Has this happened to anyone and how do you deal with it?
What is important is not to lose sight of your goal. Your goal is probably to make your business more money as time goes on. If you bare in mind that this is your only goal then customer retention can only really fit in to your plan so long as it actually supports the idea of your business making more money.
The customer is basically saying "I want you to work harder for the same money", the problem is that working harder takes more time. So, if you have to work longer to earn the same money then it basically means they are reducing your hourly rate.
Now to amplify that problem we having rising prices, I dunno maybe you have a mortgage, which in that case there is a good chance that you definitely have rising prices. Even if you think you have escaped inflation there is a good chance that something in your life somewhere is more expensive now than it was say a year ago, insurance, fuel for the motor, TV licence and then we have all the bonus and extra stuff that you enjoy doing because yourself employed, those little extras that mean you can spend a bit more money on stuff you enjoy. Basically what I am saying is that even if you decided to make the SAME money it would still be a pay cut in real terms.
Then you have a customer saying they want to give you a big fat pay cut???
Imagine for 5 minutes in your mind, if every single customer did this, imagine how much extra work you would need to do just to pull in the same money. Hopefully your going to realise that there is no question, you should be saying to yourself "Pay cut!??! Hell No!"
Once you understand in your mind that there is no way in hell your going to accept a pay cut, then decide to put a safety net up to prevent yourself smacking against the ground if they decide to drop you.
If the way to make your business less profitable is to do with hanging on to a customer that wants to pay you less money, then understand that the reverse is true.
The way to make your business MORE profitable is do with attracting NEW customers that want to pay you MORE money.
Instead of looking at a customer who wants to pay you a lower hourly rate as a problem, look at it as an OPPORTUNITY to go out there and get a better hourly rate from someone else.
Good Luck in whatever you decide to do