MLM Compensation Plans

    Hybrid Compensation Plan

    In this post, we will examine the process of designing a simple compensation plan with my typical thinking. 

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    Australian Two Up

    This plan is good for companies with a single high-priced product. I have seen it used to great effect in the timeshare industry where the investment is substantial.

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    Forced Matrix

    The forced matrix plan was developed to leverage the positive characteristics of both the binary and unilevel plans. A typical example would be a 5 x 5 matrix in which each member can have 5 recruits in their front line and earn 5 levels deep in their network.

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    Stairstep Breakaway

    Avon has built a massive global business with an annual turnover in excess of $12B using this model. Even though it is old and has several drawbacks, it should not be discounted out of hand and could be the perfect compensation plan for your business. 

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    Unilevel Compensation Plan

    This plan is well suited to sales-oriented networks. If you have a range of products that you require your agents to demonstrate and sell, then this plan is probably worth considering. I find it easy to structure, easy to explain and, although the team will not grow as fast as with other plans when it matures, it is traditionally the most stable of the plans. 

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    Binary Commission

    The binary plan pays a commission based on two variables. The first is the members rank and the second is the sales volume in the weaker of the two legs, often called matching volume. It can be one of the fastest ways to grow a team is often adopted for annuity products with low margins.

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    Rank Achievement Commission

    The once-off rank achievement commission is designed to drive people to achieve the necessary qualification for a promotion and then to reward them for the achievement. If the commission is paid monthly, it could replace several of the other commission elements. 

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    Breakaway Bonus

    If you have decided on the stairstep breakaway plan then the breakaway bonus is an essential part of the growth strategy. To grow your turnover you need to give your leadership a solid financial incentive to break out new teams. The faster your leaders achieve breakaway, the faster your business will grow and consequently, the faster your turnover will grow.

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    Pool Bonus

    The pool bonus is the ultimate recruiting, retention and motivation tool. With the pool bonus, a small percentage of the company‚Äôs turnover is set aside throughout the year and at the beginning of the following year, normally at the annual gala, a sizable check (both in cash value and physical size) is paid to the qualifying leaders in front of the entire team.

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    Differential Bonus

    This is one of the most predictable compensation mechanisms. The team leaders focus on team building and sales training. They will know the approximate sales volumes for each of their agents and as a result, have a highly predictable monthly income. Sales are generally very stable and the company sees a very small fluctuation in the monthly numbers. 

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