My advice is very simple - ignore the competition - forget about them. If you try to compete with people soley on price terms then in my view you are being very silly. Compete on a service and quality basis and charge what YOU want for that service, just make sure what you give the customer fits the bill. In any area you will find customers looking for the cheapest price and if you're in the cut throat market that is the type of customer you will attract, but in the same area there are many more people who are looking for qualityand are prepared to pay for, this should be where you should be looking for custom, otherwise your competitors are in effect dictating how much you charge.
Simon