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Network Marketing MLM Compensation Plans – Review

If considering a home-based business in network marketing, you’ve probably been exposed to the idea of the MLM compensation plan.  What exactly is this, and what would I be looking for in selecting the best network marketing mlm compensation plan for me?

The MLM company compensation plan is basically the rules whereby the distributor force is paid.  Stucture is one aspect.  Commission percentages paid is another factor.  In addition to commission on sales, most MLM network marketing compensation plans also pay out various bonuses, usually as a percentage of company revenue or profit.

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

  • Network Marketing Binary Plan – First level is limited to two individuals with infinite depth.  Generally this type of plan requires more work, since MLM companies using this system pay only on balanced left and right volume.
  • Network Marketing Stairstep Breakaway Plan – Unlimited first level width with finite depth to 10+ levels deep.  These are the oldest type of pay plan, and not as popular as in network marketing’s early era.  Companies such as Amway,  Herbalife, Mary Kay,  Neways, and Nu Skin still use this type of plan.
  • Network Marketing Matrix Plan – First level width 2 to 7 usually 5 to 50 levels deep.   This type of pay plan as been on the decline, possibly due to the problem of recruits who fill the matrix, but do nothing.
  • Network Marketing Unilevel Plan – Unlimited first-level width with a depth of usually 5 to 10 levels.  This type of plan has built-in incentives to both acquire and follow up with customers.

How can you evaluate a particular company’s compensation plan?  Factors to consider include percentages paid out in both product sales, and the likelihood of bonuses.  A good plan will include the fairness of healthy upfront commissions as well as the possibility of significant bonuses for the top achievers.

Also consider how often you get paid under a particular company’s plan and how soon after the sale can you begin earning.  In some cases, payment of commission may be delayed for several months.  This can be true for business to business sales, in which payment is made only after sufficient time for revenue to be collected “after the fact.”

Most companies that are worth considering will publish various distributor statistics, such as average earnings by associates, possibly classified according to level of involvement.  Part time associates have a correspondingly lower expectation of weekly, monthly or annual income.

A good indicator, rather that the number of millionaires created by a company would be the number of six-figure earners.  In our experience, the best companies “spread the wealth” more evenly, while still allowing super-achievers to participate at extraordinary levels, well 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.  Most network marketers find the need of a mentoring program and for those inclined to leverage the Internet, suggest the Rapid Crush 6-in-6 Coaching, which is available for a $1 trial period.

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(11) Comments

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    • Donny Gamble 8:50 pm

      Thanks for the informative post about the
      compensation plan structure for network
      marketing companies. It helped me out a lot
      because I am new to the industry

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