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...