The Internet is a super competitive environment with players from all over the world competing in a single pond for the world's business. If you're a blogger you can bet that there are thousands of other bloggers writing on the same topics, business services are offered everywhere from the States, to Europe, India, the far east and Africa and so it goes. It makes people do strange things with their business...

I'm not sure whether it has more to do with human psychology or with a capitalist frame of mind, but almost without fail, the initial reaction of businesses faced with the perception of hardship is to reduce prices in an attempt to become more competitive. Instead of focussing on their business/startup/service, SMEs become emboiled in price wars of their own making.

The problem is, I think, that people get psyched out by the perceived overwhelming odds that are stacked against them. It's true, the odds are stacked against any startup business trying to garner some recognition and build an online following. However, cutting the price of any offering devalues that offering in the mind of the consumer. This is an awful first step to take for a startup because straight out of the gates you are going to be lumped in with the plethora of cheapo Internet products and services.

It's far better to stick to your guns and, with your head held high, firmly state that your offering is worth X amount (assuming it is worth that). If you are not prepared to take shortcuts by competing solely on price, then your job, while hard, becomes far clearer. Since you have removed yourself from the low cost rat race you can now focus on providing a quality service that people are prepared to pay for.

Many people prescribe to the philosophy that:

If it is your intention to provide quality services and products then don't even consider entering the shark infested waters of discounted offerings.

That's not to say you can't be generous with your services. You can still outcompete the devalued services by offering temporary promotions. For example, you could offer to give customers who sign up in the next week a portion of your product or service for free. Go on shows or write guest articles and give away a couple of products, or give one lucky viewer a free service for a year - something like that.

This is not the same as reducing your prices to become more competitive. The point is that your product is still highly valued because it still has a high price tag. The fact that you are giving one or two units away becomes even more of a big deal because consumers perceive this to be getting something of actual value. Would you prefer to be given a mobile phone at its full value, or given a slash price phone whose model has been retailing at 40% off for the last six months?

So, value your offering highly but be generous with it - don't devalue it by making it cheap!