Network Marketing No-No # 6 – Evading the Comp Plan

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THE COMP PLAN IS SO GOOD – I CAN’T LEAVE IT WITH YOU!

Today I want to talk about network marketing pay plans, what works, what does not, what is legal, what is not; and how you can save yourself a lot of grief by telling the difference.

This is the 6th post in a series of articles on behaviours in network marketing I think need to stop immediately for the industry to attain the level of professionalism it deserves. This series of articles began with a post titled “People Don’t Dislike Network Marketing, They Dislike Network Marketers.”

SHARING THE PLAN – OPENLY AND HONESTLY

This 6th behaviour is about being open and honest with information about your compensation plan. My recent encounter with a “flash of a plan” was related to a company selling something about travel. It was “so hot and so amazing” that the individual could not let me see a copy, nor could I go to a website. The only way I was going to get information was if I attended a public meeting.

Not only is this an insult to my intelligence, it is also a warning to run. Making a decision about which network marketing company you should become involved with is a decision based on due diligence. Unfortunately, because the cost of getting started is low, many people do not take the time to check it out.

FOUR BASIC TYPES

Following are the basic compensation plans but there are many adaptations of each type. One of the best sources of information on compensation plans in the industry is Rod Cook, whose book I have profiled and whose research is behind much of this post.

UNILEVEL

There is a lot of success out there with this plan which usually has 50% of profits going back to consultants. It is one of the most popular at the moment. There is no limit to front line width and usually a limit of 5-10 levels in depth. It favors those who are willing to treat this like a business. For more information on this plan.

MATRIX

This plan has guidelines that limit the width and depth of your organization. A typical structure will by 2×10 or a 3×9. You have 2 recruits on your frontline and each leg can be built to 10 levels. You want to know what happens with attrition occurs. Can you fill in the empty spots with new people or does the bonus cheque break away to the company? This plan has often been linked to illegal pyramid schemes and is consequently losing popularity in the industry giving way to unilevel or binary plans.

BINARY
This plan allows only two legs with infinite depth that pay out whenever the volume in each leg matches. It is simple to work, but the problem occurs when you cannot get the volume in each leg to match. You have to wait to get your bonus cheque until this happens or you may be paid based on the volume in the weaker leg. It also means you are often doing all the work by placing recruits to earn your cheque. It rewards those who do not work. You need to keep a sharp eye on what is happening in both legs in order to earn your bonus cheque. The company can also often end up paying out too much, which can happen in the first 6 months to 2 years of operation, resulting in corporate bankruptcy if the commission payout is not properly controlled or managed.

STAIRSTEP – GENERATIONAL – BREAKAWAY

This plan is the oldest and most common plan with companies that have survived any length of time in the industry. It has been the most popular plan in the marketplace but the generational nature of the plan can create conflict between upline and downline. The plan allows for infinite width but restricts depth from usually 6-10 levels. It is important to make certain this plan has a no breakage aspect which means if a distributor does not qualify for his/her bonuses it does not breakaway to the company but instead gets paid to the next qualifying active consultant. Stairstep plans require additional investment to qualify for monthly bonuses which can be seen as a deterent over time. These plans have been the most successful but in the recent marketplace are tending to sag and many companies are making adjustments to these plans.

OTHER IMPORTANT QUESTIONS TO ASK

1.  How old is the company? Just like traditional businesses, most fail in the first 3 years. Here are the average survival rates in this industry. If the company has been in operation for…

less than 1 year – less than 10 % survival
1-2 years – 30% survival
2-3 year – 50% survival
over 3 years – 70%

2.  Are the cheques paid on time and can you see evidence of that?

3. Can see you a copy of a cheque – either from the person who is recruiting you, or someone else in the organization in your area?

4. It, by law, should not cost more than $500.00 to join. Buy the minimum and test the water.

5. To be healthy financially, and to survive, the company should not be promising a payout of more than  38 – 55% in bonuses.

6. Are you able to understand the plan or at least ask questions until you can?

7. If it promises to pay only for signing up people – run – it is illegal. You must sell to customers.

8.Most of all, the products should be something you can get enthused about.

BLESS BLESS
JUDY BERG


Organizational Behaviour Consultant
Network Marketing Consultant and trainer

author: Imagine Your Soul Abundant: Attracting Success, Fulfillment and True Happiness
more about: www.soulabundant.com
Judy’s book can be ordered from her website www.soulabundant.com.  Special prices for bulk orders upon request. Seminars and retreats customized to the needs of your group or organization.

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One Response to “Network Marketing No-No # 6 – Evading the Comp Plan”

  1. Thinking Big Works » Blog Archive » Network Marketing No-No #8 - Our Plan Pays A Gazillion dollars!!! Says:

    [...] » Real. Cool. Soul. on Dealing With Performers’ Egos … In A Professional WayThinking Big Works » Blog Archive » Network Marketing No-No # 6 – Evading the Comp Plan on People Don’t Dislike Network Marketing,They Dislike Network Marketers!Tom Humes on Will [...]

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