On a niche forum, I offered members $10 off on a $250 widget. One member complained that the $10 was just 4%. I replied that I could raise my price to $300 and offer $60 off, which would be 20%, and asked the member if he'd be happier with that. He hasn't replied. ;)
However, another forum member PM'd me and said that his family's B&M business does that very thing every summer. They'll raise their "regular" price and then promote a X% off sale. He said it works.
Check local laws before creating artificial reductions. Some jurisdictions require the product to have been genuinely sold at full price before hand.
Perpetual sales can work but you need to vary the discounts. For example a menswear shop near my office sells shirts for £65. But they might be £35 with a free tie (£65 without - go figure!) or four for £100 or half price. I have never paid list price for anything there. Anybody else working in central London will probably recognise the chain! They seem very successful.
I've actually done some research into this with a couple of customer sites, and what I found was that whichever number was larger relative to the price of the item being sold tended to get the best response.
Meaning if the product is $1,000, saying "Save $100" yields a better response than saying "Save 10%" because $100 sounds bigger than 10%, even though the math is the same.
Likewise, on a $50 item, saying "20% off" worked out better than saying "$10 off".
You should also look at another post I made recently about a customer's experience with gift cards vs. coupons. Same kind of psychological difference... coupons remind you you're spending money, while gift cards feel like free money someone has given you. That thread is here: [webmasterworld.com...]
if u're not dealing with any repeat customers, i think it's a good marketing strategy.. just don't go too crazy with it.. marking up about 30-50% and then giving a "discount" is common practice in many industries virtually selling for the same price