Know-How Exchange : Branding

Remember that differentiation is a branding element, and that PRICE is ONE element that brands use to differentiate from each other.
Companies often try to differentiate by being the lowest priced provider. This is seldom a good differentiator because there is always some always someone else who will try competing with you on price (and often these people may end up cheaper than you!).
When companies succeed using this strategy, its simply because there is no other differentiation that can be used.

It sounds to me like you need to conceptrate on th other key differntaitors at your disposal:

Quality
Leadership
Customer Service
Products/Solutions available
Innovators
Heritage
Product Superiority (specs, functions etc)
Brand ownage (like the Volvo "safety" tag, is there a position is that market that you can own ?)

Becoming the high-priced alternative can be a good differentiator if it is coupled with other differentiators like Quality and Leadership. In other words, if value is
perceived for the premium price.

Good Luck

Is this the only product you market? Please define your business. Is it a store with many products?

Thanks!

I would not reccomend to fight back unless you have the tools to beat the competitors prices. And even if you had them, you should be considering to position well your company in the mind of your existing customers.

Some tips I would give you are:

1. Take advantage that you have been there in the market, and try to get in the customer minds, and make a link between them and you. (Emotions play an important role)

2. Consider on providing added value to your current products. Is the service you provide good? What about giving support for the customer after purchase.

3. What about doing some research about consumers' image of you against competition. Can you take advantage of it?

4. Offer more convenience. Can they buy more things from you? Or how close and easy is for them to buy from you and from the competition.

I hope you find these answers very useful. But remember you can compete in price but it will not give you the best results, but you have to use more than that.

Based upon your last entry... As an immediate step, I would recommend you take a look at a volume bonus to act both as a sales and loyalty stimulus. Need to know specifics to really create good structure. Whether you are a wholesale or retail, you may want to consider a sprint program supporting graduated discounts (or other value add) based upon total purchases. Such a mechanism will automatically bundle your products together. Benefits back to the customer are dependent upon total purchases. Typically, it makes sense to structure the program to max. protect your biggest customers. Program will distribute costs across mutliple product lines allowing yourself to compete profitably while growing your business base for the future. The carrier will vary depending upon your exact channel.