MLM Network Marketing Compensation Plans –How to Select the Best One

Published: 05th January 2010
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In this article we take a look at the most prevalent forms of MLM network marketing compensation plans. What precisely is this, and what would you be looking for in selecting the best network marketing MLM compensation plan for yourself?

The MLM company compensation plan is basically the policy whereby the independent associates are paid. The stucture is one feature. The formula used for commission percentages paid (occasionally according to level in the plan) is another factor. Besides commission on sales volume, most MLM network marketing compensation plans also pay out different bonuses, typically as a percentage of the MLM company's sales volume or profit.

Most MLM network marketing compensation plans fall into four categories: binary, stairstep breakaway, matrix, or uni-level. Here is a brief explanation of each:

Network Marketing Binary Plan ' The first level in a binary system is limited to two people and there can be infinite depth. Generally this type of plan requires more work, since MLM companies using this system pay only on balanced left and right volume. This plan can have the highest synergy, because of the tendancy to easily stack team members very quickly in a "power leg." Approximately 14% of MLM companies use a binary plan

Network Marketing Stairstep Breakaway Plan ' The stairstep breakaway stucture has unlimited associates on the first level with finite depth to normally 10+ levels. The plan pay includes two phases: stairstep which pays higher percentages according to your rank in the company and a breakaway phase paying additional levels after achievement of a certain sales volume. These are the oldest type of pay plan, and although still highly successful, not as accepted as they were in network marketing's early era, due to lack of synergy. Approximately 39% of companies including Amway, Herbalife, Mary Kay, Neways, and Nu Skin still use this type of plan.

Network Marketing Matrix Plan ' This type plan has first level width 2 to 7 and usually is 5 to 50 levels deep. This structure pay plan has been on the decline, possibly due to the problem of recruits who fill the matrix, but do nothing. Although Melaleuca uses a 5x7 matrix, no other major company using this model has survived. About 8% of existing companies use a matrix structure.

Network Marketing Unilevel Plan ' Unlimited first-level width with a depth of frequently 5 to 10 levels. Approximately 37% of companies use this type of structure which has built-in incentives to both acquire and follow-up with customers. Unilevel plans are often improved by adding a fast start bonus and dynamic compression to improve team synergy.

What factors are most important in a company's compensation plan? Factors to consider include the percentages paid out in product sales, and the likelihood of bonuses. The best plans will incorporate the fairness of healthy upfront commissions and the prospect of considerable bonuses for the highly experienced professionals.

Most MLM companies that are worth considering will print a range of actual pay statistics, such as mean earnings by associates, possibly grouped according to level of involvement. Part time distributors should have a correspondingly lower expectation of weekly, monthly or annual income.

A good measure, instead of the number of millionaires created by a company would be the number of six-figure earners. In our judgement, the best companies 'spread the wealth' more evenly, while still allowing the highest super-achievers to be compensated at extraordinary levels, probably even into seven-figure income.

This review of network marketing MLM compensation plans has little meaning apart from the ability of a company to attract prospects. To do this, a marketing system is essential, in addition to quality products and, of course, an industry leading compensation plan.

Jim Green is an MLM attraction marketing expert, who has been in over 10 years in network marketing. For further information on marketing your business, visit our attraction marketing system, training, and tools ' powered by MLM Lead System Pro.

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