The emails start arriving every December. "40% off everything." "Biggest sale ever." Brands that spent years building exclusivity, suddenly shouting discounts from every digital rooftop. The logic feels sound: if customers are spending less, a lower price will bring them back.
Discounting a premium brand costs more than this quarter's margin. It resets what the customer believes the product is worth, and once that belief has moved, full price has to be earned back rather than simply reinstated. Buyers who learn to wait for the sale stop treating the label price as the real one.
Almost twenty years inside L'Oreal Group and Coty, running multi-million pound P&Ls across some of the most well known beauty brands, taught me to read a markdown as a decision about the brand, one whose cost lands long after the quarter it was meant to rescue. This is the structural argument for holding your price.
The discounting spiral
It always starts innocently. A limited-time promotion to lift quarterly numbers. Just this once, the thinking goes.
The first discount works beautifully — and that is the problem. Sales spike, leadership relaxes, and "customers love it" becomes the new blueprint. Underneath, customer behaviour has started to move: email opens drop for everything except promotions, and the most loyal customers quietly become the most patient ones, waiting for the next promotion or discount.
To hold the same volume, the discounts then have to deepen. Last season's 20% becomes this season's 30%. Somewhere in that sequence the positioning goes, because once customers consistently see a product at 40% off, that becomes the real price in their heads and full price starts to look like a markup.
Nothing in that sequence reverses on its own. An anchor is not a policy the brand can rescind. It is a memory, and it only fades as full-price evidence accumulates against it.
Why premium customers buy differently
One principle held steady across every global beauty portfolio I worked on. Premium customers buy on value. They are not weighing your £150 serum against a £15 alternative from a supermarket shelf; they are weighing your brand against the other premium experiences they could have chosen with the same money.
Discount that product and you have not simply lowered a number. You have invited the customer to ask whether it was ever worth the number you started at, which is a question no amount of positioning language answers afterwards.
My own rule under price pressure is that the levers worth pulling are the ones that leave the label alone. Tighter availability. Sharper service. A range that gives the customer somewhere to trade up to. More in the box rather than less on the ticket, whether that's a gift with purchase or deluxe sampling that puts someone into a product they would not have chosen for themselves. Each of those can lift what a customer spends while the anchor stays exactly where it is. A price cut is the only lever that moves the anchor, and it moves it in one direction.
What discounting costs you, long after the sale ends
The margin hit from a single sale is the part everyone budgets for. What rarely makes it into the planning meeting is what happens to the brand's pricing power afterwards.
A price, once cut, is hard to put back. Customers anchor to the lowest number they have seen, and every subsequent full-price purchase gets measured against it. Trade partners anchor to it too: a buyer who has watched a line move at 40% off will open the next negotiation there, so your discount history becomes their opening position.
Margin compounds the wrong way as well. Cutting price on a hero product rarely stays contained to that one line; it drags the perceived value of everything sitting next to it on the shelf or the page. And a discount disproportionately attracts the customers who were never going to pay full price for anything, which means the sale does not only cost margin today, it quietly reshapes who your customer base is next year.
Here is the arithmetic worth sitting with. Michael Marn and Robert Rosiello's study of pricing management, published in Harvard Business Review, found that a five per cent price cut requires close to nineteen per cent higher sales volume simply to protect the profit the business already had (Marn and Rosiello, "Managing Price, Gaining Profit," Harvard Business Review, September-October 1992: https://hbr.org/1992/09/managing-price-gaining-profit).
That ratio is not universal arithmetic. It falls out of the average cost structure in the companies they analysed, so the exact volume your own business would need depends on your own gross margin, and it is worth running the sum on your own P&L before quoting anybody's. What does travel is the shape of the problem: even a modest cut needs a volume increase several times its size before it has earned back what it gave away, and a seasonal sale is rarely modest.
The bottom line
Premium positioning behaves like a reputation. Expensive to build, slow to rebuild once damaged, and best defended before the pressure arrives rather than in the middle of it.
Pricing is brand strategy. It is not a revenue lever you pull when the numbers dip. In premium markets, how you sell matters as much as what you sell.
In beauty, the race to the bottom is easy to win. Nobody remembers the winners.
Frequently asked questions
Is discounting ever the right call for a premium brand? Occasionally, and briefly. Clearing genuine dead stock at the end of a product's life is a legitimate commercial decision. So is a rare, tightly bounded gesture to existing customers. The damage comes from repetition: a one-off clearance is a decision, a recurring calendar event is a habit, and habits are what train customers to wait.
How long does it take to rebuild pricing power after a discount campaign? Longer than the campaign that created it, and I would be sceptical of anyone who offers you a number of months. The anchor only erodes as full-price evidence accumulates against it, and every additional discount inside that window starts the accumulation again. What you can actually control is whether the window keeps being reset.
Does bundling count as discounting? It depends entirely on how it is priced. A bundle that raises the total transaction value while every item holds its own price is a different commercial decision to one that quietly cuts the per-unit price to shift stock. The test is not whether it feels generous to the customer; it is whether the customer could now name a lower per-unit number than your price list does.
Does this apply to a brand that has never discounted before? More so, if anything, because the first discount does the most damage. A brand with no discount history has a clean anchor. The moment it runs its first sale that clean anchor is gone, and every future full-price customer knows a lower number exists.
Author: Kirsty Newman, founder of The Boutique Consultancy. Her career spans twenty years in beauty and wellness, much of it at L'Oréal Group and Coty, in roles ranging from media investment to running multi-million pound P&Ls and teams of up to 16 across YSL Beauty, Giorgio Armani Beauty, Lancôme and Rimmel. She now brings that corporate discipline to founders in startups and scale-ups, including direct work with venture capital on funding and expansion.