Finding the right price for your product is the key to success, in both the long and the short term. The right price for your product would lie somewhere between the cost and the price a customer is ready to pay for your services. The cost would include the expenses on the raw materials and other fixed and variable expenses incurred in the manufacturing.
So much so, that it can also make your profits twice or thrice the present amount. Your products will technically fall into one of the two categories:
Commodity: There is a great amount of competition in this field, because the products of the different players in the field are the same it’s only the price that they are competing on. You need to be razor sharp and constantly on your toes. How proficient and efficient you are the only things that would make you stand out. A little lax will mess things up again.
Propriety products: These are authentic products. Genuine and special in their own standing. You compete with the other players in the market on the strength on the special strengths of your services. If you are good enough and in demand you can set a price that you ensure the best profit for you.
The market on the Internet is fast changing. To keep up you might have to alter your prices frequently, owing to new competition and changes in demand etc.
Then there are certain products like computer hardware that are both commodity and propriety products. Computer systems are getting constantly upgraded and more and more sophisticated and the competition is cut-throat. It’s a propriety product in the sense that a Macintosh can still afford to be much more expensive that a normal Windows systems because of the additional features it offers.
Anyhow, no matter you do you can’t afford to price your product wrongly because it can mean instant death in the market.
Price wars in this day and age are a part of everyday existence for any organization. To survive, you have to constantly be on your toes and deliver whatever you promise. If even one competitor lowers his prices everybody has to follow suit. But if you are not going to then you should have ample reason to stand your ground. A strong customer base which would stick with you no matter what, can be one good reason.