Understanding Basic MLM Plans : Multi Level Marketing Best Practices

MLM Compensation Plans

If you are ready to buckle up and explore the possibilities of Multi Level Marketing, you must know about basic MLM Plans. We have made a short description of the Top MLM Plans that can be considered for MLM Best Practices.

Before getting deep into different MLM Plans, know what is an MLM Compensation Plan

A Compensation Plan is an ultimate medium for you to get paid in Multi Level Marketing. Therefore, it is important to understand and study this compensation plan(s) for effective network marketing. We will discuss the four basic compensation plans first and then we will discuss how these basic strategies are applied in modern MLM Plans.

The four basic compensation plans are:

Binary Compensation Plan

This compensation Plan is considered to be the most popular MLM Plan from the 90s. Its the simple structure and design which makes this plan to work smooth and effective. Above the simplicity, this plan has some cool advantages which tend be another attractive factor. So, if you are new to MLM, or if you are a part-timer or an average MLM Businessperson, we bet that Binary Compensation Plan will always do job.

How Does the Binary Compensation Plan Work?

As the name suggests, Binary Plan is all about the numeric “2″, which indicates the maximum of frontline associates that a business center can have. New or the upcoming distributors falls under the existing frontline members creating a supportive ambiance. It is the team effort which makes this Plan more attractive and works effectively. The work teamwork aiming a common goal will be strong rather than different people aiming different goals.

The major objective of Binary Compensation Plan is balancing the amount of leg volume that is flowing through both ends of a business center. Consider this example, if you have 900 sales points flowing through the right leg of your business and only 500 in the left, you will be paid on the highest denominator (here in this case its 500 points).

The main learning objective of the binary compensation plan is to balance the amount of leg volume flowing through either side of your business center. For example, if you had 800 sales points flowing through the left leg of your business but only 500 points flowing through the right, you are paid out on the highest common denominator which in this instance is 500 points.

This is done because the main goal is to balance the volume that flows through your organization to boost the associates by helping the weaker downline members. This will later achieve a good volume promoting teamwork alongside.

This defines the basic idea of Binary Compensation Plan.

Matrix Plan

Matrix Plan also called Forced Matrix Plan, is totally based on a structure which has a fixed set width and depth for which the members are compensated. Currently, there exist some other plans as the variations of Matrix Plans, but the basic concept for all is the same.

The structure of Matrix Plan is represented by the equation (width x depth). For example, if someone says that this is 4 x 5 plan; it means that he is limited to sponsor a maximum of 4 frontline distributors and he has the potential to earn commissions that are up to 5 levels deep.

How Matrix Plan Works?

The structure of Matrix allows distributors to sponsor the chain of new recruits into their downline after once their frontline is fully equipped. According to old matrix strategy, the new coming distributor will be automatically added to the vacant space. But nowadays, new variants of matrix plans allows the distributor to decide or choose their position.

Mostly, the new strategy is widely accepted these days as its more attracting. This also enables the distributor to control their business along with teamwork and mutual benefit.

While discussing the potential side, a number of commissions paid on each level is different. Therefore there will be more incentive for the distributors to their particular downline only (without creating a benefit to others).

Stair Step Breakaway Plan

Stair Step Breakaway Plan is another classic compensation plan that all major start-up companies follow this plan. The structure of this plan has a proven track record as its commonly implemented.As the name suggests; here in this plan, distributors can climb their ladder of success and they are allowed to break this chain when they reach their potential success. the breaking from their upline allows them to earn more commission.

How Stair Step Breakaway Plan Works?

As an individual distributor, breaking away from your upline grants you lot of benefits which includes earning high commission rate etc. But it also can create a serious negative impact to the company you are breaking away from. Once you have broken, the volume that your upline received from you will no longer flow. While considering your upline, your breakaway will be like losing a customer.

But even if the distributors breakaway, a sponsor will still get a small amount from each breakaway. And this can be called to as override commission. Each of the breakaway in an organization is called a generation. But at the other end, this override commission is comparatively less in amount while considering to the commissions they were earning previously.

Unilevel Plan

One another compensation plan structure which is much easier to understand. As the name suggests, this plan only enables you to sponsor a single line of distributors. Ensuring that everyone you sponsor is on your frontline.

How Unilevel Plan Works?

The important feature of Unilevel Plan is that it has no limit. ie, You can add as much number of people in your frontline. The major goal of this plan is to recruit a large number of frontline distributors and encourage them to do the same.

In this plan, earning commission required a fixed minimum amount of member volume. So this plan will work effectively for part-timers to earn. Although it tends to be easier to earn a commission using this unilevel compensation structure, while comparing it to other plans, the structure itself restricts the total amount of each commission you can earn,

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