Correctly pricing your handmade soap can make the difference in whether or not your soap making business succeeds.
Pricing your soap can be pretty confusing and seem complicated. There are a lot of opinions for pricing handmade soap and it can leave you feeling stuck wondering which direction you want to go. The biggest mistake when pricing handmade soap is something every soap maker should be aware of, especially if you have a new soap making business.
Just so you know, this post contains affiliate links. Meaning I may receive a small commission when you purchase from my links, at no additional cost to you… which helps me spoil my adorable rescue rabbits.
The biggest mistake when pricing handmade soap is lowering the price of your soap.
I see a lot of new soap makers and other crafters make this mistake.
Lowering the price of your soap is one of the worst things you can do when you are first starting out selling, even though it is really tempting to do so.
Now there are times when it does make sense to lower the price of your soap, but it shouldn’t be done on a whim without a hard look at your business goals and strategy. It also takes some careful research and calculations.
The BIGGEST reason soap makers are tempted to lower their prices is lack of sales.
Here are some other top reasons lowering your prices may be tempting:
- Another soap maker is selling their soap for less and you want to compete
- A customer complained that your soap is too expensive
- You feel guilty for charging the higher price
You may be saying to yourself, “I do this as a hobby and I don’t care about making any money at it.” If you’re thinking that, stick around and I’ll address it in a minute.
Lack of sales
There can be many reasons for lack of sales, and price is usually not the problem. Before lowering your price, look at some other likely causes first. Is the place you are selling at targeting your ideal customer?
Flea markets and discount stores are notorious for selling to bargain hunters or “dollar store” minded shoppers. Another problem with the venue could be too much competition or too little traffic.
Another reason for lower sales is product packaging.
Does the product packaging have good branding and look attractive or does it need a face lift?
Having attractive and eye-catching packaging is half of the attraction to the handmade product. It makes it fun to buy and attractive for gift-giving.
Poorly displayed soap can also make your sales suffer.
People don’t buy what they don’t notice. Making your display fun, interactive and inviting will help draw them in. Lighting is also critical. You can have the best packaging in the world but poor lighting hides it. Make it shine with strategic spots of light and make sure the overall area is well lit.
If you are selling your soap online, good photography is super-important!
Customers can’t touch or smell your soap, so you have to go out of your way with the visuals. And, don’t forget a good description. Interested customers want to know the details about what they are buying.
Just make sure to break it up and use bold, italics and bullet points to help them find what they are looking for without overwhelming them. If they can’t find the answers to their questions, they will usually move on because emailing you is extra time and work. Most people are short on that these days.
Competing with other soap makers
Yes, you do have competition. No, you are not competing on price. Let me explain why.
Customers shop value, not price. Pricing your handmade soap only enters the picture when the customer perceives that the product is identical or very similar.
The exception to this is before the buyer starts shopping and has a budget range of what they are willing to spend, which really has nothing to do with your price and everything to do with their budget. It relates to what type of customer they are.
In reality, they may just not be your type (target customer).
When you compete with other soap makers, your entire offer is what you are competing on. Not price alone.
It includes things like how you source your ingredients, what type of ingredients, your values, your methods, your brand, your packaging, and how likeable you are.
You are not dollar store soap. Your soap isn’t mass produced in China.
You’re not that other soap maker, either. What you offer is unique. You are not selling a commodity product and your job is to communicate that effectively to your customer. A commodity product is a product that is perceived as the exact same product no matter who is selling it.
The only difference when buying a commodity product is PRICE.
Think wheat, corn, etc. Now you can take a perceived commodity product and make it unique by positioning your offer in a unique way. Example: Organically and sustainably farmed wheat, Non-GMO corn harvested by hand, etc.
Because you are different, you have different costs and a different perceived value than your competition.
Simply matching your competition’s price will not win you sales.
Something critical to bear in mind is this: You may be trying to compete with someone who’s unknowingly pricing themselves out of business. They might be a hobby soap maker who is not worried about being profitable.
There’s the possibility that they aren’t reporting their income or paying the appropriate taxes and getting proper licensing. They may be dumping excess inventory and taking a loss.
A customer thinks you’ve priced your soap too high.
Customers can be a great resource for feedback. Feedback can be really helpful for improving your business. However, customers’ opinions can be absolutely useless. Just know that and be prepared to sort them out and act accordingly.
You will ALWAYS get a few people who complain about your handmade soap prices.
These are the ones you don’t want as customers to begin with. Nothing will ever be good enough and they will waste your time trying to low-ball you so they can get a deal.
With these guys, you just need to stand your ground and stay proud of what you make. They either have no idea how much work and quality ingredients go into your soap or they don’t care. Most of the time, they don’t really care.
Now, there is a time where you want to take a serious look at your pricing when customers complain.
That’s when a lot of people are complaining. That means something is wrong. Maybe your soap isn’t delivering like you promised or you are targeting the wrong type of customer for what you offer.
Rarely is your price too high, though. With the right branding, some soap makers are getting away with selling one bar of soap for as much as $30 to $50 a bar or even higher.
You feel guilty.
Maybe you feel bad for charging a high price because you yourself wouldn’t pay that much for soap.
Understand that your customer isn’t you. Of course if they are a lot like you, it’s easier to relate to them. However, just because you are a bargain shopper, doesn’t mean that’s who you have to target.
Or, maybe you want to do your customers a favor.
Look, you are already doing them a favor by making specialty handmade soap. If you want to do them a favor, make a profit so you can stay in business and they can continue to get their hands on the soap they love.
Charity is good, but you can’t make a living giving away all your time and talents and not taking care of you, either.
Pro Tip: People buy from you because of how much they like you. They like you if you make them feel good about themselves and valued. Instead of charging less, focus on making them feel special, smart, stylish, etc.
Maybe you feel insecure about what your soap making skills.
You don’t feel worthy, or like your product is good enough. Just so you know, if you are waiting for perfect or the best, you will be waiting in vain. It doesn’t exist. You deserve to get paid for your work.
It is a common problem with creative entrepreneurs to significantly undercharge and undervalue their work. Set a higher price that makes you slightly uncomfortable. You might be pleasantly surprised. You can always lower it later or have a sale if you need to.
How to set your soap prices…
Pricing your handmade soap can be pretty involved, so we won’t get into that here. But let’s go over some of the mistakes made when calculating costs. When you know your costs, you can get a better idea of what you should sell your soap for.
One mistake is not including costs other than ingredients.
It’s pretty obvious that you need to add up oils, lye, fragrance, color, water and packaging costs. What isn’t so obvious is accounting for supplies used per batch like paper towels, dish soap for cleaning up and disposable gloves.
Another mistake is forgetting about taxes.
You should be estimating your taxes and setting aside a portion of your profits each month or quarter to make sure you don’t come up short. Keep in mind, as your income grows you may need to make estimated tax payments throughout the year. Then there are state and local taxes. You may not have a sales tax in your state, but you could be affected by other state business taxes. You can research the taxes for your location online or talk with a qualified tax professional.
You forget to include overhead in your product prices.
It takes more than what you add into a bar of soap to make it and get it to your customer. You need to think about everything that is normal and necessary for conducting business. Do you pay for a website? What about electricity, business cards, insurance, and equipment depreciation? You need to have enough to pay for these things too.
Forgetting to pay yourself.
This is a big one! There is a difference between profit and wages.
If you work in your business you need to make a living wage off your labor AND turn a profit at the same time. Of course, if you are a start-up you will not have much in the beginning, but you will want to set things up so you will become profitable and be paid for your time. The earlier you do this the better.
Think about it this way. If you had to hire people to do everything in your business, you would still need to have enough money left over after all expenses and wages to reinvest in growth and make a profit.
So, when you calculate the cost of your soap, remember to include wages for whoever makes the soap, markets, pays bills, etc. It might be you, an employee or contracted out to a specialist. Whoever does it, it does not matter. It needs to be a part of your cost.
One of the best books I have found on this topic is Profit First by Mike Michalowicz.** He explains a genius “envelope” method for business budgeting and whipping your business into shape. After implementing his methods, I had an immediate change in my business for the better.
Forgetting to make room for sales.
If you price your soap too low, you won’t have any wiggle room for sales or wholesale. You want to be able to make money even when you offer a discount. When you are already selling at rock bottom, you’ve got nowhere to go.
Sales are great for increasing sales numbers, but it won’t do you any good if you’re taking a loss every time you do it.
HOBBY SOAP MAKERS
OK, maybe you have no intention of turning this into a business. Lots of soap businesses start out that way. Once word gets out that you make fabulous soap, it’s hard to turn people away.
Pricing your handmade soap is still something you need to be aware of.
If you’ve been selling your soap at your ingredient cost or barely above, you may find yourself overwhelmed with requests. As fun as that can be in the beginning, it can burn you out and leave you feeling drained. You might even start to resent the people you make the soap for.
It’s fun to give away your soap for gifts, but it can get to the point where you have to sell it so you can replenish your ingredients and upgrade your equipment.
Even if you are a hobby soap maker you have the right to be reimbursed for your labor and materials.
Here’s the thing.
Once you’ve been giving your soap away upon request or selling it for dirt-cheap, it’s really hard to start asking for money or increasing the price. It can be really uncomfortable.
Don’t be afraid to price your soap to make a tiny, modest profit.
You can always cut people deals, and that small profit can be used to continue your education, or donated to a charity you love.
Now I’m not saying you have to do it this way. Just know that it’s OK to be reimbursed for your efforts. If you think there may be a chance later on you want to get more serious and start a soap making business, you will have a much easier time making the transition.
Let me illustrate this with a story.
Once upon a time there was this guy.
This guy is now my husband and he works for a giant wholesale food distributor. He gets an employee discount on lots of different bulk food items, and some of his family wanted to get the discount, too.
Word got out and being the nice person he is, he was getting discounts for family, friends, acquaintances, his local church for big events, and every person in his church, and so on.
His employer didn’t have a problem with this, but he was spending a lot of time processing, delivering and storing things at our house and in our fridge and freezer.
It even got to the point where he was floating the money, waiting to get paid, and even having to hunt people down to get paid.
Our fridge and freezer was constantly being stuffed with other people’s food, our checking account was getting dangerously low, and the little time we had left to spend together was vanishing.
Can you see how things can easily get out of hand?
It can be the same with hobby soap making if you’re not careful.
Of course I’d had enough of the situation and we put a stop to most of it. Now we occasionally get things for close family, or do a big favor for a friend, but they always have to pay up front and come pick it up themselves. No more free deliveries. No more free storage.
What if you set your soap prices too high?
You might get more sales. Yeah, you read that right.
Sometimes the reason you aren’t selling your soap is the price is low and people either think you’re cutting corners, or you don’t have much confidence in your soap products.
It smells like desperation to your customers.
There are two big turn offs when it comes to shopping: 1) Pushy, annoying sales people and 2) cheap junk.
The first thought that zips through my brain when I see a cheaply priced product is, “OK, what’s wrong with it?”
Try raising your prices.
If that makes you uncomfortable, you are totally normal. My personal preference is to set prices higher and offer discounts and incentives for buying 3 or more soaps.
To sum it all up, lowering the prices on your soap is most likely a big mistake. Just make sure you give it some thought and don’t be afraid to test different price points.
For more information about pricing handmade soap, click here for some of my favorite resources.
**Just so you know, this post contains affiliate links. Meaning I may receive a small commission when you purchase from my links, at no additional cost to you… which helps me spoil my adorable rescue rabbits.