In a recent post, Seth Godin responds to someone seeking help persuading her boss to lower prices. Seth notes
…perhaps she ought to consider raising prices and using the extra money to create a remarkable experience… Cheaper is a short term hit, not a long term advantage. Cheaper doesn’t create loyalty, because the other guy can always figure out how to be cheaper still, at least in the short run.
Well said. There can be only one lowest cost provider in any market, and chances are, it’s not you. Racing your price to the bottom rather than differentiating is a great way to run your business into the ground.