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Getting the best customer service from your IVR: Fresh eyes on an old problem

Interactive voice response (IVR) systems have one major flaw: people don’t like them. To address this, companies need to rethink their design priorities and put customer experience first.

A few months ago, a major US mobile network operator announced that it was scrapping its IVR system. The reason: high levels of customer frustration. Few companies have gone so far, but service leaders will often admit that their IVR systems have a negative effect on customer satisfaction. Worse, many solutions fail to achieve their primary goal of reducing call-center costs.

Some customers are willing to go to great lengths to circumvent phone menus—or avoid them altogether. For example, they might repeatedly press zero or say “agent,” without waiting to listen to the options presented to them. Dislike of the technology has even spawned a new industry. Consumer websites now publish lists of direct phone numbers and tips for breaking through IVR systems, such as “curse,” “mumble,” “choose the option for Spanish,” or “press nothing and wait.”1

For customer-service leaders, the unpopularity of IVR creates a dilemma. On one hand, their job is to improve customer experience and satisfaction. On the other hand, they need to meet demanding objectives to reduce costs.

Sidebar

We believe that it is possible for companies to avoid the perceived trade-off between cost and customer satisfaction. That’s because the problem with many of today’s IVR systems is not rooted in the technology—which is becoming increasingly sophisticated, capable, and flexible (see sidebar, “The rise of the smart IVR”)—but rather in its implementation.

Why and how IVR can go wrong

Most companies that design their IVR systems start at the wrong place, focusing primarily on their cost-reduction objectives instead of customer experience. This approach leads to five common problems.

A one-size-fits-all mentality

Most IVR implementations are designed with one goal in mind: a reduction in the volume of calls. In other words, the system tries to prevent any caller from getting to an agent, with no attempt to differentiate between types of calls received or the reasons for which they are made—leading to systems that are unwieldy and time-consuming for customers to navigate. Furthermore, this means that opportunities to add value are lost. For example, new customers and premium customers alike are treated in the same manner by most IVR systems, while multiple entry points spanning different phone numbers and business units increase the complexity of the initial customer engagement.

Confusing navigation and terminology

The wording and menu structures used in IVR systems often reflect the company’s internal terms and processes rather than the language and needs of customers.

Poor integration with other channels

IVR systems are often built in isolation from other channels. As a result, the system design may fail to consider the wider context of the customer journey, and it may have little integration with web- or app-based service offerings. IVR is often considered less sophisticated than newer digital channels, yet it is still the most frequently used customer-service option at many companies.

Lack of timely updates

Customer needs and business offerings change all the time, but companies are often slow to modify or update their IVR systems. For example, a change in product portfolio may not be immediately reflected in IVR options. In many cases, there is little coordination between the teams responsible for the IVR system and the teams responsible for product or strategy changes.

Not measuring satisfaction with the IVR system

Many organizations only track call-containment rates, without measuring customer satisfaction. And where data on satisfaction is collected, it often isn’t broken down by customer group or call reason.

Time for a customer-centric view

Leading companies are now adopting a customer-centric approach that treats IVR as a central part of their overall customer-care offering—and they have a strong financial incentive to do so. At one North American financial institution, for example, more than ten million customer requests are fulfilled by IVR every year, around 50 percent of the total call volume the organization receives. Compared with the cost of handling those calls with human agents, the IVR saves the company around $100 million annually. When that company redesigned its IVR system using a customer-centric approach, it was able to increase its call-containment rate by a further 2 to 5 percent and improve caller satisfaction by 10 to 25 percent across the call types addressed.

In a customer-centric approach, the design of an IVR system is dictated by the three measures of customer satisfaction: fast call resolution, personalization, and a consistent experience across channels.

Fast resolution

Our research shows that the one thing customers want more than anything else is a rapid solution to their queries. If they can be confident of that, most customers don’t mind which channel they use. There is growing acceptance among many customers that IVR technology can be the fastest way to resolve simple inquiries, such as troubleshooting cable TV connections, locating a technician, or checking the delivery status of a package.

A leading US energy provider uses its IVR system to inform customers about the status of outages as well as the expected resolution time. This approach not only reassures customers that their issues are being handled effectively but it also ensures resolution of thousands of calls every day without the need for an agent.

Personalization

Digital-first companies have raised the bar for customer service in creating personalized offerings, whether that means tailored recommendations or the ability to return to an interaction at a later time without needing to navigate complex menu hierarchies or reenter personal information. Increasingly, customers expect their interactions with other companies to offer the same level of customization.

IVR systems can achieve higher levels of personalization in several ways. For example, biometric authentication technologies can use a caller’s voice to accelerate and streamline authentication; the IVR of one airline now welcomes returning members of its frequent flyer program by name. And one financial institution adapts the IVR menu options presented to customers based on their individual call and transaction history. If an online payment transaction has recently failed, for instance, actions to address the issue are offered immediately after authentication.

Consistency

Customers’ journeys should be channel irrelevant. In other words, each interaction they have with a company should be informed by previous interactions, regardless of the channel, function, or line of business involved. Such an omnichannel approach involves an implicit agreement between company and customer: companies benefit from a detailed, comprehensive view of customer preferences and habits, and customers in return expect a consistent experience across channels. To meet those expectations, the IVR system should adapt itself to each customer’s history and context, and handoffs between the IVR system, human agents, or other digital channels should be straightforward and seamless.

IVR design and deployment: Taking an agile approach

A successful IVR strategy calls for a new approach to design and deployment. Building an IVR that works requires the organization to juggle multiple dimensions, from ever-evolving customer needs to fast-changing product and service portfolios. And that’s before it begins implementing new technologies into its IVR system.

Companies that aim to avoid the shortcomings of conventional IVR design, or to incorporate new technologies into their phone-based customer-care channels, need to rethink the analysis, development, implementation, and maintenance of their IVR systems. Instead of a “deploy and forget” approach, effective IVR management should be a continual process of evolution, evaluation, and iterative improvement. Therefore, such an approach should apply three principles.

Design for specific customer journeys

An organization must support many different customer journeys, depending, for example, on the types of customers, the nature of their requirements, and their willingness to use digital channels. Companies should determine the specific journeys that can be handled by IVR, then tailor their design to address those requirements. For example, if customers who are normally active on digital channels call a help line, they will likely seek a resolution they have been unable to find online. The best course of action in this case might be to pass the call to a human operator as soon as possible.

This journey-specific design approach can also help companies integrate IVR into the broader context of their customer-service offerings. For example, a human call-handler may temporarily transfer a customer to an IVR system to complete an authentication process or to hear a recorded summary of contract terms and conditions. IVR messages can also be used to alert customers to alternative ways to complete their request using digital channels or to provide quick situation updates in the event of a service outage or other event that might cause a spike in call volume.

Apply advanced analytics to understand IVR performance

Once leading companies have an IVR system in operation, they often use customer-journey analytics to gain a granular understanding of its performance. There are hundreds of possible break points where the customer may move from the IVR system to a human agent. Regular analysis of IVR data allows companies to identify the specific conditions that lead to these break points and then pinpoint their root causes. These companies also study data collected from IVR surveys, customer demographics, and interaction histories to better understand customer preferences and behaviors. Such data allow company leaders to devise initiatives that might improve the IVR experience, increasing both call containment and customer satisfaction.

Use rapid test and simulation capabilities

Customer-first IVR needs to rapidly and continually adapt as business offerings change, as new technologies become available, and as understanding of customer behaviors and preferences evolves. Best-in-class organizations are building rapid test and simulation capabilities to optimize call flows within their IVR systems. For example, one North American financial company has built a simulation lab that allows it to test modifications to its IVR systems in a controlled environment. It can then compare the performance of those tests with similar customer journeys in its production environment and measure the impact of IVR changes on containment and customer satisfaction in real time.

Getting started

The development of an agile, customer-centric IVR is a process, not a product. But it is a process that can generate rapid value for companies if they adopt a systematic approach and focus their efforts on the most important customer journeys. We advise companies to begin with the top customer journey in their existing IVR system. They should investigate the requirements of customers at each stage of that journey and develop the capabilities to meet those requirements within the IVR. They can then test the new customer journey with a sample group of customers, refine and improve it, and keep track of its progress as they move on to subsequent customer journeys.


Even in a digital world, automated call-handling systems will retain their position as the front line of many customer-service interactions. With the advent of new technologies, such as AI-powered natural language processing systems and predictive analytics, IVR systems are evolving from dumb menu systems into smart “voicebots” capable of handling complex customer queries. And to make the best of these new opportunities, companies need to switch their thinking about IVR technology, treating it as a tool not merely to cut call-center costs but to create customer satisfaction.

About the author(s)

Eric Buesing is a partner in McKinsey’s Stamford office, where Becca Kleinstein is an associate partner; Vinay Gupta is a knowledge expert in the North American Knowledge Center; and Subhrajyoti Mukhopadhyay is an expert in the Chicago office.

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