Excessive or frequent discounting often erodes consumers’ perception of a product’s value and quality over time, even if it boosts short-term sales. Price serves as a key quality signal, and heavy or constant discounts disrupt that signal, lower reference prices, and condition buyers to view the product as less worthwhile at full price.
Price as a Quality Cue and Quality Skepticism
Consumers frequently use price as a proxy for quality, especially when they cannot easily evaluate the product beforehand. Large discounts can trigger “quality skepticism.” Buyers may wonder what is wrong with the item that it needs such a steep markdown, or is inherently lower quality.
Research and industry observations show that discounted products are often perceived as lower quality than identical full-price versions. Frequent discounting reinforces the association between the brand and lower quality.
Shifting Internal Reference Prices
Consumers form an internal reference price based on past observations. When discounts occur often or deeply, the promotional price becomes the new normal (or “anchor”). Full price then feels inflated or like a loss, reducing willingness to pay it.
Classic examples include retailers whose constant promotions trained shoppers to buy only on deal, ultimately damaging the business when regular-price sales collapsed. Frequency and depth both matter: deep discounts at high frequency lower reference prices .
Brand Equity Dilution and Devaluation
Excessive discounting sends signals of weakness or desperation (“the product wasn’t worth the original price”). It can commoditize the brand, shifting focus from unique benefits, quality, craftsmanship, to pure price competition. Premium positioning is especially vulnerable—once eroded, it is hard and slow to rebuild.
Loyal full-price customers may feel disillusioned or “punished” for buying earlier at higher prices. Over time, the brand becomes associated with deals rather than value, attracting more price-sensitive, lower-lifetime-value customers who switch easily for better promotions.
Conditioning Deal-Seeking and Reduced Loyalty
Shoppers learn to wait for the next sale, delaying purchases and making full-price periods slower. This “discount conditioning” or promotion addiction raises price sensitivity across the board. Discount-acquired customers often show lower average order values, lower repeat rates, and substantially lower lifetime value
Other Related Effects
Expectancy effects: Lower prices can prime lower expectations, sometimes making the product feel less effective or enjoyable (supported by studies ).
Category-level damage: Aggressive discounting has led consumers to doubt overall product quality and prefer “aptly priced” alternatives.
Sadly, McDonald's has not learned this lesson.