What is Conversational AI IVR? Get to know what conversational AI IVR is all about and even hear samples.

By Hammad Syed in TTS

January 16, 2024 17 min read
What is Conversational AI IVR?

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So, what is conversational AI IVR?

An IVR, or Interactive Voice Response, is a system that lets you interact with a computer through voice or keypad inputs on your phone. Conversational AI IVR means this entire system is powered by AI. It can learn from past interactions and compound it’s knowledge over time.

Have you ever called a customer service number and been greeted by a voice that seemed almost human, yet you knew it was a machine? That’s conversational AI IVR at work. This technology is reshaping how businesses handle customer calls, making interactions more efficient and often more pleasant. 

As we explore this innovative tool together, I’ll show you how it’s making customer interactions quicker and often more pleasant, reshaping the landscape of customer service.

What is the difference between is Conversational IVR and Traditional IVR?

Conversational IVR (Interactive Voice Response) engages customers in natural language dialogue via telephone, creating a more inviting interaction. Unlike traditional systems that depend on pre-recorded voice prompts and structured menu choices, Conversational IVR allows customers to converse as they would normally.

The system employs artificial intelligence (AI) to comprehend the intent behind a customer’s words and delivers pertinent responses. This capability ensures that customer inquiries are addressed swiftly and accurately, eliminating the need for navigating through complex menu sequences.

User Interaction:

  • Traditional IVR: This system typically uses a menu-driven approach where callers are required to press specific buttons on their phone keypad to navigate through options. The interaction is usually linear and can be limiting if the caller’s needs do not exactly match the predefined menu options.
  • Conversational IVR: In contrast, Conversational IVR employs natural language processing (NLP) and speech recognition technologies, allowing users to speak naturally and describe their needs in their own words. This system understands spoken language, enabling a more dynamic and intuitive interaction that feels more like speaking with a human.

Technology:

  • Traditional IVR: It relies on Dual Tone Multi-Frequency (DTMF) signaling (the touch-tones produced by keypresses) and pre-recorded voice prompts to guide the user through a fixed set of options. The technology is relatively simple and often does not require advanced computing capabilities.
  • Conversational IVR: This system incorporates more advanced technologies such as AI, machine learning, and natural language understanding. It can interpret the intent and context of the user’s speech, allowing for responses that are more relevant and personalized.

Flexibility and Efficiency:

  • Traditional IVR: These systems can be rigid, as they force the caller to follow a specific path, which can sometimes lead to frustration if the path does not lead to the resolution of the caller’s issue.
  • Conversational IVR: With its ability to understand varied speech patterns and nuances, this type of IVR can adapt to the caller’s input, potentially offering more efficient problem-solving and a smoother user experience.

Overall, Conversational IVR systems provide a more modern, flexible, and user-friendly interface compared to Traditional IVR, significantly improving the customer interaction experience.

Understanding conversational AI IVR

Conversational AI IVR combines Natural Language Processing (NLP), Natural Language Understanding (NLU), and machine learning to transform how you talk to automated systems. 

This technology goes beyond just hearing words; it understands the meaning and intention behind what you say. This lets the IVR system answer you in real-time, making conversations feel more like you’re talking to a smart chatbot than a machine.

Imagine you’re calling a customer service line equipped with this technology. The IVR system listens to what you say, quickly processes the information, and figures out the best response based on the situation. 

This smart automation makes the conversation more efficient and cuts down on the usual frustrations caused by older, less flexible systems. You get answers quickly and without the robotic feel typical of traditional systems. 

This change not only makes solving your problems faster but also makes the whole customer service experience better, making every interaction with the IVR system smoother and more enjoyable.

Benefits of conversational AI IVR over standard IVR

Streamlined customer interactions

One big advantage I’ve noticed with conversational AI IVR is how it makes talking to customer service easier and quicker. 

Older IVR systems often make you press a lot of buttons to get through menus, which can be annoying and slow. But conversational AI lets you just say what you need in your own words. 

This means the system can handle simple questions on its own, and only the tougher problems go to live agents. This not only makes your call shorter but also lets agents focus on the more difficult issues, making the whole experience smoother.

Enhanced understanding of customer’s intent

Conversational AI IVR systems are great at figuring out what you really need, even without specific keywords. They use smart technology to understand how humans talk, helping them answer a wider range of questions more accurately. 

This doesn’t just mean they solve problems right the first time more often; it also makes the conversation feel more personal. 

As someone who engages with these systems, I see how customers appreciate when they feel understood immediately—it boosts their happiness with customer service.

Multilingual support enhances accessibility

Nowadays, being able to support many languages is super important. Conversational AI IVR systems can talk in several languages, which is a huge help for companies that work in different countries. 

This means customers can speak in the language they’re most comfortable with, which cuts down on confusion and improves service. 

For example, if someone prefers to speak Spanish, the system automatically switches to Spanish, making everything flow smoothly without any hassle.

Improved metrics for call routing efficiency

Getting calls to the right person or department quickly is crucial for good customer service. Conversational AI IVR systems do this really well because they understand what the caller is saying right away. 

They can quickly figure out who in the company is best suited to help, which means fewer transfers and less chance of getting the runaround. 

In our phone system, this smart routing has made our numbers look a lot better—calls are shorter, and more problems get solved the first time, which helps our company save money and keeps customers happier.

Self-service empowerment

The growth of self-service options with conversational AI IVR has changed the way customers get help. 

This technology lets people take care of many things by themselves, like checking balances or making appointments, just by talking to the system. 

This not only makes the contact center more efficient by lowering the number of calls but also gives customers quick answers to their problems, which they really like. It’s all about making things easier and faster for everyone.

Here’s some interesting stats around traditional IVR

  1. Market Size and Growth: The global market for IVR systems is substantial, with estimates suggesting it will reach $9.2 billion by 2030, up from around $4.9 billion in 2022. This growth reflects the ongoing relevance of IVR technology in customer service operations across sectors (McKinsey & Company)​.
  2. Cost Savings: IVR systems are known for reducing operational costs. For example, at one North American financial institution, IVR systems manage about 50% of total call volume annually, saving the company approximately $100 million each year due to the reduced need for live agents​ (McKinsey & Company)​.
  3. Customer Frustration: Despite their efficiency, traditional IVRs can frustrate customers. A significant 67% of customers have reported hanging up on an automated system out of frustration at not being able to speak to a real person​​ (Qualtrics)​.
  4. First Call Resolution (FCR): Effective IVR systems can have a high first call resolution rate, which refers to resolving callers’ issues on the first attempt without transferring them to a live agent. Well-designed IVR systems achieve an FCR rate of about 74%, which reflects their ability to handle less complex queries efficiently​ (Fit Small Business)​.
  5. Consumer Preferences: There is a growing demand among consumers for more self-service options, with 81% expressing a desire for increased self-service capabilities. IVR systems play a crucial role in meeting this demand by allowing customers to resolve their issues quickly and autonomously​ (Fit Small Business)​.

As you can see, traditional IVRs have served us well. Conversational AI IVR can help alleviate some of these common issues.

How conversational AI can solve some of traditional IVR’s shortcomings.

  1. Enhancing First Call Resolution (FCR): Conversational AI can increase FCR rates by understanding and addressing a broader range of customer queries through natural language processing. This reduces the need for call transfers to human agents, as the AI can handle more complex interactions independently (Fit Small Business)​.
  2. Reducing Costs: By automating more customer interactions effectively, conversational AI can decrease the volume of calls that require human intervention. This leads to cost savings similar to those observed with traditional IVR systems but potentially on a larger scale due to the enhanced capability of AI to handle complex queries​ (McKinsey & Company)​.
  3. Decreasing Customer Frustration: One of the biggest challenges with traditional IVRs is their menu-driven, button-pressing interaction, which can frustrate customers. Conversational AI allows for more natural interactions, where customers can simply speak their concerns and receive more intuitive responses. This can drastically reduce the frustration associated with not being able to reach a human or navigate complex menu systems, as noted where 67% of customers expressed frustration with traditional systems (Qualtrics)​.
  4. Improving Personalization and Customer Satisfaction: Conversational AI can use data from past interactions to personalize the customer experience, offering services and solutions tailored to individual needs. This not only makes the interaction more efficient but also enhances customer satisfaction by making customers feel understood and valued​ (McKinsey & Company)​​ (McKinsey & Company)​.
  5. Supporting More Self-Service Options: As customer preference shifts towards self-service, conversational AI can provide more sophisticated self-service options. This includes handling transactions, providing information, and solving problems, all without the need to navigate traditional menu options or wait for a human agent (Fit Small Business)​.

Overall, integrating conversational AI into IVR systems can address many of the limitations of traditional IVRs, improving efficiency, reducing costs, and enhancing customer satisfaction.

Implementation of conversational AI IVR

When we talk about adding conversational AI to an IVR system, it’s more than just updating software. It starts with really understanding what customers need by looking closely at how they interact with the service. 

Companies that provide conversational IVR systems take a close look at a lot of customer data. They look for patterns and common problems that many callers share. 

Once they know what the main issues are, they can customize the conversational AI to deal with these problems in a smart way.

This means creating conversations that sound natural and can change depending on what the conversation is about. The goal is to make a system that not only makes operations smoother but also improves how customers experience the service. 

All this needs to be done without forgetting the unique value that human agents bring. So, it’s important to keep a good balance, ensuring that the personal touch that is so important in customer support is not lost.

Real-world applications

Healthcare

In the healthcare industry, conversational AI IVR systems have become incredibly useful. 

Patients can quickly get important information about symptoms or efficiently manage their appointment scheduling through these automated systems. This means they no longer have to wait a long time to talk to someone about their concerns. 

These advances in IVR technology are particularly helpful during busy times like flu season or other public health emergencies. 

They handle a large number of calls, significantly cut down on costs, and make patients happier with the service they receive.

Try this conversational AI IVR that’s been trained on (and is constantly learning) pre-visit questions, post-visit follow-ups, general FAQ, etc. Simply dial +1 310.919.0613

Want your own AI agent or conversational AI IVR? Check out Play.ai

Hospitality

Conversational AI integrated into Interactive Voice Response (IVR) systems can significantly enhance the customer service experience in the hospitality industry.

By leveraging advanced natural language processing capabilities, these systems can understand and respond to a wide range of customer inquiries with precision and personalization, from booking reservations to addressing specific room requests.

This not only reduces wait times and reliance on human staff for routine inquiries but also allows for more efficient allocation of resources, enabling personnel to focus on more complex customer needs.

Additionally, AI-driven IVR systems can gather and analyze data from interactions to identify trends and preferences, further refining the guest experience and improving overall satisfaction. This technology integration leads to increased operational efficiency and customer loyalty, ultimately driving business growth.

Try these conversational IVR demos, call these numbers:

  1. Call a hotel about a booking or room service: +1 650.600.0334
  2. Call a restaurant to reserve a table: +1 312.313.6307

See more demos at Play.ai.

Retail

In retail, conversational AI IVR systems have changed the way customers interact with stores. 

These systems let customers easily check things like order statuses or store hours with a quick phone call. This improves the shopping experience by cutting down on wait times and lets human agents focus on more complicated questions or problems. 

Retailers see benefits too, as these systems make operations more efficient, boost customer satisfaction, and reduce costs by minimizing the need for conversations with live agents.

Banking

Banks and financial institutions are using conversational IVR systems to give their customers quick and secure access to their account information, transaction histories, and more. 

These systems are built with strong security measures and voice recognition technology to keep customer data safe. They make it easier for customers to get routine information, which improves customer service and lightens the load on call centers. 

This allows human agents to concentrate on solving more complex issues that need a personal approach.

Challenges and considerations

High initial investment

Switching to conversational AI IVR systems requires a significant upfront investment. This isn’t just about the money; it also involves the time and effort needed to design, develop, and integrate these systems. 

Businesses need to be ready to put money into the technology and also spend time training staff to handle these advanced systems effectively.

Complex customer needs

Although conversational AI is great at handling many tasks, it sometimes struggles with complex customer questions. 

The system needs to be smart enough to recognize when a question is too complicated and needs a human agent’s help. 

This means the AI must be carefully programmed to improve the customer service experience by knowing when to step back.

Continuous training and development

Conversational AI systems need constant updates to stay useful. This means regularly feeding them new information about the latest trends and what customers need. 

This ongoing training helps the AI to keep learning and getting better, making sure it can keep up with the changing world of customer service.

Balancing AI and human interaction

It’s important to find the right mix of AI and human help. Businesses need to make sure that while they use AI to make things more efficient, they don’t completely remove the personal touch that customers often look for. 

The goal is to make sure AI works together with human agents to make the customer experience better, not to replace personal help with technology.

Future of conversational AI IVR

Looking ahead, the evolution of conversational AI IVR is very promising. With ongoing advancements in artificial intelligence and machine learning, these systems are getting smarter. 

Imagine an IVR that not only understands what you say but also picks up on the nuances of your language and accent, whether you’re a native speaker or calling from abroad. 

This deeper understanding is becoming more feasible as speech recognition technology improves.

These systems are also getting better at handling complex interactions. This means they can do more than answer simple questions; they can have detailed conversations, pick up on how you feel, and respond in ways that make sense for your mood. 

AI tone detector

For instance, if you sound upset, the system might change its approach and offer to connect you with a human agent sooner.

The way these systems connect with other digital platforms like social media and messaging apps is also evolving. Conversational AI IVR systems are on track to be a key part of a seamless omnichannel customer service experience. 

This will allow you to move smoothly from tweeting a question to sending a message through an app, to speaking with an IVR system that remembers the details of your earlier interactions.

Voice assistants

Moreover, the growing use of voice assistants is changing how we interact with devices and services. 

By integrating these assistants with conversational AI IVR systems, it will be even easier to use your voice to start services, get help, and manage your dealings with businesses without having to make a phone call or type out messages.

All these improvements are making customer service more efficient, effective, and friendly. By using advanced AI technologies and enhanced speech recognition, businesses can meet a broader range of customer needs in real-time. 

Every interaction aims to be as helpful and pleasant as possible. This isn’t just about technological advances; it’s about making each customer interaction feel more personal, even though it’s handled by a machine.

Enhance your IVR with PlayHT’s advanced voice generation

As conversational AI IVR continues to revolutionize customer service, integrating advanced text-to-speech solutions like PlayHT can further enhance your system.

PlayHT offers realistic voices that can make automated interactions feel even more human-like. 

Whether you’re handling customer support calls, managing reservations, or providing information, PlayHT’s text-to-speech technology ensures your IVR system communicates clearly and effectively. 

For businesses looking to upgrade their interactive voice response capabilities, trying out PlayHT could be a game-changer. Check out PlayHT today and experience the benefits of top-tier AI voice generation for yourself!

FAQs

1. How can AI-powered IVR solutions streamline operations and reduce operational costs for businesses?

AI-powered IVR solutions make everything run smoother by taking over simple tasks that usually need a person. This means businesses don’t have to hire more people to handle more calls, which saves a lot of money. These systems are also really good at quickly solving common problems, which means calls are shorter and cost less.

2. What are the benefits of using a virtual agent in a conversational AI platform for customer engagement?

A virtual agent in a conversational AI platform is great for keeping customers happy because it’s always there to help, any time of the day or night. These agents are smart enough to understand and answer lots of different questions accurately, making sure people who call feel listened to and helped. This makes customers happy and loyal because they can always get the help they need.

3. How do traditional IVR systems differ from conversational AI IVR solutions in handling customer queries?

Traditional IVR systems rely heavily on touch-tone inputs, where callers press buttons to navigate through menus. This often leads to longer wait times and can frustrate callers. In contrast, conversational AI IVR solutions use natural language understanding to let callers use their voice to express needs, significantly improving the IVR experience by making it more intuitive and less time-consuming.

4. What use cases are most effectively addressed by implementing a conversational AI IVR solution in a contact center?

Conversational AI IVR systems are perfect for dealing with lots of calls that ask the same simple questions, like checking account balances or scheduling appointments. These systems can take care of these calls all by themselves, which lets the human workers focus on more complicated problems. This makes the whole call center work better.

5. What should providers consider when integrating new technology like conversational AI into existing telephony and IVR systems?

Providers should consider compatibility with existing telephony infrastructure and the flexibility to integrate with other technologies. It’s crucial to ensure that the new conversational AI platform can seamlessly connect with the current systems to maintain a cohesive customer service experience. Additionally, providers should assess the scalability of the solution to accommodate future growth and evolving customer needs.

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Hammad Syed

Hammad Syed

Hammad Syed holds a Bachelor of Engineering - BE, Electrical, Electronics and Communications and is one of the leading voices in the AI voice revolution. He is the co-founder and CEO of PlayHT, now known as PlayAI.

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