How effective is penetration pricing?

Penetration pricing means introducing new products or services at low initial prices to penetrate the market. The prices are increased after the number of satisfied customers has increased.

Achieving success with this method depends on the value and quality of your product or service. If you focus only on penetration pricing and not the products' quality, you might lose the customers once you increase the price. Since the profit margin is narrow initially, you need a good cash flow to keep things going.