Understanding the buying cycle is crucial for search engine optimization because it will tell you which keywords you need to rank for and although it is called a 'buying' cycle it refers to all webmaster objectives.
Let's start with a product example:
The mistake many webmaster make is in thinking they should rank for 'camcorders for sale'. Yes, any keyword research tool will tell you that gets searched a lot but what they don't tell you is that Internet users rarely buy at that point so high rankings are expensive to achieve and bring little or no benefit.
Let's look at a service example:
If you understand the buying cycle of your potential customers or clients you can then focus on what to rank for that will bring you the most benefit rather than generic terms that will be difficult to rank for and deliver few or no results.