PeoplePC Case Study: Is There Really A Free Lunch?

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cost structure?

PeoplePC's cost structure was highly variable dependent on the number of members it had in service and the number of new members that had signed up for service each month. This was an effective cost structure for this company, as costs would rise and fall with revenues, creating a more stable net profit percentage. If their costs were primarily fixed, when PeoplePC's membership faltered net profits would plummet.

2c. How can companies like PeoplePC make offers that appear to be free, or almost free?

Companies like PeoplePC can make offers that appear to be free or almost free only if there is a secondary revenue source that is not immediately apparent to most consumers. In the case of PeoplePC, their low initial costs are supplemented with added revenue from merchants. Free-PC utilized revenue from advertisers to offset their 'free' offer.

2d. What are the true costs to the consumer?

The true costs to consumers vary depending on the offer, ...

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as consumers do not have to shop for a separate ISP. The divisibility however was not there. A consumer could not simply try the service first; they had to sign up for a three-year contract. This may have be seen as PeoplePC's biggest hurdle. Lastly was the communicability of the product. Once consumers tried the PeoplePC computer and service, word of mouth advertising definitely helped the product take off.

4a. What are the core, actual, and augmented products being sold by PeoplePC? Clearly differentiate between the three.

The original core product PeoplePC was offering was the computer. The actual product they were offering was a computer, with Internet service. ...

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