To sdizdars point, your customers absolutely define who is the competition.
So glad for having read "Differentiate or Die!" by Trout in college to know the necessity of that great differentiator.
Sure, you might have come up with the one great idea that nobody has thought of, but probably not. If nobody is doing it, there just may be a really good reason.
What kind of customers are your competitor targeting? Differentiate and target the other kind.
And don't set your price higher than your competitor just because you think you provide a more valuable product. If you've already built your financial model with a lower price, there's no reason to not undercut your competitors.
However don't assume that you have the right price either. Entrepreneurs often set their prices too low. For more on this see http://jacquesmattheij.com/Double+your+price+(and+no,+I%27m+....