MLM compensation can at first glance seem intimidating. It is my hope to bring clarity on this subject for you with a basic introduction. There are 4 basic types of MLM compensation plans that are being utilized in network marketing today. Each has its own strengths and weaknesses.
These MLM pay plans are structured like a flight of stairs. Each step representing a higher level of achievement. As product volume and group volume increase, the higher you ascend on the staircase. The higher you rise, the greater your commission rate and bonuses on downline volume.
The people in your downline are also climbing the same staircase. When they reach a certain level of production volume, they and their downlines "break away" from your team. It is generally at this point that the volume of the breakaway group is no longer included in your monthly production quota and your commission from this distributor and their group is generally reduced. Interestingly enough, you have the potential to earn more compensation from the breakaway leg, because you are paid on the total group volume of that leg
In a typical MLM matrix pay plan, strict limits are set on both the width and depth of the organization. For example in a 3 x 6 plan, you are allowed 6 levels of depth, but your frontline is only 3 people wide. The first three people you recruit will full up your first generation line. The fourth person will then "spill over" onto the next generation level.
Unilevel MLM Compensation Plans
A typical unilevel pay plan resembles a stairstep MLM compensation plan in many respects, with the exception of breakaways. There is generally a limit set on the number of levels from which you can earn commissions; however, there is no limit on the width of any generational line. Advancement to higher achievement levels and higher commission levels are achieved by meeting specified monthly volume goals.
Binary MLM Pay Plans
Similar to a "2 x ?" matrix plan, a typical MLM binary plan only allows for two people on the frontline of your organization. Your organization divides into two legs, "a right leg" and a "left leg." Commissions are generally paid only on the weaker leg, usually determined by lower sales volume during the current payout period. Generally no commissions are paid on the strong leg.
Although there are advantages and disadvantages to each type of MLM pay plan, you can generally do well with any of them, by applying the fundamentals of lead generation, relationship building and downline training.