| How to Set a Price for a Product: Handmade Business Pricing Strategies | ||
| Author: Geoffrey Michael Wednesday, August 19, 2015 |
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Setting prices for your products is both art and science. You want to be competitive, but you also want to make a profit. Science can tell you the breakeven point needed to cover all your costs, and that establishes the baseline where the then art takes over. It then becomes a matter of showing the public that you offer value for its money.
Setting prices for your products is both an art and a science. On the science side, you need to calculate your costs and set a baseline price that ensures your business covers expenses and makes a profit. On the art side, you need to understand how your customers perceive value, how your competitors are pricing, and how your brand positioning impacts sales. Learning how to set a price for a product is one of the most important business skills for small makers, because the right pricing strategy helps you stay competitive while still protecting your bottom line.
When you know how to set price in a way that reflects your value, you’ll be able to attract the right customers, strengthen your brand, and create a sustainable business. Pricing isn’t just about numbers, but also about perception. Done well, it builds trust, enhances your reputation, and makes sure your products and services stand out in competitive markets.
When you know how to set price in a way that reflects your value, you’ll be able to attract the right customers, strengthen your brand, and create a sustainable business. Pricing isn’t just about numbers, but also about perception. Done well, it builds trust, enhances your reputation, and makes sure your products and services stand out in competitive markets.
Why Pricing Matters for Handmade Small Businesses
For many makers, figuring out how to price handmade goods feels intimidating. Set the price too low, and you risk undervaluing your time and creating unsustainable profit margins. Set the price too high, and you may face resistance from your customer base. The key is finding a balance where customers are willing to pay what you’re asking while you maintain profitability.
In handmade industries like soaps and candles, pricing can make or break your business. A beautifully packaged candle with premium fragrance oils may support a higher-priced positioning, while a simple soap bar in bulk packaging may be best suited for value-focused shoppers. The right price helps you stand out at craft fairs, online marketplaces, and retail shops, ensuring your brand feels both trustworthy and worth the investment.
Successful small businesses use pricing strategies not only to cover costs but also to strengthen their identity. Whether you want to position your business as affordable, premium, or somewhere in between, your pricing tells a story about your products. Over time, a clear pricing strategy builds credibility and creates loyal customers who understand the value of what you offer.
In handmade industries like soaps and candles, pricing can make or break your business. A beautifully packaged candle with premium fragrance oils may support a higher-priced positioning, while a simple soap bar in bulk packaging may be best suited for value-focused shoppers. The right price helps you stand out at craft fairs, online marketplaces, and retail shops, ensuring your brand feels both trustworthy and worth the investment.
Successful small businesses use pricing strategies not only to cover costs but also to strengthen their identity. Whether you want to position your business as affordable, premium, or somewhere in between, your pricing tells a story about your products. Over time, a clear pricing strategy builds credibility and creates loyal customers who understand the value of what you offer.
Know Your Total Costs
Before you can choose a pricing strategy, you need to know your total cost of production. This includes the obvious expenses like raw materials, fragrance oils, colorants, jars, or soap molds, but it also includes overhead costs like electricity, workspace, equipment, and even your time. Too many small businesses forget to pay themselves for labor, which leads to artificially low prices that are difficult to raise later on.
When setting prices for your products, start with a cost breakdown. For example, if you’re making a batch of soap, calculate the cost of oils, lye, fragrance, colorants, packaging, and labels. Add your labor cost per bar and a reasonable profit margin. That final number is your baseline, or the minimum you should charge to keep your business sustainable.
To make this process easier, tools like WSP’s Fragrance Oil Calculator can help ensure you’re measuring and costing accurately. By understanding your costs, you’ll be able to price confidently, protect your bottom line, and avoid undervaluing your products in competitive markets.
When setting prices for your products, start with a cost breakdown. For example, if you’re making a batch of soap, calculate the cost of oils, lye, fragrance, colorants, packaging, and labels. Add your labor cost per bar and a reasonable profit margin. That final number is your baseline, or the minimum you should charge to keep your business sustainable.
To make this process easier, tools like WSP’s Fragrance Oil Calculator can help ensure you’re measuring and costing accurately. By understanding your costs, you’ll be able to price confidently, protect your bottom line, and avoid undervaluing your products in competitive markets.
Research Your Market and Customer Base
Once you know your costs, the next step in how to set a price for a product is understanding the marketplace. Conducting market research will give you insights into what a similar product sells for and what customers are willing to pay. This doesn’t mean copying other small businesses—it means positioning your brand strategically in relation to your competitors.
For handmade goods, pricing varies greatly depending on the setting. At a local craft fair, buyers may expect lower prices but still want something that feels unique and artisanal. On platforms like Etsy, many customers are comfortable paying more for products that have strong branding and beautiful packaging. In boutique shops, higher prices are often accepted because the product feels exclusive and premium.
Every customer base has different expectations, and knowing their price sensitivity helps you avoid underpricing or overpricing. For example, if your customers view a higher-priced candle as a sign of better quality, lean into that perception and design packaging and marketing that reinforces the premium feel. On the other hand, if your buyers are more price-conscious, focus on demonstrating value through durability, ingredient quality, or quantity. In competitive markets, this balance is what allows small businesses to thrive.
For handmade goods, pricing varies greatly depending on the setting. At a local craft fair, buyers may expect lower prices but still want something that feels unique and artisanal. On platforms like Etsy, many customers are comfortable paying more for products that have strong branding and beautiful packaging. In boutique shops, higher prices are often accepted because the product feels exclusive and premium.
Every customer base has different expectations, and knowing their price sensitivity helps you avoid underpricing or overpricing. For example, if your customers view a higher-priced candle as a sign of better quality, lean into that perception and design packaging and marketing that reinforces the premium feel. On the other hand, if your buyers are more price-conscious, focus on demonstrating value through durability, ingredient quality, or quantity. In competitive markets, this balance is what allows small businesses to thrive.
Pricing Strategies That Fit Your Brand
Once you understand your costs and market, it’s time to choose a pricing strategy that aligns with your brand. There isn’t one perfect formula—what matters most is that your pricing reflects your story, your audience, and your business goals.
Here are three proven pricing strategies for small business makers:
Your choice of pricing strategy should match your brand’s image. A rustic handmade soap line may thrive with value pricing, while a candle brand in sleek glass jars with high-end scents may fit perfectly into a premium pricing model.
Here are three proven pricing strategies for small business makers:
- Economy pricing: Keeping prices as low as possible to attract budget-conscious shoppers. This approach requires high sales volume to make a profit, which is challenging for most handmade businesses with limited production capacity.
- Value pricing: Setting prices that balance affordability with perceived quality. This is the most common approach for soap and candle makers, since it allows you to compete in competitive markets while still maintaining healthy profit margins.
- Premium pricing: Establishing high prices to position your products as luxury. This strategy works well if your packaging, branding, and product quality support the perception of exclusivity.
Your choice of pricing strategy should match your brand’s image. A rustic handmade soap line may thrive with value pricing, while a candle brand in sleek glass jars with high-end scents may fit perfectly into a premium pricing model.
The Psychology of Pricing
Numbers tell one story, but perception tells another. Psychology plays a huge role in how to set price and how customers respond to your products. Something as simple as pricing an item at $9.99 instead of $10.00 can make buyers feel like they’re getting a better deal—even when they know the difference is just a penny. On the other hand, rounded numbers like $20 can imply quality and confidence, which works well for luxury or premium products.
Perception also comes from presentation. A higher-priced soap wrapped in elegant packaging may immediately signal better quality than a bulk soap bar, even if the ingredients are similar. Likewise, a candle in a minimalist jar with a clean label can feel more valuable than the same candle in plain packaging. This is why visual elements and branding play such an important role in reinforcing your pricing strategy.
Ultimately, psychology is about making sure your price supports your brand story and gives customers confidence in their purchase. By combining smart pricing techniques with thoughtful branding, you create products that not only sell but also build long-term trust and loyalty.
Perception also comes from presentation. A higher-priced soap wrapped in elegant packaging may immediately signal better quality than a bulk soap bar, even if the ingredients are similar. Likewise, a candle in a minimalist jar with a clean label can feel more valuable than the same candle in plain packaging. This is why visual elements and branding play such an important role in reinforcing your pricing strategy.
Ultimately, psychology is about making sure your price supports your brand story and gives customers confidence in their purchase. By combining smart pricing techniques with thoughtful branding, you create products that not only sell but also build long-term trust and loyalty.
Test, Track, and Adjust Your Prices
Setting prices isn’t something you do once and never revisit. Small businesses should continuously evaluate whether their prices are working by testing, tracking, and adjusting as needed. As your overhead costs change (such as rising material prices or new packaging), you may need to update your pricing to maintain healthy profit margins.
One effective approach is to test dynamic pricing strategies. For example, run a limited-time discount on a best-seller to see if increased sales volume offsets the lower margin. Or, try bundling a few products together at a slightly reduced price to encourage larger purchases. Makers with seasonal collections can also experiment with price skimming if they’d like. This is the practice of launching new items at a higher price point when demand is highest, then gradually lowering the price as the season ends.
Tracking is key. Monitor your sales data to see which products sell quickly and which ones stall. Compare your pricing to a similar product in your category to make sure you’re staying competitive while still protecting your bottom line. Over time, these adjustments will help you refine your pricing strategy so that it reflects your brand, resonates with your customer base, and supports long-term growth.
One effective approach is to test dynamic pricing strategies. For example, run a limited-time discount on a best-seller to see if increased sales volume offsets the lower margin. Or, try bundling a few products together at a slightly reduced price to encourage larger purchases. Makers with seasonal collections can also experiment with price skimming if they’d like. This is the practice of launching new items at a higher price point when demand is highest, then gradually lowering the price as the season ends.
Tracking is key. Monitor your sales data to see which products sell quickly and which ones stall. Compare your pricing to a similar product in your category to make sure you’re staying competitive while still protecting your bottom line. Over time, these adjustments will help you refine your pricing strategy so that it reflects your brand, resonates with your customer base, and supports long-term growth.
Building a Sustainable Pricing Model for Long-Term Success
Learning how to set a price for a product is one of the most important decisions a handmade business owner can make. By knowing your total cost, researching your market and customer base, selecting the right pricing strategy, and understanding the psychology behind how people buy, you can create a pricing model that works for your unique business.
For makers, how to price handmade goods isn’t just about covering costs; it’s about building a brand that customers trust and return to. The right price communicates quality, value, and consistency, helping your products stand out in competitive markets. Whether you choose value, premium, or dynamic pricing, remember that your pricing should evolve as your business grows and as your customers’ expectations change.
At the end of the day, pricing is both art and science. It requires careful calculation, thoughtful branding, and ongoing testing. With the right approach, your pricing won’t just cover expenses—it will strengthen your reputation, support your growth, and keep your products and services profitable for years to come.
For makers, how to price handmade goods isn’t just about covering costs; it’s about building a brand that customers trust and return to. The right price communicates quality, value, and consistency, helping your products stand out in competitive markets. Whether you choose value, premium, or dynamic pricing, remember that your pricing should evolve as your business grows and as your customers’ expectations change.
At the end of the day, pricing is both art and science. It requires careful calculation, thoughtful branding, and ongoing testing. With the right approach, your pricing won’t just cover expenses—it will strengthen your reputation, support your growth, and keep your products and services profitable for years to come.