I don't even bother competing with stuff like that, as some have already mentioned, you get what you pay for. If you want cheap costumers then you can try to compete but be careful what you wish for. I know economy is bad, lots of people without work trying to make a buck, just ask yourself if all the time and money you have to invest is worth the money you're charging. You might be able to use that energy, time and money in something that can actually be beneficial to you and your business.
I've had people ask me to put a proposal together for a wedding hoping I would charge "craiglist" prices and ended up getting turned down after they saw what an actual wedding shoot would cost them. I don't shoot weddings, not my cup of tea but I was giving them a great deal and they still turned it down. I've decided, I'm not going to go after a cheap costumer market, that's not what I want to attract, I'll make some promotions while I build a clientele and my portfolio but that's only for a short time, you can try doing the same but don't give your work away unless that's what you want to get stuck with at the end.