Companies make investment in understanding consumer behaviour and implementing strategies, which will help them retain customers.

Consumers can be categorized as an individual consumer and organizational/industrial consumers. Understanding their behaviour and buying pattern is important in ultimate survival of companies in the market place.

Consumer behaviour consists of activities/process followed in making any buying decision of goods as well as a service. In recent time service (holiday, travel, etc.), decisions are forming large part of consumer behaviour.

One thing needs to be highlighted here is that consumer behaviour does not end with purchase of goods or service, but also post purchase activities are included in consumer behaviour.

Consumer behaviour and consumption behaviour are two different concepts developed and cannot be used as a substitute. Consumer behaviour deals with the process of an individual or organization in coming to the purchase decision, whereas consumption behaviour is a study focus on consuming unit or service.

Furthermore, there is a difference between consumer behaviour and buying behaviour. Consumer behaviour as highlighted before talks about process and actions taken by the final or end users where as buyer behaviour looks at intermediate users (who add value to goods and service) and final users.

Understanding of the consumer behaviour begins with study of the consumer buying process. Consumer buying process is five step activities.

1. Starting with need recognition,
2. Which leads to information search, once information is obtained from different sources.
3. Next step, is the evaluation and intent where in consumer evaluates various parameters of the product or service.
4. The next step in five-step activity is the purchase decision where in intent is converted into an actual purchase of the good or the service.
5. The final step is post-purchase reaction where in customer if she is satisfied with goods or services recommends to other prospective customers or repeat the purchase. If the customer is not happy with purchase, a bad word of mouth follows, and she looks for alternative product or service.

Three factors are identified as determinants to consumer behaviour namely economic determinants, psychological determinant and sociological determinant.

Economic Determinants are personal income (individual’s purchasing power), family income (total purchasing power of the family), the future income expectations (expected increase or decrease in availability of disposable income), availability of liquid asset (asset, which can be converted to cash), consumer market credit (if market conditions are good credit easily available) and social class (effluent class, upper-middle class, middle class, etc.).

In compare the industrial buying process is much more formal process done according to pre-defined policy and norms. The key features of organization buying are it’s a formal and standardized process, it is done in large quantities and may be done at periodic intervals of time, and decision-making process usually involves more than one individual.

As there are determinants for consumer behaviour, similar industrial buying behaviour has its own set of determinants, which are overall objectives of the organization, technological capabilities of the organization which consist of information systems and network capabilities and finally organization structure, which includes its capital and number of employees.

From above it can be comprehended that consumer behaviour is important factor in determining marketing policies.