Oct 04, 2023

Interactive Voice Response (IVR) vs AI Voice Assistants for SMBs

Customer service is the lifeblood of most small and medium-sized businesses, helping to form lasting bonds with their customers. It enables them to stand out from larger competitors like big-box retailers or online giants and build a sustainable business.

Even in 2023, a key element in maintaining that relationship is the phone. 60% of consumers prefer using the phone to reach local businesses (source: BrightLocal). While other channels have gained in popularity, a 2023 Research Report sponsored by SoundHound of over 1,000 restaurant goers found that 62% of customers indicated a desire to “be able to conveniently place pick-up orders by calling the restaurant.”

Phone challenges

Handling the phone continues to be a challenge, however. Over the years small businesses, like larger ones, have adopted one or more of a handful of phone answering solutions, such as cloud-based call centers, IVR systems, virtual assistants, and more. Each has its benefits and drawbacks.

But with the arrival of new technologies in 2023, it’s time to consider how they match up with new innovations like AI-powered voice assistants. Based on modern, well-tested voice AI technology, AI-powered voice assistants converse with callers in a natural way, avoiding the frustration of canned automated responses and providing fast answers to caller questions.

This blog will look at what’s made IVRs popular, examine their pros and cons, then introduce AI phone answering as an alternative, and look at how the two compare:


Interactive voice response (IVR), also known as a phone tree, is an automated phone system tool that answers incoming customer calls and offers options for next steps via a menu. It uses these responses to route customers to the right agent or department, provide recorded responses to frequently asked questions, and more.

IVR systems have become ubiquitous in the business landscape for several reasons:

  • Cost-Effective: By providing an automated phone answering system, IVR reduces the need for human operators and lowers costs associated with staffing. 
  • 24/7 Availability: IVR allows businesses to provide round-the-clock customer support, ensuring that callers can access information or assistance outside of regular business hours. 
  • Call Routing: IVR efficiently routes calls to the appropriate departments or agents, minimizing the need for manual call transfers.  
  • Scalability: IVR systems are easily scalable, making them suitable for businesses of all sizes.

IVR has become so popular that the global market for IVR, estimated  at US $4.9 Billion in the year 2022, is projected to reach US $9.2 Billion by 2030, growing at a CAGR of 8.3% over the analysis period 2022-2030, according to Global Industry Analysts, Inc.

However, IVR systems are not without their limitations. Here’s a look at a few of the downsides of IVR.

Less-than-stellar customer experience 

The biggest disadvantage of IVR is that it relies on menu selections that can be confusing or difficult to interpret. The customer is presented with multiple options by an automated voice, which they must patiently listen through. This slows down the experience by adding a cumbersome step between them calling and reaching a customer service agent, often leading to frustration.  

IVR Solutions Provide a Poor Customer Experience

IVRs are complex and offer a poor user experience.

“Out of 2,009 UK adults aged 16 to 55 surveyed, only 15 percent believed that IVR made for a good customer experience (CX).”

Vonage 2019 IVR Study

While IVR is helpful in one respect, the fact that it doesn’t depend on a human being is a drawback. IVRs can’t understand customers, can’t talk like an agent, and can’t always solve problems. It’s very limited in its ability to understand complex queries or requests. So although IVR seems cost effective and a time saver, it can easily damage a business’s customer base if poorly implemented.

IVRs can lead customers to abandon your business

In some instances, IVR can elicit an even stronger reaction from customers. If an IVR system is particularly frustrating, it can even lead to the customer abandoning the business altogether. A 2019 Vonage survey found that “more than half of consumers (51%) have stopped using a business because they’ve reached an IVR.”  

How do AI voice assistants provide answering services?

Recent technological advances in voice AI are enabling businesses to use an AI voice assistant to answer their phone. SoundHound’s Smart Answering, for example,  leverages artificial intelligence and natural language processing to handle customer queries and provide assistance. These systems are designed to simulate human-like conversations and offer personalized customer experiences.

Benefits of an AI voice assistant answering service

Voice assistants can answer phones and provide several benefits to a small business:

  1. Answers All Calls.  AI voice assistants efficiently handle incoming calls, greet customers, and provide basic information such as business hours, location, and services offered. SoundHound’s Smart Answering, for example, handles 100% of a businesses’ calls, relieving staff so they can stay focused on serving customers in front of them.
  2. No Hold Time, No Wait Time. Most AI voice assistants pick up calls on the first ring. Callers are not only spared having to wait for someone to pick up the phone (or sent to voicemail), they are never placed on hold as the AI voice assistant can respond to almost all caller requests. An option to reach a live person is also available.
  3. Appointment Scheduling. AI phone answering systems can respond to caller requests to make an appointment by asking the caller if they’d like a link to the business’s appointment page, then texting them the link if they say yes. This reduces the need for manual appointment scheduling and improves convenience for clients.
  4. Call Routing and Transfers. AI voice assistant answering services can intelligently route calls based on customer needs or preferences. For example, in a hair salon with “independent” stylists who rent their chairs, a business can set up their AI voice assistant to route calls to a stylist’s mobile phone when the caller asks for that stylist. Or the business can designate a specific person who is the specialist in nail polish questions and route calls to that person.
  5. 24/7 Availability: AI voice assistant answering services handle calls outside a business’s working hours. So customers can reach the business at any time, allowing them to leave messages or book appointments, which can result in increased customer satisfaction and bookings.
  6. Call Analytics: AI phone answering systems often provide analytics and call tracking features. This allows you to analyze call patterns, measure call volume, and gain insights into customer preferences. These insights can help you make informed decisions about staffing, marketing strategies, and customer service improvements.

Comparing voice AI phone answering to IVR

While AI voice assistants may lack the direct connection with a person that some callers desire, AI voice assistants don’t put customers on hold. And they answer on the first ring. IVR systems often fall short in delivering a personalized and empathetic experience, whereas AI phone answering can simulate human-like conversations and provide tailored responses. 

IVR systems are cost-effective for high call volumes, but AI phone answering can bring long-term cost savings by reducing the need for human operators and streamlining operations. 

While IVR systems may struggle with complex inquiries, AI phone answering has the potential to comprehend and address intricate customer needs more effectively. 

Both IVR and AI phone answering solutions are scalable, allowing businesses to adapt as they grow and handle increasing call volumes.

Type of Questions Smart Answering Handles Instantly With No Staff Involvement

Caller's questions to Smart Answering service.

Ready for a custom demo of your own AI voice assistant?

Blog: Lead form included in blog articles

Interested in Learning More?

Subscribe today to stay informed and get regular updates from SoundHound Inc.

Subscription Form Horizontal