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Network Marketing Compensation Plans

Network marketing compensation plan

The incredible power of the network marketing compensation plan means that you are no longer restricted to earnings based on the maximum amount of time you can possibly work in a week.

Of course there is a limit to how many hours you can work in the course of a week or month and in the traditional business model, this restricts your income to the physical time you are able to work.

With the way Network Marketing compensation plans are devised, you are able to earn money not just through your own efforts, but through the efforts of others. A little like the franchising model, you are able to expand your business and your earning potential through additional business centres (other distributors).

Network Marketing/MLM compensation plans vary from one company to the next and they can be very confusing; different companies have different models and it can be difficult to compare them like for like.

Personally, I don't think the compensation plan is the thing that should make or break your decision over which company to go with (see choosing a network marketing business). In my view, you need to go with a business opportunity that you are excited about and feel fits your own needs rather than the exact details of the plan. If you can't get excited about the business or the products you are not going to make a success of the business and therefore won't make any money so the compensation plan will be irrelevant!

With that in mind, I have tried to summarise the main points you should be aware of here:

  • Income from direct sales of the products to residential and/or businesses customers. This rewards you directly for only the sales that you make but is not where the bigger incomes are to be made.
  • Sign up fees for enrolling new customers and distributors
  • Income paid as commission or royalties of everyone in your network or downline

Network Marketing Binary Plan

This type of compensation plan has all members building two legs with the first level being limited to two with infinite levels or depth after that.

Whilst it may be fairly simple to understand, it can involve more work on your part and because you generally get paid on the weaker leg (the leg with the lowest sales), you need to keep an eye on both sides of your organisation.

You may also have to wait longer to receive any commission in this type of plan if you only get paid when your lower leg achieves a certain volume.

Network Marketing Matrix Plan

This is a plan where you tend to have a first level width between 2 to 7 usually up to anywhere between 5 and 50 levels deep.

In general distributors building a matrix for example in a 4 x 12 matrix you would have 4 positions under you (legs) on your first level with 12 down each leg. When people drop out it can impact on the earnings you are able to achieve.

Network Marketing Unilevel Plan

This usually consists of unlimited first-level width meaning that you can personally recruit as many people as you like on your first level. In general you would expect to see a depth of between 5 and 10 levels.

Essentially you are able to predict and control your earnings based on your own efforts and anything that your downline does is a bonus.

Network Marketing Breakaway Plan

A breakaway plan is essentially the same as the Unilevel plan but once members in your downline reach a certain leadership level, they "breakaway" into their own organisations.

This is good for encouraging leadership and in order to develop true long-term residual income you need to ensure the success of everyone in your downline.

More Reading

The way you run your business is far more important that the MLM Compensation Plan

Choosing your MLM Network Marketing Business.

Multi Level Marketing Scams

Return from Network Marketing Compensation Plan to What is Network Marketing?

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