Multi-Level Marketing (MLM) is a popular business model that incentivizes distributors for customer sales they generate and for the customer sales of other distributors they recruit. This dual compensation plan is what sets MLMs apart from other direct sales companies. However, not all MLMs are created equal, and one of the key distinctions among them is the compensation plan or payout structure. In this post, we’ll delve into the different styles of MLM compensation plans and discuss their unique features, benefits, and potential drawbacks.
Binary MLM Plan
In a Binary MLM Plan, each distributor recruits two other distributors who occupy the two legs (one on the left and one on the right) of the binary tree structure. The compensation is typically based on customer and distributor sales volume accumulated in each leg. The payout is often calculated on the weaker leg (the one with less sales volume), promoting balance in team growth. While the simplicity of this plan is an advantage, uneven growth can potentially limit earnings.
Unilevel MLM Plan
A Unilevel MLM Plan is one of the simplest and most straightforward. In this plan, a distributor can recruit an unlimited number of customers and distributors into their first level, and earn commissions on the sales generated by these first-level recruits. The simplicity of this plan allows for easy understanding and management. However, the depth of the payout is often limited to a certain number of levels.
Matrix MLM Plan
In a Matrix MLM Plan, each distributor recruits a certain number of distributors and forms a set matrix, such as 3×3, 2×10, or 5×5. This plan limits the width of each distributor’s network, focusing instead on depth. The distributor earns a commission on customer and distributor sales from all levels of the matrix. This plan encourages teamwork but may limit individual earning potential due to the fixed width.
Stairstep Breakaway Plan
In the Stairstep Breakaway Plan, distributors advance in ranks based on their customer and distributor sales volume or the customer and distributor sales volume of their team. Once a certain rank is achieved, the distributor “breaks away” from their upline and operates independently, earning a higher percentage of commission. This plan rewards high performers but may lead to loss of strong members from an upline’s team when they break away.
Generation MLM Plan
A Generation MLM Plan is based on generations rather than levels. A generation is all volume from you down to the next person in your downline who is the same or higher rank. This plan can be lucrative for those who build deep and successful networks, but it can be complicated to understand and manage.
The visionary MLM corporate executive is adding an affiliate program to its existing comp plan. Affiliates earn commissions by selling product to potential customers. Most of these customers come from their personal centers of influence. They also have an opportunity to receive a commission from customers of personally sponsored individuals. This module is sometimes referred to as Influencer Marketing.
Stay tuned for our next BLOG Post on Hybrid MLM Comp plan
Each MLM compensation plan style has its unique benefits and challenges. The choice depends on the company’s goals, the type of products or services it sells, and the behavior it wants to incentivize among its distributors. As a potential company owner or distributor, it’s crucial to understand the compensation plan of an MLM company. Remember to conduct thorough research, ask questions, and make sure the plan aligns with your personal and financial goals.
In the world of MLM, knowledge is power. The more you understand about the compensation plan styles, the better equipped you’ll be to make a successful choice.
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