Let this deal go. The company, I was working earlier, had a habit of signing on every customer that knocked their door. In the long run, it created a lot of problems to support those customers (at a very low margin or at a loss), just to maintain the reputation of "not leaving the customers cold" in the marketplace.

Letting this deal go, might also send a strong message to X, Y, Z potential customers, that you are offering much more than the cheapest solution and are willing to walk away.