Britta Reque-Dragicevic
Britta Reque-Dragicevic
Updated: August 17, 2021

Conversational AI vs. IVR: What’s the Difference?

Conversational AI vs. IVR: What’s the Difference?

Voice has long been customers’ preferred method for communicating with companies, and it continues to be so. By far, phone or voice is the customer service channel that consumers across multiple generations and countries prefer. But historically, voice has also been the most expensive channel for contact centers. Staffing agents to answer phone calls incurs heavy labor costs and limits the number of customers that contact centers can serve at one time. Scalability and cost have been and currently still are major challenges for contact centers today.

As contact centers digitally transformed over the past decade, many have lowered their costs by adopting automation. Most notably, interactive voice response (IVR) systems have helped contact centers operate more efficiently. IVRs have frustrated customers though. More than 60% of consumers feel “IVR technology makes for a poor customer experience” because they feel forced to choose from inflexible menus and can’t reach a live agent.

As AI and automation have advanced in the last few years, companies now have a way to give customers the flexible and intuitive voice experience they want and at 50% of the cost of an offshore call center. With conversational AI, companies are empowered to reimagine voice interactions.

But what’s the difference between conversational AI and IVRs? It’s easy to confuse the two, so let’s break down the difference.

  IVR Conversational AI
What it is An automated phone system Set of technologies that includes machine learning, natural language processing, and natural language understanding
Customer service channels it’s used for Phone Phone, SMS, and chat
How customers interact with it Customers recite a number, a keyword, or press a key on their dial pad Customers talk to or message the AI, just as they would naturally communicate with another human

 

IVR

IVR is the technology that allows humans to interact with an automated phone system by using their voice or dial pad. The IVR presents customers with a menu of options to choose from. Customers select an option by saying a keyword, a number, or touching a button on their phone. IVRs can route customers to a live agent, present self-service options, walk customers through troubleshooting, and authenticate customers.

Although contact centers can reduce their costs and increase first contact resolution with IVRs, these benefits come at the expense of customer satisfaction. Customers may have to wait through the whole list of menu items before choosing. Predetermined “this or that” options mean IVRs don’t always offer the right option for a customer’s situation or the caller won’t know which option is best for them.

Customers have to speak in the IVR’s language, since IVRs aren’t built with natural language understanding (NLU). As a result, they aren’t able to understand how humans naturally speak. They also don’t recognize multiple intents, like “I want to update my payment information and return an item.”

With all these limitations, it’s not surprising that 64% of survey respondents had negative feelings, such as frustration, stress, and anger, when presented with an IVR. So are IVRs really helping contact centers, or are they hurting them instead?

Conversational AI

Conversational AI is the combination of machine learning, NLU, NLP (natural language processing), and other technologies that enable humanlike interactions between humans and machines. Consumers frequently experience conversational AI when interacting with chatbots and voice assistants. Unlike IVRs, conversational AI enables machines to understand how humans naturally speak or write.

When conversational AI is applied to voice, customers can call and ask questions as they normally would and switch between topics. Instead of being asked to “press one,” customers can simply say, “I didn’t receive my package.” The AI will understand the customer’s intent, which is they want to get an update on their shipping status. Customers can even resolve multiple issues in a single conversation, since AI understands multiple intents.

Which is Right for Your Contact Center?

It’s important to first understand this isn’t an either-or situation. You don’t need to choose between using an IVR or conversational AI. Contact centers can leverage both by placing conversational AI in front of or behind an IVR.

When conversational AI is in front of an IVR, it will be the first interaction that customers have when they call. If the AI isn’t able to resolve the customer’s issue, the customer is routed to a live agent. When conversational AI works behind an IVR, customers will need to first select a menu option before being put in touch with the AI.

Both IVRs and conversational AI help contact centers serve customers more efficiently, reduce their costs, and automate the resolution of Tier-1 issues. If you do need to choose one, the answer depends on the way you want to run your contact center and the experience you want to give customers. Since conversational AI understands how humans speak, can process multiple intents, gets smarter over time, and doesn’t lock customers into a phone tree, customers enjoy an easier and smoother resolution to their issues.

Learn how you can use conversational AI to reduce your costs by 50% and resolve 90% of Tier-1 issues, while also increasing customer satisfaction.