An Overview of MLM Compensation Plans
By Michael Noto
Over time businesses change their structure and guidelines. The MLM or Network Marketing industry is no different. Being that these companies are mostly sales companies the changes over time have come in form of dynamic compensation plans. Some of these plans have been revolutionary and some a downright bad idea. A compensation plan is obviously one of the main factors one will evaluate when choosing which Network Marketing business opportunity is best for them. Here are a couple of the most popular plans explained in detail.
1. Stairstep Breakaway Plans: This is the oldest and most popular type of MLM comp plan. The name is derived from the fact once a rep makes a certain amount of sales they then start their own organization thus they “break-away” from their manager in the process. The difference in titles and advancement up the ranks revolves around sales numbers and the amount of people in your organization, for every goal you hit the larger percentage commissions you as a manager of your organization receives. Some popular MLM companies that have this structure are Amway and Tupperware.
2. The Matrix Plan: This plan in a nutshell limits the width of a reps organization. This plan is not popular among many top performers. This is primarily because they end up having to give up people in their downline that they have trained and mentored. This as you can imagine can become frustrating to the person who is new to the organization as well in that the person that introduced them to the program will not be involved in their development.
3. Binary Plans: These plans are characterized by limiting the width of each level to two legs. Commissions are based on "cycles," where a distributor is paid a fixed amount whenever both legs achieve a certain number of sales units each. Commissions are paid incrementally when the sales volume in each leg matches. Think of your organization as set up in two trees, the power leg (automatic placement of recruits to the rep) and the profit leg (recruits who are personally enrolled by the rep). Compensation in a Binary plan is based upon a formula dependent upon a certain value of sales in the power leg matching up with a certain value of sales in the profit leg.
I hope this article gave you at least a sense of some of the most common comp plans available to Network Marketing or MLM entrepreneurs. Each plan offers is advantages and disadvantages. Factor the type of comp plan heavily into weighing which biz op is right for you and you will give your venture a better shot at succeeding.
About the author
Discover how a normal, everyday surf bum cracked the $200K a month code with The Reverse Funnel System at http://www.ReverseFunnelExpress.com/ today. Also, visit The Reverse Funnel Blog. from http://www.FreeArticlesAndContent.com
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