This is smart use of the strategy of "auto-cannibalizing" (i.e. eat your own margins before someone else eats it for you!) your margins to maintain and grow market share. It is counter intuitive and contrarian (particularly in the current economic environment) but, when done right, works well in contributing to building a "wider economic moat" (Warren Buffet's words not mine!) and makes your business model and market share more defensible. One industry where this technique is widely used in the generic pharmaceuticals industry. I owned a business in this domain so I guess I know a thing or two about application of this technique. - Alexander Ainslie from FriendFeed MT Plugin