Pricing Strategies

midyear

Pointers to Make Sure Your Handmade Soap’s Price is Right

One of the most challenging aspects of running a handmade soap making business is determining how much you will charge per handmade soap that you are about to sell.

Going too low might not cover your handmade soap recipe costs or worse, it might correspond to losses on your end, like taking away quality fragrance oils from your recipes.

Pricing handmade soap making kits too high, however, might turn off your potential buyers, too. To find the sweet spot in pricing your merchandise, determine and calculate how much it will cost you. For starting a handmade soap business or any business, the universal formula to be used is:

(Raw Materials + Fixed Cost + Labor Cost) x Markup = Retail Price Per Piece

To achieve the minimum base production cost, add up the raw materials, fixed cost, and labor cost. This basically gives us an idea of how much the handmade soap is worth.

On the other hand, the markup or profit is the amount added on top of your base price to arrive at your selling price. To give you a better idea of each component, check out the 4 pricing aspects you should always consider:

1. Raw Material

Find out what type of handmade soap you want to sell in the first place. Your choice will ultimately be the baseline on how to price your products.

Will it be a bath bomb or an organic handmade soap? Perhaps it’s a fruity one or one with essential oils? This will also determine what method you are going to use. Will it be melt and pour, cold/hot process or milling, DIY bath bomb?

Each type will require different handmade soap supplies that may raise or lower your overall cost. See below for a sample breakdown of raw materials for a purple lavender handmade soap:

 

RAW MATERIAL COST
Fragrance: Lavender $6.50
Color: Purple $8.00
Oils: Olive $15.00
Water: Distilled $4.00
Lye $15.00
Packaging (Wrapper, Jute String, Logo Print Out) $10.00
TOTAL $58.50

 $ 58.50 / 75 pcs = $ 0.78

(Total Raw Materials / Number of Bars = Raw Material Cost per Bar) 

2. Fixed Cost

Basically, fixed cost is the cost of running any business. This covers electricity, rent, and other utilities required to produce your handmade soap products.

Fixed cost may vary from month to month depending on your manufacturing consumption so it is important to accurately compute this to cover your monthly recurring expenses.

Assuming you’re working at home, here’s a sample calculation below, omitting the room/store rental:

 

FIXED COST COST
Electricity $30.00
Water $15.00
Phone $20.00
Internet $70.00
Equipment (i.g. Mold, Tools) $45.00
TOTAL $180.00

(Monthly  Fixed Cost / Number of Bars = Fixed cost per bar)

3. Labor and Manufacturing

Never ignore your own labor costs. Determine how much per hour will you charge for yourself and establish how many hours it would take to complete a batch of your handmade soaps.

Don’t forget to factor in your prep time, cleaning up and doing your own packaging. These would already give you a rough estimate of your own monthly rate. Here’s an example:

 

LABOR COST
Preparation Time $30.00
Making the handmade soap $15.00
Cleaning Up $20.00
Packaging $70.00

 

LABOR COST
Preparation Time $30.00

 2hrs & 30min x $10.00 per hr / 75pcs = $0.33

(Hours x Hourly Rate / Number of Bars = Labor cost per Bar)

 

4. Markup

After figuring out how much your handmade soap bar costs, it’s time to include your revenue per product sold or your markup. Adding this to your base production cost will ultimately give you your final retail price. Experts recommend markup of 150%-200% or multiplying the base cost by 2.5 to 3.

Based on our sample above, here’s the final selling price of the lavender bar handmade soap:

(Raw Materials $0.78 + Fixed Cost $0.40 + Labor Cost $0.33) x 2.5 Markup = Retail Price Per Piece $3.78

All these aspects are what makes up the overall pricing of your handmade soap making business. Keep in mind to work on a trial and error basis by adjusting your costs and experimenting on your mark up in order to find the right price for your homemade handmade soap products.


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starting a soap business 3

9 Tips on Having Your Handmade Soap Bag ‘Em Money at the Craft Fair

The main objective for those starting a soap business is making a profit while doing what we love!  

Nowadays, the rise of craft fairs has skyrocketed to capture every business which covers various needs. These setups create an inviting atmosphere that encourages vendors and customers to interact with each other with convenience and comfort.

To maximize your investment towards this venture, here are several tips that would help you improve your soap making kit brand and business potential in a craft fair:

 Tell Your Story 

Being at a craft fair enables vendor and customer interaction that online selling does not get to offer as much. Presence at a craft fair adds a personal touch by letting you talk about your story and tell them why you’re doing what you’re doing.

Talk about why you decided to sell your DIY bath bomb and handmade soap as an example. There’s no better conversation starter than letting people in on the background of your product and eventually how it can benefit them along the way.

Packaging 

Ever bought an item just because the packaging looks good? Not only does your handmade soap need to look appealing, it should come in attractive packaging as well. This needs to complement and reflect your brand whether it’s quirky, chic or over the top in order to create a coherent look and feel for your products.

craft fair 4
craft fair 4

 

Name your Collections 

What should you consider when naming products? Make sure this is relevant and induces customer recall. Your handmade soap will be remembered by buyers either by anchoring on benefits, using wit or creating personalities that resonate with them.

Use Seasonality 

Create collections on top of your current bunch by offering them on a specific period aligned with the current seasonal theme. Not only are you targeting your current buyers. You’re also creating a market for their family and friends through gift giving which can eventually increase your handmade soap brand’s word of mouth and product awareness.

Turn Buyers into Followers 

There’s nothing more valuable these days than your brand’s presence on social media. This creates a community of followers to keep them updated with your new offers and where they can purchase.

Create your brand’s community through the craft fair by encouraging them to like or follow your page. Naturally, once they do they get more ideas on how to make bath bombs and handmade soap or organic soap and bath bomb recipe. In exchange, share with them a small token from your booth, such as sample item they can bring home for free.

Product Bundling 

One of the oldest tricks in the book is putting together some of your products and creating promo bundles. This is an effective strategy in increasing awareness. Product bundling also encourages trial for a new product or one that is less bought when it’s partnered with your bestsellers.

Create an Interactive Setup 

You want your booth to be visibly appealing and make it stand out from the rest. Making it inviting attracts more people to approach you. It also creates better opportunities for you to talk about your handmade soap product.

Ensure that you have samples from your collection that are available for the people to touch and try for a more personal experience.

Product for a Cause 

Integrate social responsibility to your business by getting in touch with charities who will also benefit from your product. Share the charitable involvement of your brand in order to let customers know that they are not only patronizing a good product but they are also supporting people who made your brand available in the market.

Compelling Offers 

Research and implement offers that are attractive to your customers. Irresistible promos can encourage them to buy handmade soap even if they aren’t looking for your product in the first place.

Propel your product towards potential loyal customers and consequently boost a following by capitalizing on these strategies. Assess your business performance afterwards because there’s no better way to develop your craft than learning from experience.


Need craft supplies for your DIY Soap and Bath Bomb projects?

Our products are carefully curated to bring to you the best of the marketplace including All Natural Bulk Dried Edible Flowers, Skin Safe Liquid Soap Dye, and Mica. Creativity drives us to keep our offerings on trend and in style.

Purchase from our Store and get these resource booklets for free!

Interested in crafting ideas like Bath Bomb Recipe, DIY Bath Bomb, How To Make Bath Bombs and more? Let us inspire the creative spirit in you. Browse our blog for more handmade soap recipes.

Let’s connect via Facebook and Pinterest and you might just win a free giveaway!

Pricing Strategies to Increase Your Profit Margin

How to Get Your Handmade Soap it’s Deserved Profit

Starting a soap making business requires research, choosing soap making supplies, manufacturing handmade soap and of course, making a profit out of it.

Now, before going out there and finally getting soap making kits available for purchase, make sure to correctly price the handmade soap to cover the costs and still make enough revenue out of quality soap recipes.

Here are the different pricing methods one should take note of to maximize the business’ profit margin, before arriving on the final retail selling price:

1. Penetration Pricing

The biggest challenge in launching a new handmade soap into the market is intense competition. To be given an opportunity for the customers to try your new soap handmade soap, one way to go about it is to price it relatively low and thus enter or penetrate the market. This tactic is setting a low initial entry price or what we usually see as an “introductory offer”.

On a short-term basis, introductory offer may not generate your soap business with surprising revenue increase due to the low profit margin. However, in the long run, being able to induce trial and capture a huge market share will reap long-term profitability.

     Photo Credit: Spruce 

2. Fixed Amount Strategy

By the name itself, this method is all about determining and adding a fixed amount on top of your cost to arrive at your retail selling price.

This approach is widely used since those starting a soap business will know for certain the amount of gross profit margin each sale will generate. The con however, is that the amount may not reflect competitive pricing within the market. Here’s a sample formula:

Unit Cost X Markup % = Selling Price

$ 10.00 x 150% = $ 15.00

3. Psychological Pricing

This technique is used to assign certain price points where buyers may think they are getting a bargain for the handmade soap. This is based on the theory that certain amounts give a psychological impact on the purchasing behavior of buyers. Usually these target customers are looking for value for their money.

As an example, a potential buyer might think your soap priced at $15.00 is too much. But they might buy your item for the cost of $14.99 thinking this is cheaper.

Photo Credit: Pinterest 

4. Bundle Pricing

This strategy is basically putting together two or more of your soap handmade soaps and selling them at a certain price that would be relatively lower if sold individually. This is a known method in selling out your slow-moving items by bundling them at a lower price altogether which can give a notion to your customers that you are giving them something for free.

You can also pair up a less bought soap with your bestselling one to induce trial for your bestselling soap patrons. Here’s a sample scenario:

Lavender Soap (Bestselling Item) = $10.00

Milk Soap = $8.00

Special Bundle Offer for Lavender + Milk Soap = $14.00

Take these strategies into consideration to make sure you still make a profit out of your soap business. Study the homemade soap industry and determine which method would best fit your handmade soap. In the long run, it’s all about having the tenacity to implement various methods in order to arrive with the pricing strategy that works for your business model.


Need craft supplies for your DIY Soap and Bath Bomb projects?

Our handmade soaps are carefully curated to bring to you the best of the marketplace including All Natural Bulk Dried Edible Flowers, Skin Safe Liquid Soap Dye, and Mica. Creativity drives us to keep our offerings on trend and in style.

Purchase from our Store and get these resource booklets for free!

Interested in crafting ideas like Bath Bomb Recipe, DIY Bath Bomb, How To Make Bath Bombs and more? Let us inspire the creative spirit in you. Browse our blog for more handmade soap recipes.

Let’s connect via Facebook and Pinterest and you might just win a free giveaway!

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