From:http://www.creativepro.com/article/three-big-reasons-never-compete-price

1. You undermine your credibility by charging less.
Stop for a moment and think about the message you send your prospects by charging less than you’re worth. In your mind, you think clients are saying, “Oh, great! Now I can finally afford this service!”

But in reality, prospects are thinking, “Why is this designer charging less than everyone else? They must lack experience, or maybe they’re just not very good at what they do.”

Prospective clients expect those who are good at what they do to charge more than the competition, and they’ll gladly pay a higher price to get the service they desire. After all, your prospective clients believe in “you get what you pay for,” just like most people do.

If you needed plastic surgery, would you want to hire the bargain-basement discount doctor, or an expert who charged what his or her expertise was worth? What would the cheap doctor do for your face and image? What does the bargain-basement designer do for their client’s image?

Just something for you to ponder.

2. You attract those who know the price of everything and the value of nothing.
When you compete on price, you attract clients who value price more than anything — including the value of your work and how it can benefit their sales, marketing, and position in their industry.

It doesn’t matter whether you provide the very best services money can buy or you do a just a so-so job, you’ll never have a long-term relationship with these clients, unless you’re willing to compete on price forever… because price is all they really care about.

As soon as someone cheaper comes along and you’re not willing to drop your prices, those clients will be gone.

3. Most people who are cheap and looking for the cheapest price can be “royal pains” to work with.
Internet marketing coach Yanik Silver once told a story about the Mercedes dealership in his hometown. He said the customers with the lowest-priced, entry-level Mercedes complain the most and cause the most problems for the staff. But those who purchased the highest-priced models of Mercedes are the best clients to serve and work with.

The same is true for your freelance design business. Cheap clients almost always complain more, take up more of your time, and are rarely satisfied. That’s because they’re always looking to get more for their money — which usually means more work for you, more headaches for you, more fires to put out, etc.

Of course, all of this comes without more pay.

No matter how great of a freelance designer you are, you’ll never be as successful as you could, if you compete on price.