When people call customer care, they typically hit zero because they want to talk to a human instead of serving themselves, right? Wrong. Recent surveys show that up to 76 percent of consumers believe that self-service is more convenient than other options. That preference is even higher among Gen Y consumers, at 82 percent.

To accommodate that preference, enterprises, government agencies, contact centers and other organizations are increasing their Interactive Voice Response (IVR) investments. Many are choosing hosted IVR services rather than premises-based platforms. In North America, hosted speech IVR spending will outpace on-premises IVR by more than 200 percent, according to a recent Ovum study. By 2016, the analyst firm predicts that hosted speech IVR revenues will exceed on-premises by nearly 250 percent.

Some of the benefits that come with hosted IVR are relatively obvious. For example, as with any cloud-based IT or contact center solution, a hosted IVR service virtually eliminates CapEx. And because the vendor amortizes the operations over hundreds of customers, with each one paying only for the service it uses, each customer’s OpEx is also reduced. Those savings are compelling, especially now during the global recession, when every organization is looking to lower costs.

Other economic benefits are far less obvious, especially as IVR technologies are becoming more intelligent and conversational. Hosted IVR providers enable immediate access to these newest and most sophisticated IVR technologies, freeing their customers from the cost and time investment that comes with purchasing, integrating and deploying new technologies on premises. That creates a window of opportunity for hosted customers to use a new technology to deliver a customer service experience so compelling that it becomes a powerful market differentiator. In other cases, a hosted solution provides access to cutting-edge technologies that the organization otherwise couldn’t cost justify if it had to buy the necessary hardware and software, as well as hire specialized staff to support it.

One of those technologies is voice biometric authentication. Instead of requiring callers to remember information such as PINs – which 10 percent of customers need to reset each month – or account numbers, the IVR system simply compares the caller’s voice to a voiceprint created when she became a customer. Many organizations also use biometric authentication to compare callers to a database of known fraudsters. With a hosted IVR, companies can implement biometric authentication faster and more cost-effectively, resulting in higher self-service rates.

Why Mobile is Key

Many of today’s hosted IVR solutions enable organizations to extend IVR technologies to other customer touchpoints. Because 60 percent or more of customer service calls come from mobile phones, particularly smartphones, organizations are looking to simplify self-service for mobile users and remove the inconvenience associated with typing information on a small screen. With hosted IVR, the time and resources invested to build IVR applications using speech recognition, natural language, voice synthesis (text to speech) and biometrics can cost-effectively be extended to enable a more natural spoken interface for mobile apps.

This “IVR mobilization” strategy gets a boost from another trend. Thanks to platforms such as Samsung’s S Voice, Google Now and Siri on the iPhone 4S, consumers and businesspeople are increasingly comfortable with the concept of speaking to apps as a way to get answers. That’s possible because with the right IVR technology, those apps are now capable of accurately understanding and providing answers.

The ideal IVR solution today provides the same level of intelligence – often called “natural language understanding” – to understand not only what callers are saying, but also their intent. IVRs of the past required callers to stick to a limited set of spoken phrases in response to IVR questions.

For example, a caller might be required to say “departure information” or “arrival times” in response to an airline’s IVR system. But if the caller instead uses everyday terms such as “When is it leaving?” or “What time does it land?” – a style similar to what they’d use with Siri – many IVR systems become confused because they don’t have the statistical models to find a match.

Hosted IVRs, with the latest technology plus data models built from billions of calls, have an advanced ability to deliver on the conversational aspects that callers are becoming accustomed to. And as more and more companies move to hosted IVR, those models become more robust, continuously improving caller interactions and company economics via more callers successfully self-serving.

US Airways illustrates the advantage of conversational IVR. In July 2011, the airline used a hosted IVR service to launch an IVR application that includes:

  • The ability for callers to naturally speak the reason for their call.
  • Features that personally greet callers and provide relevant information without the need to talk or type.
  • Advanced audio read back that sounds extremely natural instead of robotic.

The US Airways IVR truly provides the effortless self-service that consumers and business traveler’s value.

“The more we know about our customers and the reason for their calls, the more efficiently we can provide the assistance they need and allow them to get on with their day,” says Kerry Hester, US Airways senior vice president for operations planning and support at US Airways. “By integrating those insights with cutting-edge speech recognition technology, we are providing our customers with the convenient, quality care they have come to expect from US Airways.”

Bottom-Line Benefits – and Beyond

The cutting-edge technologies that hosted solutions are known for provide bottom-line benefits. For example, every time a caller hits zero to get to a live agent, that organization’s bottom line takes a hit. At many retail banks, for instance, every 1 percent of callers who abandon the IVR cost an additional $2 million to $3 million annually. Because they incorporate the latest and greatest natural language technologies helping to make caller interactions easy and natural, hosted IVRs minimize those drop-out rates and save money.

Of course, sometimes a live agent is the best way to serve a caller. A hosted IVR system can enhance and streamline that interaction, too, by getting callers to the right agent fast. US Airways’ IVR system even minimizes call durations by asking highly relevant questions and then automatically providing the callers’ responses to the agent. One US Airways customer posted on FlyerTalk, an interactive online community for frequent flyers: “The time previously spent on hold is now used by the computers to pull up your records. I’m going to call it a win.”

It’s not only a win for callers; it’s a win for US Airways, too. With the IVR handling some of the information-collection process, each live interaction takes less time, so each agent now can be more productive. That adds up to significant savings, considering that each call to a live agent costs an organization anywhere from $2 to $14. A hosted IVR can provide a self-service experience that’s effective enough to handle a large percentage of caller requests, and it shortens the call duration for others. That works out to tens of millions in annual savings.

US Airways also illustrates how the strategy behind IVRs has evolved. In the past, organizations implemented IVRs with a strict focus on the cost savings. That’s still a motivator, but smart organizations such as US Airways now focus their IVR technology selections and design strategy on meeting consumer preferences for self-service and delivering a level of customer service that stands out in their market. It turns out that by focusing more on customers and their preferences (rather than on the internal savings), self-service and satisfaction rates are climbing, and customer service savings are climbing right along with it.

Competitive Advantages Without the Complexity

Natural language understanding, biometric authentication and extensibility to mobile apps are three examples of how increasingly complex today’s IVR platforms are. That complexity is yet another reason why so many organizations are choosing hosted IVRs over premises-based solutions. They want all of the benefits that this complexity enables, but owning that complexity becomes a distraction to running their business.

A hosted solution frees organizations from the learning curve, specialized staff and overhead costs that come with complexity. As a result, they’re free to focus on their core competencies rather than the nuances of next-generation IVR technologies. Hosted solutions also provide scalability, both up and down. For example, when customers suddenly embrace new self-service options or technologies, as they have with Siri and speech recognition, a hosted solution can provide the service to scale up quickly and cost-effectively to meet that demand.

A hosted solution also can provide the necessary capacity to serve customers during peak periods – such as the holiday shopping season or annual open-enrollment periods – and then scale back down afterward. With a premises-based platform, the organization is required to operate excess IVR and telephony capacity that sits unused for several months out of the year, putting unnecessary drag on its bottom line. That’s just one more reason why 50 percent of IVR purchases next year will be hosted. If yours isn’t one of them, rest assured that your competitors almost certainly are.

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About Andrea Mocherman

This was a contributed post by Andrea Mocherman. To see more content like this, visit the Customer experience section of our blog.