Competition is good for both a business and its customers, especially for the customer. Competition drives a business to innovate and work harder to get and keep customers. Competition allows customers to get the best price and product for their money. So for the customer it can be great, but not always for the business that cannot compete. A business that does not innovate and continue to compete will soon go out of business and well this is not good for them or the customers (it removes a choice).
Then there is the price war. This is where companies drop prices as a method of competing; this is designed to draw customers away from the competitor. Sometimes a company makes a drastic drop in price to try to corner the market or just get back in the game. This only works if both companies are on similar ground with similar products. If the product was not competing well before because it just didn’t fill the customer’s needs, then no amount of price drop will take business away from the competition. In the end only a good and desirable product or service will succeed.
The key to the success of any business is to innovate and give the customer what they need and want at a good price. Price should be based on competition, sustainability of the business and of course what a customer will pay, not on trying to kill the competition or a last ditch effort to save a failing business.
As a consumer you should measure a product by how well it fits your needs first then by price. If you need a new LCD TV because everything is digital now then there is no use in buying an old analog CRT TV no matter what the price. If the product doesn’t fit the need why would you buy it and why would you expect the LCD salesman to match the price?
As a customer, if you find two products that seem similar and one is 50% less than the other, you need to investigate why. I am not saying the cheaper one is not the best product for you, I am just saying you need to investigate why. And remember to evaluate if it really fits your needs. If you see a company drop there price drastically, you need to wonder why; usually it means they are not selling their product and not competing well. And you need to be worried that they will be there to support you in the future (can they sustain their business at that price).
Customers must demand a great product at a great price and businesses must demand the right price for their great product. If there is an imbalance in either then both the business and the customer loses.