Selling things on the Internet is very competitive. As new Internet businesses come online you will be attacked in many ways including price. Ultimately there will come a time when you must determine whether you should compete based on the price of your product or not? Before you do consider these strategies.
1. Is your goal to make more profit on the sale or to get the customer? Many Internet businesses lead with a front end product that is inexpensive. Their strategy is to get their customer into a product funnel that they can then sell higher priced products later.
If you are selling a report for seven dollars and your competitors selling one for five dollars instead it might be worth meeting their price. Ultimately a two dollar price drop is not worth losing the customer which could ultimately lead to hundreds or thousands of dollars in future sales.
2. What is the overhead involved in creating the product? If you are creating information products you do not have a lot of ongoing costs involved in creating a product. Therefore you can analyze your price to determine the real cost involved.
Is it worth losing potential sales because you are overpriced when in reality you could increase your sales by cutting the price? The only way to determine how you can profitably price a product is to know exactly what overhead is involved in creating it.
3. What are your ongoing costs associated with the product? Everybody has to promote their product on the Internet somehow. If you are a master of promoting with free and nearly free advertising you may be able to reflect that in your price.
However do not make the mistake of forgetting about your time involved! Time is money and you should calculate yours on an hourly rate to determine how much money you need to make to break even and create a profit.
4. Can you add value to the product as opposed to dropping the price? Many successful Internet marketers include bonuses to justify the cost of their product.
However a better strategy is to enhance the product itself in some way. This makes the product more valuable at the price you are trying to charge.
Bonuses become somewhat stale in that they are not unique. If you can avoid giving bonuses away and make the product itself seem worth more, you will be able to avoid dropping your price to make more sales.
Ultimately the question of whether you should compete strictly on price comes down to your niche and your products. Understand that you are in business to make a profit before you make any price cutting determination.