Cost Cutters: 6 Ways to Save on Postage and Shipping

SENDING MONTHLY INVOICES to clients and mass mailings to potential customers just got a lot more expensive.

The U.S. Postal Service raised the price to deliver a single, one-ounce first-class letter to 44 cents from 42 cents today. Prices for other mailing services, including standard shipping (from 26 cents to 27.3 cents), priority mail (from $4.80 and up to $4.95 and up) and express mail (from $12.60 and up to $13.05-plus) also increased today. (For a complete list of new rates, head to USPS.com ). While the couple of cents difference may seem minimal, it can add up to hundreds of dollars in extra expenses for some businesses, says Paul J. Rauseo, managing director of George S. May, a small-business management consulting firm in Chicago.

Tack those extra costs onto recent hikes at FedEx ( FDX ) and United Parcel Service ( UPS ), and shipping costs have grown exponentially in the past several months. (FedEx boosted its shipping rates by an average of 6.9% for U.S. and U.S. export services earlier this year, while UPS raised its 2009 ground shipping rate by 5.9% and its air express rate 4.9%.)

Here are some cost-cutting strategies to help your business cut back on postage and delivery costs:

Take the virtual postal route

Instead of sending out a mass mailing to customers, decide whether your message might be just as effective if it were sent online, says Dave Pittman, a business advisory partner at PricewaterhouseCoopers in Chicago. Enlist email marketing firms such as Constant Contact and VerticalResponse to make sure your email doesn’t end up in a spam filter. Constant Contact, for example, charges $15 a month to send a mailing out to as many as 500 recipients. That’s about 33 emails per dollar. Send 33 mailings out at the standard shipping rate of 27.3 cents and it would cost $9.

To save on mailing invoices, use web invoice services such as Intuit's ( INTU ) Billing Manager and FreshBooks. Companies who manage three clients or fewer can send out an unlimited number of invoices for free with FreshBooks. For 25 or fewer clients the fee is $14 a month. Intuit’s Billing Manager also allows unlimited invoicing with packages that start at $4.99 a month.

Align your company-wide loyalties to one vendor

Small businesses with various branches that use different delivery companies can consolidate to save cash, says Pittman. Delivery vendors, such as FedEx and UPS, often extend a price break to customers that consolidate all of their delivery needs under a single vendor, he says.

Be more selective with your mass mailings

Before blindly sending out marketing materials to all of the names on a mass mailing list, do some research first. Targeting mail to those who are more likely to buy will not only help you get a better return on investment, but it will also help reduce the amount of return mail you receive, says Rauseo. Previous customers and referral clients are good candidates for a company’s mass mailing. And if you do receive returned mail, make sure you update your company’s internal list to avoid future mailing mishaps.

Send in bulk

If you’re sending at least 200 pieces or 50 pounds of identical mail (whichever is less) you can qualify for the United States Postal Service, or USPS, standard class rate, which is 27.3 cents per piece of mail, according to USPS. Standard shipping prices will vary based on an item’s weight and shape, among other things. But only send in bulk if you plan on several mailings throughout the year. Otherwise, it may not be worth it. To qualify for the standard class rate, businesses must pay an annual mailing fee of $185 for each facility where the mail is sent from. You’ll also need a mailing permit for each facility.

Use electronic postage

For $10 to $20 a month, electronic postage services such as Endicia , Pitney Bowes ( PBI ) and Stamps.com ( STMP ) offer software that enables small businesses to print U.S. Postal Service-approved postage through their personal computers, printers and Internet connections at a discount to Postal Service rates. Stamps.com, for example, claims to save customers 3% to 3.5% on first class mail fees, 5% off express mail, up to 11% off priority mail and up to 8% on international mail. Pitney Bowes offers to cut first class mail and first class flats postage between 6% and 12%.

Sort your own mail

The more work you do that the United States Postal Service would otherwise have to do, the more you’ll save, says Monica Hand, a USPS spokeswoman. The Postal Service provides a 12.5% discount to businesses that sort their outgoing mail by zip code and drop it off at central bulk mail centers. (To locate a facility click here and for an accurate assessment of how much your delivery will cost, use the USPS’ postage calculator.)

-Write to Diana Ransom at dransom@smartmoney.com

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