What is penetrating pricing? Identify two conditions under which it is desirable.

Penetrating Pricing — This pricing strategy involves setting a low price in the initial stage so as to make the brand quickly popular and to maximise the market share. The manufacturer seeks to sell to the masses. Many firms use this strategy while launching fast moving consumer products. The policy results in high sales volume during the initial stages of a product's life cycle. For example, 'Nirma' detergent powder quickly penetrated the mass market by providing value for money and displaced the higher-priced 'Surf' in India.

Two conditions under which penetrating pricing is desirable:

1. Highly elastic demand — When the demand for the product is highly elastic, i.e., the quantity sold is highly sensitive to price. By reducing price, demand can be increased to a large extent.
2. Strong potential competition — When there is strong potential competition in the market, a low initial price helps restrict the entry of new firms and capture a larger market share before competitors enter.