I think that a frequent and rather upsetting example of this is when contracts are issued to the lowest bidder on a building or road project only to find out that they could bid low because the materials they use are poor qulality. One recent example near my hometown was a road project that was awarded to the lowest bidder. Less than a year after the road was completed, it gave way to huge pot holes and, in places, disintegrated altogether. The construction company had to redo several miles of a dual lane road. I can't imagine that the company made any money, and they certainly hurt their reputation.
On a more personal level, I think we've all been enticed to buy goods that are of lower quality because they are cheaper only to find out that they don't work as promised. An example of my own: I needed a new potato peeler and didn't want to buy the more expensive model for $6, so I picked up a similar one for $2. It doesn't work properly, and I'll be purchasing the better model anyway!