Question

Identify two desirable conditions under penetrating pricing.

Answer 1

Penetrating pricing is desirable under the following conditions:

1. Demand for the product is highly elastic, i.e., the quantity sold is highly sensitive to price.
2. Substantial economies in unit cost can be achieved by operating at large volumes of production and sales.
3. There is strong potential competition in the market.
4. High income market is inadequate, i.e., very few consumers are willing to pay a high price.
5. The public is likely to accept the new product as a part of its daily life.