Seth Godin wrote a post not long ago with a gem of a sentence, “cheap is the last refuge for the marketer who can’t figure out how to be better.” Instead, I believe cheap is a viable option for certain customers/markets.
I believe his point is about product/service differentiation. And I think he is trying to say that “cheap” is a type of differentiation, but one that is unimaginative and also unsustainable. He’s correct on these points. But he may have neglected to consider that cheap may be exactly what some customers want.
For some people, paying more for a product actually gives them a sense that they are getting more and their experience improves because they pay more, not because the product is actually any better. For others, paying less for a product improves the experience. Getting a deal on the purchase outweighs any negative repercussions over the lifetime of a product.
The trick is to match customer needs and expectations with your capabilities. The pivot point is that if your target customers need “cheap,” then why invest in being better?