I have a friend that is doing mainstream sites and he charges several thousand dollars to produce what we would typically only spend $500 on. Same is true with hosting, I have had clients with mainstream sites come to me and ask for a quote and then tell me that there is no way I can offer them service for that price as they are currently paying 3x to 4x the amount for shit service.
I think its smart to cut costs, but not at the expense of quality and/or reliability. For example, going with a dirt cheap host may save you a few bucks every month but that is irrelevant when your sites are down for days on end, or sooo slow that you lost new customers.
cheers,
Luke