It might be irrational but people value what they buy by how much they spend. I remember when I left my last full time job I felt we were undercharging our customers. I went back to those same customers doing the same work and charged them three times as much as they had been paying. Their attitude towards me changed completely, I was really shocked at the difference, I'd gone from being a grunt who installed systems to a valued member of the team.
You can't make it up in volume when you're charging directly for your time. But you can with a service where the marginal cost to serve an additional user is less than that $1.