People and pricing
Marketing professor Mark Bergen was trained as an economist, yet there was still something he didn’t understand: Why do retail and wholesale prices remain so rigid?
Soon after arriving at the University of Minnesota in 1996, he met a fellow new faculty member, an ethnographer, who explained that his discipline took him into the field to observe, describe, and interpret human cultures—including corporate cultures.
Bergen, who is the James D. Watkins Chair in Marketing in the Carlson School of Management, began doing just that: He spent two years inside a local manufacturing company—along with two ethnographers, a macroeconomist, and a marketing colleague—exploring how that company went about setting prices.
He discovered that the cost of changing prices was “orders of magnitude more expensive than I had thought,” and much more controlled by actual human beings than rational economic principles.
Understanding all the considerations that managers use to set prices “has fundamentally changed the way I teach and consult,” Bergen says. “It turns out there is a relational language you can use to describe pricing, which may be the biggest barrier to prices moving in the way economists expect.”