Two main problems with competing on price that I've experienced -
#1 - As others have mentioned, competing on price will mean that you attract users for whom price is the most important thing. These users are often more fickle, retain at significantly poorer rates, and in my experience, they (counterintuitively) consume more support resources. They also have a substantially lower NPS, which also shines through when they write reviews. Those are some big negatives.
#2 - Pricing your product substantially lower than the pack means that you'll have a very hard time competing with other players in many paid acquisition channels, if you ever intend to. There are plenty of other ways to find customers, but you'll have to rely on channels & audiences with lower intent (as in, people who aren't directly seeking out and already motivated to find what you are selling.)
There are ways to succeed with low cost and free products, but it's a winding path that is far from as obvious as it may seem.
#1 - As others have mentioned, competing on price will mean that you attract users for whom price is the most important thing. These users are often more fickle, retain at significantly poorer rates, and in my experience, they (counterintuitively) consume more support resources. They also have a substantially lower NPS, which also shines through when they write reviews. Those are some big negatives.
#2 - Pricing your product substantially lower than the pack means that you'll have a very hard time competing with other players in many paid acquisition channels, if you ever intend to. There are plenty of other ways to find customers, but you'll have to rely on channels & audiences with lower intent (as in, people who aren't directly seeking out and already motivated to find what you are selling.)
There are ways to succeed with low cost and free products, but it's a winding path that is far from as obvious as it may seem.