Discounting more than 40% kills trust in your product
Discounts of 60% or more tend to reduce sales rather than increase them - especially for lesser-known brands. Deep discounts signal low quality, and the damage can be so strong it creates a negative placebo effect.
Quick Summary
Discounts of 60% or more consistently reduce sales rather than increase them, particularly for lesser-known brands in categories where quality is hard to judge before purchase. Deep discounts trigger a quality signal problem: shoppers assume there must be something wrong with the product.
Keep promotions at 40% or below. The 15-25% range drives urgency without triggering scepticism. If a large discount is necessary, pair it with a clear external reason such as end-of-line clearance to protect the quality signal.
Key Finding
60%+
Discount threshold above which sales consistently decline rather than increase, especially for lesser-known brands.
Cao, Hui & Xu, 2018
It seems backwards. A bigger discount should mean more sales, right? You're giving people more value, a better deal, a bigger saving.
Research tells a different story. Discounts of 60% or more consistently reduce rather than increase sales - particularly for brands that aren't household names and in categories where it's hard to judge quality before buying.
The quality signal problem
Price is one of the main ways people estimate product quality when they can't physically inspect it. A product that's suddenly 70% off triggers an immediate question: why is it so cheap?
The answer buyers land on is usually not "what a generous brand." It's "there must be something wrong with it." Or: "this must be the kind of product that normally gets ignored at full price."
The discount intended to drive urgency instead destroys credibility.
The placebo effect in reverse
Research found the damage isn't just perceptual - it affects the actual product experience. In one study, people who drank an energy drink sold at a steep discount solved fewer puzzles than those who paid full price for the same drink. The low price made the drink work less well.
That's the power of price as a quality signal. It changes what people expect - and expectation shapes experience.
Where to draw the line
Keep discounts at 40% or below unless there's an undeniable, external explanation (store closing, end-of-line clearance, warehouse move). When there's a genuine reason, state it clearly - the explanation protects the quality signal.
For regular promotions, 15-25% is typically the sweet spot. Strong enough to create urgency. Not so deep that it raises questions.
Research: Cao, Z., Hui, K.L. & Xu, H. (2018). Information Systems Research, 29(3). Erasmus University Rotterdam & Hong Kong University of Science and Technology.
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