With regards being up against larger companies, in reality, they're not your competition. You need to use REAL competitors. If you are trying to operate a business on a shoestring budget with limited resources, comparing yourself to GoDaddy for example is not a real world comparison. They are not your competition. Comparing yourself to an overnight host run by a hobbiest for pennies is also not your competition.
Just like the corner grocery store or gas station, their competion is not Walmart( which is only a mile down the road), they are competiting strictly against other similar businesses. There's something that the corner grocery store offers that the giants such as Walmart can't offer - customer service. Sure they have someone at the door that says hello when you enter, and there's thousands of selections within their building, and for the most part, the checkout stations are usually fairly nice when putting your groceries in bags, but that's nothing compared to a corner grocery store that knows your name, knows what you want, asks about your kids, gives you free doughnuts & coffee in the morning, and creates a welcoming atmosphere.
So it's time to re-evaluate your competition, and find out just who really is your competition. Companies selling unlimited hosting are not your competitors. People selling web hosting for dirt cheap are also not your competition. If you want to lump them in as your competition, you have to be ready to explain why you're better.
For our company, when we started, 10MB of disk space was what the competition offered - but just because THEY offered that, it didn't mean we did.
Up until last year, we still offered web hosting space at $5 for 1GB of disk space. With today's technology and resources, we're able to offer more than that, but you get the idea.
Don't compare your prices to that of your competition. Offer value to your customers, and no matter what the price, you will have customers that will pay. You have to distinguish yourself against the competition, and before you know it, you'll be selling web hosting for 15+ years and not even know it!
We've been in the business since 1994 (nearly 18 years now), a lot of things have changed, but many things remain the same. Customer service is still a priority, and most customers HATE large corporations with hundreds of thousands of clients. Our company has no ambition to be dealing with tens of millions of dollars in revenue each year - it's just too much work