Don't sell a product or service; sell value

You must have heard the term 'value-based selling'.  What it really means is that if you sell on value (or what your product or service can do for the buyer), you can make price a less important factor in the selling process.  Don't be fooled by the Wal-Mart strategy.  Never sell anything on the basis of lower price alone.  Even if all your competitors sell by advertising lower price and you start to lose market share, do other things but do not start lowering prices.  It does not help you in the long run.

Setting prices

Many companies simply see what the prevailing prices in the marketplace are and then set their prices based on that data.  Wrong strategy.  Price your product instead on the basis of (1) your costs (2) ability of your customers to pay.  For example, let us say, you set up a bagel shop and every bagel shop in the area sells bagels for $0.50 but your cost is $0.75 because your recipe is such that it only uses fine ingredients.  Now if you set your prices based on market prices, you will destroy your business from day one even if your argument is that by offering similar or lower prices you will get market share.  What if you don't gain market share?  You will lose everything that you invest.  On the other hand, if you sell your bagels at $1.00 and target those customers that value fine ingredients, high-quality service, and personal attention to them, you will steal market share but at the price that you really want.  The customers who had always wanted that experience but never had the choice will rush to you.  You win all the way.

Stay away from price wars

Only Wal-Mart can win in a price war because it has scale (a fancy term for "size"0.  It has tremendous leverage when negotiating prices from its suppliers and when Wal-Mart drops prices, it can pass on the cost to the suppliers.  You can't do that.  While no one wins in a price war, you don't want to fall into the trap of engaging in one.