The worst strategy (and we will assume here that you have an actual business strategy) is to be the lowest cost option. Here are four reasons why being the cheapest doesn't help your business:
You anchor your business with the worst of your competition
If you're selling gadgets and electronics, it doesn't matter how good your device is, being the cheapest means that you're associated with being a knock-off, unreliable and maybe even just a toy.
You could have the next most excellent smartphone that's on par with the latest Apple, Samsung or Google device, but because it's a third of the price, people are going to be hesitant. A few people might buy your product, but most will probably stick with the more expensive equivalent.
Being cheap in this instance will have people comparing you with Huawei, Pocophone or 1+. You might win that battle and capture their market share, but that wasn't your intention in the first place.
Apple wins despite being the most expensive option.
You become a vendor and not a partner
As a marketing consultancy, we refuse to act as vendors. We've discovered from experience that clients who price shop and look for the cheapest option are just looking for a vendor that can help them complete a to-do list. This is not the space that we want to play in.
We understand that what we do best is becoming partners with a client. It's not just about the tasks. It's also about the strategy, guidance and advice we provide - you can't put an exact price on this, and you can't price shop for it either.
Being just a vendor means that you can be replaced with another vendor at any moment. That's a dangerous and risky game we don't want to play.
You will burn out to stay afloat
Low prices mean you have to shift a lot of product/service, and that can be very stressful. Imagine the number of cars Toyota needs to sell to make a profit compared to the number of cars Rolls Royce needs to sell to make a profit. They're playing a completely different game and selling to a different audience, but there's a noticeable difference in approach. In 2018 Rolls-Royce sold 4,107 vehicles in 2018 (the most in the brand's 115-year history), Toyota, on the other hand, sold 220,910 vehicles in December 2018 alone (and that was just in North America).
We all have limited time, and doing less work means you're able to spend more time on each of your projects. It allows you to deliver more value, thinking about all the little details and justifies why you're charging more too.
Someone will undercut you one day
Being cheap can work, but your advantage will, without question, disappear one day. It could be a significant competitor who wants to bankrupt you or maybe someone willing to cut corners to undercut prices. It doesn't matter. There will be someone ready to do what you do, but cheaper. You can count on it.
In a similar vein, being cheap and looking for the most economical option doesn't help either. There's a balance between finding an ideal partner and keeping to a strict budget - but you can't always let the bottom line make all the decisions for you.
When it comes to finding a marketing consultancy (we will always go back to that since we have the most experience in this), going with the cheapest option means also making compromises. Instead of getting the agency to do the work, you will end up having to do a lot of the work anyway. Worst case, you spend a bit of money and six months down the line have to throw everything away and start from scratch. Instead of saving money, you end up paying more, AND you wasted six months. It's not worth it.
Expensive options work because there's a market for it. There's a reason they exist, and it's because other people see value in what they do. Expensive and terrible companies, they don't last very long.