Ever press zero or say “operator” rather than enduring the maze of menu choices when calling your bank or airline? Every time a customer escapes an interactive voice response system, that organization’s bottom line takes a hit. At a mid-size bank, for example, even 1 percent of additional callers that bail out of IVR can raise customer care costs by $2-3 million.

The good news is that IVR menu mazes are becoming a thing of the past. Companies are realizing that focusing on customer convenience is truly the best way to ensure cost savings and customer retention.

As a result, many of today’s IVRs are more conversational and designed to be convenient for callers – resulting in fewer zero-outs.

US Airways illustrates how businesses can maximize the self-service experience and at the same time, minimize costs. In July 2011, the company implemented a new natural language IVR that allows callers to simply speak, using their own words, the reason for their call.

“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,” said Kerry Hester, 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.”

Conventional IVR systems allow callers to speak only a limited set of words or phrases in response to menus, such as departing or arriving in the case of airlines. If the caller instead uses vernacular terms such as leaving or landing, these IVR systems become confused because they have no recognizable match in their database.

By comparison, US Airways customers are free to use their own words to speak the reason for their call. The airline’s IVR uses the newest natural language technologies along with advanced techniques such as disambiguation, to understand the caller’s intent. Callers can simply speak the reason for their call, and the system gets them to the right automated service or agent fast.

For US Airways, the bottom-line benefit of a more conversational IVR equates to about $3 million in annual savings. For most organizations, natural language can reduce zero-out rate by 40 percent and misrouted calls by 50 percent, all while improving customer satisfaction.

According to experts, organizations spend $2 to $14 for each call involving a customer service agent. A conversational IVR system can reduce that to pennies per call while providing a self-service experience that’s effective enough to allow up to 90 percent of callers to complete their desired task without needing to wait for an agent.

When a caller is transferred to an agent though, it shouldn’t be considered an IVR failure. Every organization’s goal should be to provide the best customer service possible, and sometimes an agent is the ideal. In fact, IVRs can improve the experience for callers who end up with an agent while reducing the average agent cost per call. For example, if there’s a wait for the next available agent, the IVR can use that time to gather information from the caller. The system then can present those responses to the agent as text in a screen pop when the caller is connected.

As a result, the agent can immediately began checking flight options, account balances or whatever the caller needs, instead of spending time on a preliminary Q&A. The caller comes away more satisfied because she gets what she needs quickly, while the agent is more productive because he now spends less time with each caller but with no trade-offs in the care level.

In the past, organizations designed IVR almost exclusively focused on reducing agent cost. Today they use it as a powerful tool for adding caller convenience, improving customer loyalty, and yielding additional bottom-line benefits such as reduced customer retention costs. To deliver results takes a powerful technology platform.

Instead of maintaining a costly and complex premises-based IVR platform, nearly 50 percent of organizations this year will select a hosted IVR solution. That number will grow to nearly 70 percent by 2016. Capex and opex savings are obvious reasons, but another equally important motivation is the integrated access to the latest and greatest conversational technologies – the kinds that enable a self-service experience so great that it becomes a key market differentiator.

US Airways, for example, was the first domestic carrier to use a natural language IVR and, as a result, benefitted from favorable press coverage and industry accolades.

Better than an on-premises IVR, a hosted IVR service can provide the technology along with the expertise to cost-effectively implement technologies such as voice biometric authentication. Instead of requiring callers to provide passwords and PINs, voice biometrics can use the unique characteristics of a caller’s voice as his or her password. With voice biometrics, the caller can be authenticated in as little as five seconds – no more remembering passwords and PINs. Decreasing the time and complexity to identify callers improves customer convenience while at the same time, saves customer care cost.

With that many qualitative and quantitative benefits, both for the organization as well as for the caller, it’s not hard to see why leading organizations are opting out of on-premises IVR in favor of hosted IVR services.

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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.