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5 Tips On Network Marketing Compensation Plans

Jun 14, 2008
How do you determine if a particular network marketing compensation plan is good? Consider the following 5 tips:

Tip #1: Try to understand the plan conceptually, at the top level, versus all of the details. Network marketing compensation plans can be complicated. Some are straightforward, but most are complex these days.

Tip #2: Take the time to learn the industry lingo associated with network marketing compensations plans. If there is a term you are not familiar with, ask someone you trust what it means, or research it. Below I describe several common types of compensations plans to provide you with some terminology with which you may not otherwise be familiar.

Tip #3: Do not sign-up with a particular network marketing company unless you are comfortable with the compensation plan.

Tip #4: Take full responsibility for your understanding of a compensation plan. Meaning, get all of your questions answered with regards to the plan.

Tip #5: Determine whether or not you can meet the goals for which you've set for yourself with the compensation plan - assuming, of course that your goals are realistic.

Now, consider that there are several, common network marketing compensation plans which include, but may not be limited to:

Stair Step Breakaway (aka Unilevel): This is one of the more popular network marketing compensation plans. It has several components. Distributors are either managers or non-managers. Distributors are compensated via overrides and possibly bonuses.

Override commissions can come from the non-managers and managers in a particular manager's organization. Think in terms of overrides that a manager receives from his non-managers as commissions that a sales manager would receive in any sales organization.

The overrides a manager receives on the managers in his organization are often referred to as "generational overrides." Typically, most network marketing companies will compensate down to at least three generations of managers.

Bonuses are what the term implies. If a manager exceeds specific sales volumes, then he receives a certain percent commission on that volume. Often the volume attributed to the bonus cannot come from those in the distributor's organization that have reached a certain rank in the organization. Thus the term "breakaway."

Matrix Plans: This type of plan forces an organizational structure in the form of a matrix. A distributor can only have a specific number of people on his first line. If he personally recruits any additional people, he must sign those new distributors up under people on his first level. Commissions are paid on sales volume down a certain level within the distributor's matrix.

Binary Plans: Each distributor has only two legs on each level. When both legs achieve a specific volume in sales, the distributor is paid a fixed amount. When the sales volume in each leg is the same, commissions are paid based on an incremental plan.

Hybrid Plan: This type of plan is probably one of the best to consider. However, hybrid plans can be complex. A hybrid plan attempts to compensate new distributors as soon as possible while rewarding distributors who build strong organizations.

A hybrid plan has two plans. One plan will pay commission on sales volume generated by the distributors in one's organization. Most hybrid plans will pay a commission on sales generated at least 7 levels down. The other plan will be a bonus structure based upon the performance of distributors in one's down line who are actively building organizations under the distributor.

As you can see, a hybrid plan can be very lucrative and typically one receives two different checks a month - one for sales volume generated by down line distributors and one for bonuses received for the business builders in one's organization.

So, as you are evaluating a compensation plan, keep these 5 tips in mind. Above all, make sure you do all necessary research and choose a plan that best fits your needs.
About the Author
Kimberly Anne is a Master Coach with MLMU and has helped thousands of network marketers build successful businesses. She provides free, no-holds barred, let everything hang out, tell it like it is, 30-minute business coaching reviews that can mean the difference between success and failure for network marketers. To get your free live coaching call visit www. freecoachingcalllive.com .
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