Why has my battery capacity dropped so quickly?

I have a 15" Macbook Pro from Early 2011, use it about 70% of the time on the charger, and try to let the battery cycle completely when I can. I was checking my battery health two days ago in the Battery Health app, and noticed that it was at 78% and showed "Needs Service." I followed up in System Profiler and it showed the same percentage and "Service Battery." I am currently at 343 cycles. Today when I checked my battery, I saw that it was at 23.1% capacity, same story in Profiler. I understand that a battery is a consumable good, but why the exponential drop in capacity? I really do not want to spend $120 on a new battery for a 1.7 year old machine.