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Conversational IVR
Conversational IVR is the evolution, or even revolution of telephonic customer service. Forget button-pressing, and simply let customers tell your Conversational AI what they need and want.
Understanding IVR (Interactive Voice Response)
Conversational Interactive Voice Response (IVR), is a telephonic customer service system powered by AI. Unlike traditional IVR with its button-pressing menus, Conversational IVR uses natural language processing (NLP) to understand a customer's spoken request.
This allows customers to talk to a smart assistant on the phone. The IVR analyzes the customer's intent and responds either with relevant information or by routing them to the right human agent. This frees up agents for complex issues, shortens wait times and offers customers a more natural and efficient experience for simple inquiries.
The history of IVR
The roots of IVR go back to the early phone days, when operators manually connected calls using switchboards. In the 1960s, the first Touch-Tone telephones with buttons paved the way for Dual-Tone Multi-Frequency (DTMF) IVR. These early systems used recorded prompts with menus of options you selected by pressing buttons. Think "Press 1 for Sales, 2 for Support..." While efficient for basic routing, they lacked flexibility and offered a frustrating experience.
The 1970s saw the rise of Voice Recognition (VR) IVR, where callers spoke their choices. However, VR technology was limited, often requiring specific keywords and struggling with accents or background noise.
The late 20th century brought Menu-Driven IVR with more complex decision trees and pre-recorded responses. This offered some improvement, but it remained rigid and unable to handle nuanced requests.
A big step forward was the rise of Natural Language Processing (NLP) in the early 21st century. Conversational IVR, powered by NLP, understands the meaning behind spoken sentences, not just keywords. This allows for more natural conversation with the system.
The latest advancement comes with Large Language Models (LLMs). These AI models enable even more sophisticated interaction. LLM-powered Conversational IVR can hold more complex dialogues, understand context better, and adapt to different communication styles. This makes the future of IVR bright, promising a truly natural and efficient way for companies to interact with their customers..
How IVR works
Here are 5 key components that make Conversational IVR systems work:
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Automatic Speech Recognition (ASR)
This component converts the caller's spoken words into digital text, allowing the system to understand what's being said.
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Natural Language Understanding (NLU)
This AI technology analyzes the text from ASR to grasp the meaning and intent behind the caller's words. Essentially, it figures out what the caller wants.
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Dialog Management
This component manages the flow of the conversation. It uses the information from NLU to determine the next step, whether it's providing information, routing the caller to an agent, or asking clarifying questions.
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Text-to-Speech (TTS)
Once the system knows how to respond, TTS converts the chosen response back into natural-sounding speech for the caller.
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Knowledge Base Integration
Conversational IVR can access and utilize information from a company's knowledge base, allowing it to answer frequently asked questions or provide specific details directly.
Call flow
Conversational IVR interactions follow a typical path, with the goal of either answering your query or routing you to an appropriate human agent.
Imagine you call a company. A friendly voice greets you (pre-recorded audio). Automatic Speech Recognition (ASR) then kicks in, converting your spoken response into text.
Natural Language Understanding (NLU) then analyzes the text to understand what you want. Did you say "billing" or "technical support"? Based on this (intent recognition or prompting), the system uses Dialog Management to choose the next step.
If your request matches a pre-designed response, or the system has enough knowledge to generate a relevant answer, then it plays that as a Text-to-Speech (TTS) prompt. For more complex requests, the system might ask clarifying questions ("Can you tell me more about the technical issue?").
Throughout, the system might access a Knowledge Base to answer FAQs or retrieve relevant information. Finally, depending on your selection or the conversation's direction, the system might:
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Route you to the appropriate department using Automatic Call Distribution (ACD).
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Offer self-service options like account management through voice commands.
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Connect you to a live agent for complex issues.
This conversational flow offers a natural and efficient way to navigate the IVR system, getting you the help you need faster..
DTMF vs. speech recognition
Speech recognition is a huge upgrade compared to traditional button press IVR. Let’s look at how they are different.
Traditional DTMF IVR relies on button presses for interaction. Imagine a robot voice saying "Press 1 for Sales, 2 for Support..." You respond by pressing the corresponding button on your phone's keypad. This is limited, inflexible, and offers a frustrating experience if you forget the options or your desired choice isn't listed.
Speech recognition, conversational IVR ditches the buttons. You speak your request naturally, like "Connect me to sales." Advanced speech recognition technology understands your spoken words and translates them to text. The system then uses Natural Language Processing (NLP) to grasp the meaning behind your words and route you accordingly. This allows for a more natural conversation and handles a wider range of requests compared to the button-pressing days of DTMF IVR.
What are the benefits of IVR?
Improved customer experience
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24/7 availability: IVR systems operate round-the-clock, providing customers with support and information anytime they need it.
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Quick resolutions: Automated responses and self-service options help customers resolve their issues quickly without waiting for a human agent.
Cost efficiency
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Reduced operational costs: Automating routine inquiries reduces the need for a large customer support team, saving on labor costs.
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Scalability: IVR systems can handle a high volume of calls simultaneously without additional costs, unlike human agents.
Increased efficiency
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Call routing: Efficiently directs callers to the appropriate department or agent, minimizing transfer times and improving first-call resolution rates.
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Handling peak times: Manages high call volumes during peak times effectively, reducing wait times and customer frustration.
Enhanced data collection
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Customer insights: IVR systems can collect and record customer interactions, providing valuable data for improving services and products.
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Personalization data collected can be used to personalize future interactions, enhancing customer satisfaction.
Consistency and accuracy
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Standardized responses: Ensures consistent and accurate information is provided to all customers, reducing the risk of human error.
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Compliance: Helps in maintaining compliance with regulatory requirements by ensuring that all interactions follow predefined scripts and protocols.
Flexibility and customization
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Customizable menus: IVR systems can be tailored to fit the specific needs of a business, offering customized options and messages.
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Integration with other systems: Can be integrated with CRM, ERP, and other business systems for seamless operations and data flow.
Enhanced productivity
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Free up human agents: By handling routine tasks, IVR systems allow human agents to focus on more complex and high-value interactions.
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Efficient workflows: Streamlines workflows by automating repetitive tasks, leading to increased overall productivity.
Improved business continuity
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Uninterrupted service: IVR systems can continue to provide service during power outages, natural disasters, or other disruptions, ensuring business continuity.
Scalable solutions
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Adaptability: Easily scalable to accommodate the growing needs of a business without significant additional investment.
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Future-proof: Can be updated with new features and integrations as technology evolves, ensuring long-term utility.
Enhanced security
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Secure data handling: IVR systems can be designed to handle sensitive information securely, complying with data protection regulations.
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Authentication and verification: Can include features for secure customer authentication and verification, enhancing the security of transactions and interactions.
What metrics measure IVR systems?
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System stability metrics, such as uptime and latency
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Question recognition metrics, such as true positive rate
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Customer experience metrics, such as customer satisfaction %
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Containment metrics, such as First Call Resolution
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Activation metrics, such as signup %
Which ones are most relevant for your business depend on your goals with the IVR. However, it can’t be stressed enough that - whatever else - the key metrics are those that measure how well and how fast the IVR system can recognise customer queries correctly!
What can IVR be used for?
Customer service
Conversational IVR systems are often used in customers service for all manner of high traffic queries and requests, for example in retail business:
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Order status inquiries
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Returns
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Warranty claims
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What’s in stock inquiries
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Reservations/cancellations
In most cases, high traffic calls can be resolved right away, or the call can be used for information gathering leading to more efficient handover to a human agent (or ticketing system).
Banking and finance
In banking and finance, advances in user identification mean that customers can make inquiries about:
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What’s my balance
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Making transfers
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Opening, closing altering accounts
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Reporting fraud or fishing
Many more use cases are on the board, once again more complicated inquiries can be handed off to human agents.
Healthcare
Due to the sensitive nature of healthcare, conversational AI is mainly a useful tool for the practical side of healthcare customer interactions:
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Appointment (re)scheduling
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Patient information
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Reminders
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Insurance details
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Prescription renewals
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Reporting measurements and data points
Implementing an IVR, where to start
Implementing a conversational IVR involves several steps, starting with defining your business goals. During the implementation process it’s always good to keep those goals in sight.
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Define needs
Identify business goals and the customer issues you want to address. Analyze call data to understand common inquiries and areas for improvement. Define what your main value driver will be, for example reducing peak times, average caller wait times, percentage of calls automated, etc.
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Choose a Conversational IVR platform
Select a platform that fits your needs and budget. Consider factors like cost, scalability, integration capabilities, and ease of use.
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Design the conversation flow
Using the proven CDI method, map out the dialogue between callers and the system. Consider customer prompts, system responses, and potential decision points based on user input.
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Train the system
Prepare the system with relevant data like customer queries (and perhaps knowledge base entries). Train the NLU engine to understand your target audience's language patterns.
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Testing and refinement
Rigorously test the system for accuracy, naturalness, and call flow efficiency. Gather user feedback and use it to refine the system for optimal performance.
Remember, successful implementation hinges on considering your business objectives. Align your IVR with the level of self-service you want to offer. Usually it’s a healthy ambition to ensure it complements, not replaces, your live agents.
Technology selection:
Choosing the right Conversational IVR technology and platform involves analyzing your business needs and aligning them with platform features. Here's a breakdown to help you select the best fit:
Understand your use case
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Identify customer needs: What issues do callers typically face? Can an IVR address them effectively?
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Self-service goals: How much self-service functionality do you want to offer (e.g., FAQs, account management)?
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Agent workload: Can an IVR reduce call volume and streamline routing, freeing agents for complex issues?
Evaluate platform features
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Natural Language Processing (NLP) capabilities: Assess the platform's accuracy in understanding natural speech and intent.
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Scalability and integrations: Can the platform handle future growth and integrate with your existing CRM or knowledge base systems?
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Security and compliance: Does the platform meet your data security and regulatory compliance requirements?
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Ease of use and administration: Consider the platform's user-friendliness for building and managing conversation flows.
Research and compare providers
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Industry reputation: Look for providers with experience in your specific industry and a track record of success.
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Pricing models: Compare pricing structures (subscription, per-minute) and ensure it aligns with your call volume.
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Free trials and demos: Take advantage of trial periods and demos to test the platform's functionality and user interface.
Additional tips
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Customization: Consider the platform's ability to tailor the user experience (e.g., greetings, branding).
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Reporting and analytics: Does the platform offer insights into call flow performance and user behavior?
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Customer support: Ensure the provider offers adequate technical support and resources for ongoing assistance.
By carefully analyzing your needs and evaluating platform features, you can choose the IVR technology and platform that empowers you to deliver an exceptional customer experience - and realize your business goals.
Integration with existing systems:
It can add great value to make your IVR more transactional and/or allow it to have more context. Integrating a conversational IVR (Interactive Voice Response) with CRM, databases, and other systems involves creating a communication hub. Here's a simplified approach:
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Choose your tools: Pick a Conversational IVR platform that offers API (Application Programming Interface) access. Many CRMs and databases also offer APIs.
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Map the conversation flow: Design the questions and responses your IVR will use. Identify where information needs to be retrieved from (CRM, database) and where updates might be needed (CRM).
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API Connections: Developers will build connections between the IVR platform and your CRM/databases using APIs. This allows data exchange during conversations. Imagine the IVR acting like a waiter, taking your order (user request) and fetching information/updating systems (kitchen/databases) based on your needs.
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Security: Ensure proper authentication and authorization protocols are in place when connecting systems. You don't want just anyone accessing sensitive data.
Remember, this is a simplified explanation. It's best to consult with CDI for a successful integration.
How CDI helps businesses grow with IVR solutions
Training and support
As a globally recognised Conversational AI company, we’ve helped brands to deliver Conversational AI systems that deliver great service to their audience whilst improving their bottom line.
If you’d like help understanding how you can find the best IVR system for your business case, don’t hesitate to get in touch.
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FAQs
What does IVR stand for?
IVR stands for Interactive Voice Response. It’s a phone-based system that uses voice and/or keypad input to let callers interact with menus, self-service tasks or route to human agents.
What are IVR systems and how do they work?
An IVR system receives calls, presents a menu or listens for voice input, then either provides information, automates a task, or routes the caller appropriately. In conversational IVR, natural-language speech recognition replaces rigid button-press menus.
What are IVR menus and prompts?
Menus are the structure of options callers hear; prompts are the voice messages that guide them (“Press 1 for…”, or in conversational IVR: “How may I help you today?”). Well-designed prompts improve user experience and reduce caller frustration.
What are IVR services and applications?
IVR services refer to the self-service tasks the system supports (balance checks, order status, appointment scheduling) while applications mean the use-cases across industries (banking, telecoms, healthcare). Conversational IVR enables more flexible applications beyond simple menus.
How much does IVR cost and what factors influence the cost?
Cost depends on platform/technology, call volume, number of languages, integrations (CRM, back-end systems) and speech vs keypad interaction. Choosing a conversational IVR adds cost for ASR/NLU components, so business goals and KPI-targets matter before investment.
Why is IVR important for customer service and operations?
IVR is important because it handles high volumes of calls, routes effectively, automates simple tasks and frees agents for complex work. When well-designed, it improves customer experience and operational efficiency.
What are common pitfalls when implementing IVR systems?
Pitfalls include over-reliance on button-menus, poorly designed voice flows, lack of natural-language support, ignoring caller context, missing continuous improvement. Conversational IVR projects must focus on design, user testing and analytics to succeed.
How does conversational IVR differ from traditional IVR?
Traditional IVR uses button-press (DTMF) menus and often rigid flows. Conversational IVR uses speech recognition and NLU to understand natural caller input and respond contextually. That shift allows for more intuitive interactions and greater self-service.
How do you measure success of an IVR system?
Success is measured by metrics like containment rate (call resolved without agent), average handle time, first-call resolution, user satisfaction, time to answer and call deflection. Conversational IVR also measures accuracy of intent detection and caller experience.
What is conversational IVR?
Conversational IVR combines voice technology and natural language understanding (NLU) to create human-like phone experiences. Instead of “press 1 for sales,” users can simply say, “I’d like to speak to sales,” and the system understands their intent.
How does conversation design improve IVR systems?
Conversation design shapes how your IVR listens, speaks, and responds. By following clear design patterns, using natural prompts, and testing with real users, conversation designers create IVRs that are clear, efficient, and respectful.
How do you implement best practices in IVR design?
Start with a structured workflow, strategy, design, build, and optimise. Use real caller data, keep prompts concise, test frequently, and always offer a clear path to a human agent. At CDI, we teach teams how to embed these principles through training and practical tools.
What makes a good IVR prompt?
Good prompts are short, conversational, and polite. They help users make quick decisions without frustration. Avoid long menus or technical language. Test your prompts often, even small changes can improve completion rates.
How can AI improve IVR systems?
AI makes IVR systems smarter by recognising intent, learning from conversations, and providing contextual answers. It allows for personalised experiences and smoother handovers to agents. But AI only works well when combined with good design and governance, both core parts of CDI’s approach.
What industries benefit most from conversational IVR?
Conversational IVR adds value anywhere customers interact by phone, banking, insurance, retail, healthcare, travel, and utilities. CDI works with teams across these sectors to design consistent, scalable voice experiences.
How can teams develop skills to build better IVR systems?
By learning structured conversation design, prompt writing, and data-driven improvement. CDI offers training, certifications, and workshops that teach professionals how to design, test, and manage conversational IVR systems effectively.
What’s the difference between IVR and voice assistants?
IVR handles phone-based interactions, while voice assistants (like Alexa or Google Assistant) live on smart devices. The design principles are similar. Both require clear prompts, strong conversational design, and a consistent brand voice.
How do you make IVR more human?
By designing with empathy. That means using friendly tone, anticipating user intent, handling errors gracefully, and never trapping people in loops. Conversational IVR uses NLU and human-centered design to make every interaction smoother and more natural.
Is IVR technology still used?
Yes, IVR technology is still widely used. It has evolved from simple tasks like gathering information to complex user interactions. Modern IVR systems improve the customer experience by operating more efficiently and offering opportunities for personalization and automation, making them a valuable tool for businesses.
How to make an interactive voice response?
To create an interactive voice response (IVR), start by identifying key customer needs. Design a clear menu with options and use simple language. Ensure intuitive navigation and test the IVR to ensure it's user-friendly. Don't forget to gather user feedback for improvements.
What is an interactive voice response system?
An interactive voice response (IVR) system is a technology that allows callers to obtain information, provide data, or make requests through speech or keypad input. This system automates interactions, allowing you to complete tasks without speaking to an agent, increasing efficiency and convenience.
How to call through IVR?
To call through an IVR, dial the number provided and follow the instructions in the call menus. Use your keypad to make selections and request additional information if needed. Make sure you speak clearly and calmly so the system can understand you.
What is the difference between VoIP and IVR?
VoIP (voice over IP) involves sending voice communications over the internet, while IVR (interactive voice response) is a feature often used within VoIP systems. IVR automates caller interaction by presenting them with voice prompts and menu options, allowing them to quickly answer their questions without human intervention.
What is an example of a conversational IVR?
An example of a conversational IVR is when you call customer service and say, "I need help with my refund." The system understands this natural language and automatically offers relevant options, instead of making you navigate through a menu of numbers. This makes the experience more user-friendly and efficient.
What is the difference between traditional IVR and conversational IVR?
Traditional IVR systems are often rigid and impersonal, with long menus that can frustrate customers. Conversational IVR, on the other hand, uses natural language processing to create conversations that feel logical and human. This results in faster and more efficient interactions, focusing on the customer and better understanding their needs.
What is speech recognition in IVR?
Speech recognition in IVR makes it possible to understand and interpret human speech. This allows users to express their requests via voice commands, making interactive systems more efficient and user-friendly. It eliminates the need for manual input, significantly improving the user experience.
What is conversational IVR?
Conversational IVR (Interactive Voice Response) is an advanced speech program that uses artificial intelligence. It allows callers to communicate naturally, using voice commands instead of navigating through menus. This makes the user experience simpler and more efficient.
What is IVR communication?
Conversational IVR (Interactive Voice Response) is an advanced speech program that uses artificial intelligence. It allows callers to communicate naturally, using voice commands instead of navigating through menus. This makes the user experience simpler and more efficient.
What is IVR communication?
IVR, or interactive voice response, is a system that allows callers to request information or make requests using their voice or keypad. It offers an efficient way to automate conversations and helps users quickly achieve their goals without human intervention.
What is IVR and how does it work?
IVR, or interactive voice response, is a technology that allows users to obtain information, provide data, or make requests through a telephone interface. This is done through voice commands or menus, allowing visitors to efficiently accomplish their goals without having to speak to a representative.
How does an IVR system work?
An IVR system works by automating phone interactions. When you call, you receive spoken instructions or menu options. By making a choice using your voice or keypad, the system can prompt you to provide information or process requests, allowing you to quickly get the help you need without having to speak to an agent.
How does IVR payment work?
IVR payments, also known as pay-by-phone, use interactive voice recognition technology. Customers can easily make payments by following spoken instructions. These systems can also securely store credit card information for future payments, making the process even more convenient.
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