I normally answer these questions without looking at what others have already answered.  Today, I wrote my answer ,but lost it through a misplaced keystroke on my phone. These answers are better approached on a regular sized keyboard and computer. I inadvertently read a few responses related to perceptions. It is true that the reason someone will buy a Cadillac instead of a Volkswagen is because of its name and status. There is no where where it is written or can be proven that the sheet metal, or the bearings used in the engine, or transmission, or the wheels are better. It is just assumed.

it boils down to business model or business plan. We set out in our respective businesses to provide a solid product or service. A chef needs to be competent to bake a decent, delicious muffin. That is his first concern. His second is his ability to sustain his dream, and that is where the business plan or model comes into play. How much to charge; how much to expense; and how much of a desired profit margin to sustain his dream. Much like a doctor, he desires to save lives ,and treat injuries. He does not go into medicine initially thinking of how much money he can make. That was not his motivation. Even in private practice his first goal is to treat patients, not ponder advice from his stock broker.

a business is only viable if based on true costs of running that business, not perceptions. The business plan can factor in a profit, but only after the actual costs of sustaining that business are determined. I would give my customer a much abridged version of this answer, but it would definitely contain all the essential elements. 

being straight forward, honest, and direct leaves the customer completely free of questions, and hopefully, of doubt as to your integrity. 

undercutting your own business is the most crippling thing you can do. Maintain your stance. Bartering is what our forefathers did on their farms. Trading in kind vegetable for beef was seen as currency. We live in a different time.