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Are You Confused by MLM Compensation Plans? Understand the Top 7 Models in Less Than 10 Minutes

Aug 17, 2007
When deciding on an MLM opportunity it is critical to understand the compensation plan as it details everything you need to do to get paid a specific amount of money. All MLM marketing plans have advantages and disadvantages and by doing your homework you'll be able to decide which one is best for you. Before we describe the seven most popular types of marketing plans, there are two things in every compensation plan you need to know about.

Demotion means dropping from one rank position to a lower one. It usually results in a loss of future potential income. Or, your remainder quota required to reach a certain target is increased. The volume achieved in the past does not count towards the grand total anymore.

Maintenance, sometimes called autoship, is the minimum amount of sales volume,usually every month a distributor or serious business builder has to buy either his own personal volume or combined with group sales in order to maintain his rank, be eligible for bonuses, overriding commission or sometimes even maintain his distributorship. Having maintenance or no maintenance has its pros and cons. Here are three scenarios to give a clearer picture:

Mandatory Maintenance

Require you to purchase products every single month. This is good if you have built a large organization and it ensures you have guaranteed income every month. Not good if you are forced to maintain and you are not making money in your business. If you are in love with the product and don't mind paying for it every month then it is fine. But this can cause a person who is not seriously building or is still struggling with his business some pressure and it is one of the main causes of drop out in MLM.

No Maintenance

There is no monthly purchase requirement. This is very good for people who have just started their business or for people who are just casually trying out an MLM. There is no pressure and a person can be in an MLM for years but still at the same rank.

The bad news is that it might not be good for the long term,because no maintence means no requirement for downlines to buy anything, unless your group is in love with the product or if you and your downlines have built a solid customer base and the demand of the product is there.

Optional Maintenance

You are required to buy a certain volume of products when you want to override your commission from the company. This is very good in the sense that you are not pressured to pay maintenance and you only pay when you are making money.

Now that you understand how demotion and maintenance fit into the equation, here are the top 7 MLM compensation plans:

The Stairstep

The Stairstep or step and ladder plan is a simple plan that has requirements that you must meet to get up the "Stairs of Success" Every step is a promotion usually based on achieving a certain volume and each promotion or rank gives you a larger cut.

The Unilevel

The Unilevel is a simple "Number of Levels" that the company will pay you, and usually there is no promotion or rank. You make money by getting a certain override off of the volume, and usually there is a requirement of volume to qualify for a check.

The Binary

The Binary is an interesting design for a Comp Plan. It usually has 2 "legs" that you can have "Business centers" in, and you have a volume requirement to get paid on each leg. There is what is called "balancing" in the Binary model. You must balance the volume from each leg to make sure you maximize your commissions.

The Breakaway

This plan has been said to have become somewhat unpopular in the industry, as you could lose the business you build, once it gets to a certain level of success, and it "breaks away" to no longer be a part of what you get paid on. It usually appears in stairstep.

The Matrix

The Matrix or sometimes called a Forced Matrix is like a pre-order tree. A computer driven plan puts into your group by computer, and they go in the next available slot. Usually this plan is combined with some form of a Binary and it does work well if there are a lot of people that are recruited and working together to fill the matrix.

The Australian Two Up

This is a marketing plan that is very unique. Basically, the two people you recruit are given to your upline sponsor and the rest of the recruits are yours.

The Hybrid

A hybrid is a combination of any of the above features. An example would be a Forced Matrix with Unilevel benefits ensuring that those who actually work to fill the tree gets paid more, or an Australian Two Up with Stairstep advancement to offset the disadvantages of distributors being too deep in an organization.

Many companies are now combining the advantages of several models to create MLM compensation plans that will help distributors maximize their income.
About the Author
Andrew Cocks and Terry Zambri are Certified Bob Proctor Life Success Consultants and Network Marketing Coaches. Their new FREE book, The Life Success Factor, combined with their exclusive 3 step marketing system is creating massive success for their team. Visit: http://www.TheNetworkMarketingCoach.com
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