MLM Compensation Plans - Which One Makes More Sense?

Compensation plans in network marketing vary from one company to the next. They can be difficult to understand especially if you have never come across network marketing before.

Here are the 4 main Compensation plans network marketing companies utilise:

Binary Plans:

This type of pay plan uses the concept of ’spill over’. In this type of structure you only ever have 2 legs you can build on. This means that should you have a strong up-line, you and a portion of your down-lines organizations will benefit from the enrolment of new sponsors. This can potentially mean you only have to concentrate on one leg. However, most of the companies that use this type of program, generally pay you on the weaker leg in the binary so you are still responsible for keeping a good balance on both legs of your organization.

Matrix Plan:

The typical matrix is limited in width on the first level to usually 2 positions although with some companies it can go much wider. Usually it has a predefined depth level of 5 to 12 with linear commissions. The problem is maybe the two you initially get will not actually do anything. Matrix plans only make up a small percentage of the total pay plans offered by different companies.
This type of pay plan has been on the decline as Binary and Unilevel pay plans increase in popularity.

Unilevel Pay Plan:

Unilevel, as the name suggests, only enables you to sponsor one line of distributors, therefore everyone you sponsor is on your frontline. There are no width limitations to this plan and commissions are normally paid out on a limited depth, usually 5 and 7 levels deep. Therefore, the common goal of this plan is to recruit a large number of frontline distributors and then encourage them to do the same. To earn a commission using this structure there is normally only a minimal amount of personal volume that is required, which essentially makes it easier for part-timers to earn an income.
One of the main disadvantages of the plan is that every distributor you sponsor effectively becomes cross-line to all of your other frontline distributors and therefore must work in competition with the others.

Stair Step Breakaway Pay Plans:

Stair Step Breakaway pay plans are the oldest and most popular type of pay plan, once members of your organization reach a certain leadership level decided by the company, they breakaway into their own organizations.
At first glance to the sponsor, this looks pretty scary, yet in most cases you’re still paid to a certain extent on those new organizations.
The plan rewards the few who can consistently sponsor new distributors and build multiple breakaway legs.

It is up to you to ask questions when evaluating any company’s pay plan and make an informed decision as to whether it is the right one for you. There are some plans out there that claim to payout more than 100% of revenue but these companies are usually nothing more than a pyramid scheme. As a general rule of thumb anytime you see a payout of more than 60% you should question it. Ensure you consider a few other factors such as the company’s products and pricing, sales volume quota requirement and commission qualification requirements.

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