You might have heard many companies quoting, “our company pays out X% which is the best in the entire industry.” While every MLM company tries to offer the best service, it is untrue to say which compensation is the BEST of all.
A person has to do a statistical analysis and take the time to compare every single company’s compensation plan to find the best…. one that suits their requisites perfectly. For this, you should atleast have some idea about the different compensation plans.
Types of Compensation Plans
In the beginning when network marketing came into play on multiple levels of members in an organization, the compensation plans were known as the Breakaways. While it is still not clear exactly when multi-level marketing started, it evolved in the early 1920’s and 1930’s with firms like California Vitamin Company (today’s Nutrilite) and California Perfume Company (today’s Avon).
Below are explained the different compensation plans in brief. Understand them before we head further.
The Stair Step Plan : The oldest type of MLM business structure, also referred to as the “breakaway” plan. In this, a distributor from your downline will rank advance after achieving a predefined amount of personal and assembled volume, and consequently will “break away” from your group. Here, you’d be earning a minor override on the volume existing in their group, but they would be earning a higher percentage as they have broken away from you. With this plan, you can sponsor personally as many people on your front line as you want.
Unilevel : This plan allows the distributor to sponsor any number of people on their front line enabling them to expand the scope of their organization. This plan is profitable as people cannot typically break away from you.
Binary : In a MLM Binary Plan, there are two legs – left and the right. Organizations can build only two legs with this compensation plan. Here, organizations are paid on volume building up in a leg, instead of a sales percentage of the distributors and their multiple levels.
Hybrid : As the name implies, this plan is a blend of two structures. Often, it will be a combination of both MLM Binary Plan and the uni-level plan. A majority of the hybrid plans pay like a binary on the front end, i.e. on the initial sales volume, and typically like a uni-level on the back end, i.e. ongoing sales volume.
Matrix : Last, but not the least! The Matrix plan bounds you both by width and the depth. Say, if you are using a 3-by-9 matrix, you can only have three distributors each level down to nine. If you sponsor a fourth person being in this type of matrix, it’d follow on the next level below you. This is because you have already a limit set on the maximum number of people that can fit on your front line.
The best type of compensation for you
While companies should choose compensation plan that is based on their business goals and requirements, seeking help from such service provider can also be beneficial. There are far more crucial things to consider when it comes to choosing a network marketing company, including :
- Details about the Company : You need to determine who the owners are and what reputation do they hold in the market. Research well about their history, failures and achievements and test their knowledge about the industry.
- Feasibility and marketability of the Product : Study the current market trend of the customers to determine whether there is any demand for your products and services.
- Upline Leadership : Review the leadership that you are partnering with and check if it is involved, active and evolving.
- Tools and Systems That Company has : You need to determine if the company that you are partnered with have the right tools, resources and systems to help make sales and profit easer and seamless.
- The Culture : Before making any decision, check if the company culture fits in for you.
- Turn-Around Time : This is an important aspect for every business. Evaluate whether the company or group you’re associated with deliver their services in minimal time.
All these considerations can help you pick the right compensation plan for you and use it in the best possible way.
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