Points are one of the most misunderstood mechanisms in MLM.
I have seen points used in the most bizarre ways. Some of my clients have even used points in place of money.
Points are, however, very powerful and useful. You can use them to drive behaviour, determine status and rank, and calculate incentives and recognition.
Let me take a moment to share the power of points, and why we use them.
In any large and successful MLM company, product prices will vary over time. The company may also be trading in various countries and currencies. Before the advent of points, companies were forced to manage discreet systems with compensation plans tuned to each region. It was also necessary to adjust the compensation plan when the prices were increased. The reason for this is simple.
Let's say a compensation plan stipulates $100 per month in personal sales to achieve active status. This could equate to 10 product sales of $10 each. In 5 years’ time, however, this same product may be selling for $20. The result is that the member would now only be required to sell 5 units to achieve the same status.
If we look at a multi-currency example, the company may be selling the product in the USA for $10 but in Europe for €8. You would require 2 different rules, normally in two discreet systems. The first status rule would require the member to achieve $100 per month in personal sales while the second would require €80 per month in personal sales.
As you can see, this is messy. Enter points!
By assigning points to a product and then using the points to drive status, promotion, incentives and recognition, you create a stable measuring device across time and geographic region. Let’s take the above example and apply points. We can assign 1 point to $1 as a starting point. Then we set the rules to assign active status when a member achieves 100 points per month in personal sales. This will result in the sale of ten units. A person in Europe would sell the same ten units for €80 and also accrue 100 points thereby achieving active status.
Now let’s assume that the price of the product doubles over a five-year period. The product will still be worth 10 points and the member will still be required to sell 10 units to achieve active status.
As you can see, using points will allow you to keep a standard compensation plan across currency and time and reduce your need to alter or update your compensation plan or documentation.
One last thing - as time goes by, the $ to point ratio will change. If your initial ratio is $1 to 1 point and the price doubles, your new ratio will be $2 for 1 point. Any new products added would now need to have points assigned using this new ratio. To keep things straight, you need to take your oldest product to calculate your point ratio whenever you are adding points to a new product.