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Marketing 388 Assignment 4 People Pc

1636 words - 7 pages

The marketing objectives that PeoplePC and Free-PC are apparent that they are trying to build market share leadership as the free computers will be a gimmick to attract massive amounts of people to enroll into its free deal. It is believed that with a large amount of audience at hand, companies could negotiate for lowest costs and highest long-run profits.It is apparent that the companies are trying to penetrate the market quickly using market penetration pricing as it could attract a large number of buyers quickly and win a large market share. They also using psychological pricing because the deals to obtain these PCs are clearly very different from the prices they when compared to a PC bought elsewhere.The fixed costs of PeoplePC assuming that the website is created in an office like environment with working staff (technicians and sales representatives), the fixed costs would be PeoplePC's rent for each month, heat, interest and salaries for the 500 representatives that answer the calls and the around the clock technical support (assuming they are on fixed salary). The domain name and cost for the website would be fixed; however, if the website becomes too popular and consumes too much bandwidth, PeoplePC may have to pay for the amount of increased traffic to its website as a variable cost. The improvement of the website could cause more consumption of web storage space which would be a variable cost. The number of PCs provided by the company would definitely be variable because of its dependency of consumers ordering them.The implications of this cost structure is that PeoplePC could pay much less in customer acquisition costs, in some examples, if it costs $1000 to acquire a customer, it could get just 10% of that for doing the same work, it can become very profitable.PeoplePC can make offers that appear to be free or almost free because of several reasons: first PeoplePC behaves as massive purchasing agent which allows them to bargain for the lowest prices from suppliers backed by powerful buying power from the combinations of the customer of PeoplePC known as its members. It severs as an internet shopping club. Secondly it earns a fee from the advertisers when a member makes purchases through the "banners" or advertisements that were placed by the advertisers within the PeoplePC website, for many companies, new customer acquisition via traditional means such as advertising and personal selling can be very expensive PeoplePC can acquire new customers for a fraction of the original cost.The true costs to the customers would be the "membership" fee each month and upholding that payment for 3 years.The relative advantages that PeoplePC are offering compared to existing products is that it is outstandingly cheaper and do not require users to view adverts on the screen nor do they require internet activity. The offer includes a brand-name PC such as Compaq or Toshiba which other offers may be offering low-end or generic computers. Another...

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