The Death Of IVR: AI’s Evolving Impact On CX

Chief Technology Officer, Talkdesk. Munil Shah is a seasoned AI and cloud executive passionate about driving innovation.

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We’ve all been there. “For technical support, press 1. For billing inquiries, press 2 …” The frustrating maze of automated phone menus, followed by the dreaded “Your estimated wait time is … 30 minutes.” This all-too-familiar scenario has been the bane of customer service for decades. But what if I told you the days of these archaic interactive voice response (IVR) systems are numbered?

We all recognize the game-changing nature of generative AI (GenAI), and perhaps nowhere is it more impactful than in completely reinventing the customer experience (CX). By harnessing the power of natural language processing (NLP) and machine learning, GenAI is making traditional IVR systems obsolete, ushering in a new era of personalized, efficient and intelligent customer interactions.

The Twilight Of Traditional IVR
To appreciate the sea of change that GenAI brings, we must first recognize the limitations of traditional IVR systems. Imagine trying to have a conversation with someone who only understands a handful of phrases and forgets everything about you each time you meet. That’s essentially what traditional IVRs do to customers.

These systems force users through rigid, predefined pathways with limited options, struggling to understand diverse accents, speech patterns and background noise. They provide generic, one-size-fits-all responses that fail to account for individual preferences or past interactions. It’s a frustrating experience that creates a ripple effect of dissatisfaction throughout the customer service ecosystem. This frustration often leads customers to attempt to “hack” the menu by repeatedly pressing 0 or saying “agent” to bypass the prompts. While this might provide callers a shortcut to a human agent, it disrupts the intended flow of the system, potentially allowing customers to jump the queue unfairly. More importantly, it places an additional burden on agents who must now conduct the initial triage that the IVR was designed to conduct, as well as solve the customer’s issue. This workaround negatively impacts key metrics such as average handle time and first-call resolution, further straining the efficiency of the contact center.

Customers face confusing menu options, long wait times and incorrect routing. Agents are overwhelmed by repetitive inquiries that could be automated, reducing their productivity. Contact center supervisors struggle to meet KPIs like reducing call abandonment rates, especially in the face of surging call volumes and labor shortages. Ultimately, businesses suffer from reduced customer loyalty and potential attrition due to these negative experiences.

The GenAI Effect
GenAI is not just an upgrade to existing systems; it’s a paradigm shift in how we approach customer service. It’s like having a conversation with a highly intelligent assistant who understands not just what you’re saying but what you mean and the emotion behind it.

At the heart of this shift is natural language understanding. GenAI removes the barriers of traditional IVR scripts and menus, allowing customers to communicate naturally. Large language models (LLMs) trained on massive volumes of data are able to understand context and make intelligent, content-driven decisions for each interaction. This means that instead of navigating a convoluted menu system, customers can simply state their needs in their own words. The GenAI-powered system then interprets this input, regardless of how it is phrased, and determines the most appropriate routing path.

These systems leverage GenAI to enhance the routing process. They go beyond mere understanding—it excels at analyzing the customer’s intent and urgency. Each interaction is tailored to the customer’s stated needs and the system’s analysis of the situation. The AI can quickly categorize the issue, determine its complexity and route the call to the most appropriate resource, whether that’s a self-service option, a knowledge base article or a specific agent with the right skills.

This level of sophistication extends to how calls are handled within the system. Smart routing powered by GenAI reduces call abandonment by quickly identifying issues and taking the best next action. It can determine whether a call needs immediate human attention or if it can be resolved through automated means, ensuring faster resolution times and improved customer satisfaction.

Gen AI And CX: Best Practices And Challenges
While GenAI presents exciting possibilities for customer experience, it’s essential to recognize that its integration into CX systems is not without challenges. Companies face several hurdles as they work to implement this technology. These include ensuring data privacy and security in compliance with regulations like GDPR and CCPA, integrating GenAI with legacy systems, managing the substantial costs of implementation and navigating responsible AI considerations such as mitigating AI bias and AI hallucinations. The technical and financial demands can be perceived as an obstacle for small to medium-sized brands.

To successfully integrate GenAI into their CX strategies, businesses should follow several key steps. These include conducting a thorough needs assessment, starting with small pilot programs before scaling up, investing in training for both the AI system and human staff and developing a robust data strategy to ensure clean and diverse training data as well as guardrails to maintain AI safety, maintaining human oversight for complex issues, monitoring and improving the system based on feedback and staying informed about evolving regulations. Many low-code, no-code solutions exist so that these steps don’t have to require investment in technical staff or preclude some organizations from adopting GenAI into their CX strategies.

By addressing these challenges head-on and following a structured implementation process, companies can harness the power of Gen AI to create more efficient, personalized and satisfying customer experiences while maintaining the essential human touch in customer service.
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