI IVR’s ability to serve in different languages improves accessibility and customer communication.

The result? Happier customers who are more likely to remain loyal and recommend your business to others.

In an era where customer experience is a key differentiator, AI IVR can give your business or call center a powerful advantage.

5. Lower operating costs

While traditional IVR systems may appear more cost-effective due to lower upfront implementation costs, AI IVRs deliver a higher ROI over time.

These systems reduce expenses by automating a significant portion of call handling, decreasing the dependency on live agents and minimising labour costs.

Additionally, faster and more accurate call routing reduces call durations and repeat calls, further boosting efficiency and lowering overall costs.

In fact, call centers across industries experience up to a 40% reduction in average call handle time from using voice AI and a 50% reduction in operational costs.

Beyond these direct savings, the improved customer satisfaction that AI IVR fosters can lead to increased revenue.

All these factors make the initial investment highly worthwhile for businesses looking to optimize their customer service operations.

6. Advanced analytics

Although traditional IVR can provide basic analytics (e.g. call volume stats), they lack the depth and granularity offered by AI-powered systems.

With AI, IVR can generate deeper and more valuable insights using advanced technology and data processing capabilities.

AI-enhanced IVR can offer a range of analytics and reporting features, for example:

• AI-generated call transcripts, interaction summaries, and reports
• Real-time monitoring
• Sentiment analysis
• Call pattern analysis

These capabilities empower you to improve customer service, manage telephony demand more effectively, and make data-driven decisions.

The takeaway

AI has the potential to overcome traditional IVR’s shortcomings and redefine what customers can expect from automated service.

By leveraging new technologies, AI IVR delivers more seamless, intelligent, and humanised support compared to legacy IVR systems.

This can yield significant efficiency gains for contact centres, as well as enhance customer experience.

It’s why we’ve released our own voice AI-powered IVR solution.

Designed to optimise call management with conversational IVR, Talkative’s voice AI currently offers:

• An Intuitive Workflow Builder: Build sophisticated voice workflows using Talkative’s versatile chatbot builder. Create customised AI IVRs, implement knowledge base lookups, manage call transfers, welcome messages, data collection, and more.
• Custom Language Options: Choose from a library of AI voices or use your own custom AI voice to humanise automation.
• Multilingual Support: Assist callers in a range of different languages, improving accessibility.
• Seamless Agent Handoffs: Transfer calls directly into live agent queues via SIP or PSTN for a smooth customer journey.
• Advanced Analytics: Leverage real-time and historical AI analytics, including transcripts, interaction summaries, insight reports, sentiment analysis, real-time monitoring, and more.

With our solution, you can transform clunky IVRs, reduce interaction costs, and provide 24/7 automated support with the warmth of a human voice.

In addition to voice chatbots and AI solutions, we offer a complete suite of customer contact channels and capabilities - including live chat, web calling, video chat, cobrowse, messaging, and more.

Want to learn more?

Book a demo with Talkative today, and check out our interactive product tour.