subject: Mlm Compensation Plan Basics [print this page] Mlm Compensation Plan Basics Mlm Compensation Plan Basics
Network Marketing Compensation plans are often difficult for inexperienced and aspiring Business Owners to absorb, and yet they are ultimately the way in which you get paid in a network marketing business. It can be difficult for prospects new to the industry to be familiar with both the jargon and the concepts presented in even the simplest pay plan. However, it is important that you understand how they work, to determine weather or not a specific pay plan is suitable for your goals and skill level as you enter this industry.
In this article I'll teach you the basics of network marketing pay plans and also provide links to other articles and videos in the series evaluating the 4 basic pay plan types. These articles will help you evaluate the advantages and drawbacks of each of the common pay plan structures and help you to identify the best compensation plan for your goals and ability level. The links below will take you to detailed explanations of each plan, but it is suggested if you are fresh to the industry that you first start here and undestand the basics first.
The 4 basic Mlm Compensation Plan structures include:
UniLevel Plan
Stair-Step Breakaway Plan
Forced Matrix Plan
Binary Plan
Some concepts and jargon commonly used by people in the network marketing industry:
Sponsor: A sponsor is the individual who first introduced you to and enrolled you up with their network marketing company. You should recieve adequate support from them to get you started, and help you succeed in the industry.
Distributor or Associate: You become a distributor when you join a network marketing company. You become bound by the terms and conditions agreed upon to distribute and sell products or services the company offers as an independent contractor. Some companies may call their distributors associates instead.
Business Center: Your new position when you join a Mlm marketing company is considered to be a new business center. This gives you a position in the companies pay plan from which you may then begin to build your own business organization or team. The organization refers to both yourself and all the distributors that you and your team sponsor. Having a business center entitles you to get compensation in the form of commission on the sales volume you and your team sell as an organization. The more sales your business center does the more you get paid.
Upline: Your Upline refers to all the individual distributors signed up directly above you in the compensation structure. these distributors were sponsored into the business before you generation by generation in a related chain much like a family tree.
Downline: Includes all the individuals you have personally brought into the business and the new distributors they bring into the business center much like your own family tree, it grows and expands as you have offspring of your own and they the produce their own offspring. This growing number that has joined your organization are alllocated under you in the compensation structure and are thus saidto be downline from you in the compensation plan.
Width and Depth: Width and Depth relates to the dimensional proportions of actual compensation plans. Dimensional proportions and structures in pay plans vary by type and design.
Width: refers to the maximum number of distributors you can have placed immediately under you in the pay plan structure, and how wide this is allowed to extend. The first line of distributors directly signed up by you is normally referred to as your "frontline".
Depth: refers to the depth of levels deep dimensionally in which you can earn payment on from your business. Naturally there is only so many times that you can split a dollar, therefore a commission based on the work of the distributors in your downline can only pay so deep, though some plans claim payout to infinity.
For example, in a typical forced matrix structure the width and depth of the plan is stated numerically as (width x depth). The plan has a width of 3 distributors and is 2 levels deep.
Level: Level refers to the position of a distributor in a downline with regard to an upline distributor. Frontline distributors who are located directly below you are called your 1st level associates. Distributors next below your frontline associates would be 2nd level associates, below them 3rd level, etc. etc.
Crossline: relates to associates who work for the same Mlm Company, but whose efforts do not benefit one anothers pay. They are a part of your business center but not of each others business centers, or sales organizations. All associates on the same level of your organization would be cross line from one another. Their individual efforts and their team efforts benefit you directly, but have no monetary impact on each others businesses. They are considered crossline from one another.
Legs: Every 1ST level or frontline distributor in your group is the start of a new leg in your business. For example, in a 3x2 matrix you would have 3 frontline distributors or 3 legs (2 outside legs and a middle leg) in your organization. Unilevel plans can go as wide as you want with frontline distributors so you could have as many legs as you recruit wide. In a simple Binary plan the emphasis is on two frontline distributors or two legs in your business center.
Point Value: For every product sold in network marketing, a fixed amount of points (PV) is associated with the product being sold. Your commission payments are determined by the volume of points that pass through your business center(total volume) during a set period of time.
Higher priced products ordinarily offer a higher point value as a reward, but this is not always the case. Flagship products or products the company is trying to promote may offer higher point values as reward for distributors to sell more of that particular product.
Not only that but every company and compensation plan likes to calculate total volume in a slightly different way.This can become confusing. The following are some of the common factors a company pay plan may use in establishing total volume.
Group Volume: This is the total amount of points you and your whole business center has accumulated during a pay cycle.
Leg Volume: The specific volume of points in each leg of your business that has accumulated during a pay cycle. Payouts can occur when there is a specific ratio of balance between volumes in each leg in certain plans. Example would be payout happening when a 1/3 2/3 balance ratio is achieved. This is confusing I know, don't be concerned about it just be aware of the concept for now.
Level Volume: The amount of points earned by each level, or specific levels of your sales team during a pay cycle.
Carry Over Volume: is volume from a previous pay period that was earned but didn't qualify (for whatever reason) to receive payment on. Commonly a balanced ratio for payment was not achieved. This volume is sometimes lost but often it is transfered to the next pay period where you may add to it and qualify for commission payment on the volume. Carry over volume actually allows any unpaid points to carry over to the following pay period so that you don't lose any commission.
Variable Level Commission Rate: Stair-Step Breakaways, UniLevels and the Forced Matrix Plansusually offer a variable commission rate for each level of distributors in your organization. These rates vary by program and company but they tend to follow the following hypothetical outline. In these types of programs differing commission rates apply to the volume generated by different levels in your downline. For example, for your level one frontline distributors you might earn 20% on the PV sold by this group. But on your second level deep you would earn a different commission rate, let's say 10%. The third level may then start to reward you for building deep and pay 15% for volume generated by this group of distributors.
Some commission breakdowns offer a level commission rate where you earn the same commission rate for every level. For example, a 10% commission from all 3 levels may be standard. It's important toenvision the payment structure of a particular plan in regards to your abilities and goals as a marketer, and evaluate weather the two are compatible. Pay plans that favor higher commission rates at the shallow levels of the plan favor novice distributors, part-timers, and those without the resources to build deep. A heavy hitter, who is competent recruiting large numbers and building deep, will appreciate higher commissions deeper in the Commission structure. It's largely a matter of preference and ability as one size may not fit the desires of everyone.
Rank and Advancements: Network marketing businesses use ranking systems to designate accomplishment levels earned by associates in the organization. As your team grows and you pass certainstandards of achievement in the industry your rank titles climb the ladder of achievement. These titles are generally assigned to distinguish your achievements and earn recognition from your peers, but in some cases there may be bonuses, or privileges associated with rank as well.
These are some of the common rank achievements:
Bronze Director
Silver Director
Gold Director
Ruby Director
Emerald Director
Diamond Director
Bonuses: Bonuses are a part of manyNetwork Marketing companies' pay plans. Car programs, cruises, vacations, pay bonuses, etc. It is important to understand that generally these bonuses only come to those who achieve a certain level of success, and is a way to recognize and reward those achieving success in an organization.
Compensation Plan Differences: Each company's pay plan is different to some degree. The main differences are between the 4 main pay type structures, but even among structures of the same type, they may vary. The biggest differences are in how commission payments occur, bonuses, and specific qualifying features of the plans. Terminology may vary some as well, usually with regard to rank designations or specific titles for features of the plan, but the information above will give you a good basis for grasping the terms and functions of Mlm pay plans regardless.
Which plan is best?
Each persons abilities and goals vary greatly. Plans are like personalities, some are better designed than others for a particular person, their experience level, skills, and situation. So trying to perscribe a one size fits all solution is an unrealistic proposal.
You should do your homework on any particular plan you may be considering, and you should take some time to assess your goals and skills first. You should seek out third party information about exactly what it is going to take to be successful in this industry before you join any particular opportunity or Mlm as an industry.
That's actually the reason I put this series together. I think Network Marketing is an awesome opportunity for properly prepared people.. But I also understand that it takes a lot of marketing knowledge, proper training, discipline, and mentorship, for most people to earn a significant income in Mlm. People need to hear the truth; they need answers not horse crap. They need mentorship and strategies that work.
So I wanted to reach out to people who are both looking at Mlm and to those already involved, and help you learn how to build your business, and create a sustainable residual income in this industry using modern day MLM tools, marketing systems, and strategies that work.
So what I've done is put together an incredible amount of cutting edge information, tools, training, and resources that will teach you exactly how to succeed in Mlm, and it will work for you whether you're involved with a Matrix plan, Binary, Stairstep Breakaway, or any other reliable Mlm Pay Plan.
