Compensation Structure in mutli-level marketing

Multi-level marketing is a controversial business. It is legal or not, no one can say. Even government authorities can’t advice you about legal structure of any mlm business. Most experts say out of 100, more than 99 person who joins mlm business lose money or doesn’t get make any profit. But still many persons are getting good amount of money from it. Experts say only top level management, owners and share holders make money in mlm business. Person’s lower in pyramid doesn’t make any profit or lose his money in mlm business.

That doesn’t mean mlm is illegal and non profiting. Some companies have legal commission structure and some has illegal commission structure. So you should be careful while joining any mlm company or making commission structure while starting own mlm company.

If you are starting own mlm Company then it’s good business for you. Checkout detail: How you can start Multi-level marketing company?

There are some rules and regulation about joining persons under your mlm business. You should confirm about local laws before starting mlm business. Few rules and regulations are:
  • It shouldn’t be illegal pyramid structure business. 
  • It should be concentrated on selling products and doesn’t involve in making money through selling printing material and taking joining/training fee. 
  • It shouldn’t require large investment to join business 
  • It should have significant products and services that a person would buy even without participating in business 
  • Commission should be based upon sale of product rather than joining of persons. 
  • Products should not claim any false and misleading information 
  • It requires learning new skills and 7-8 hours/week and 3-4 years to be successful in mlm business. It shouldn’t promise quick and easy money. 

There are five types of commission structure used generally by the network and multi-level marketing companies. All plans are own advantage and disadvantage. If one plan is working for other company then not necessary it will work with your company too. You have to choose your compensation plan based upon your experience, product type and your marketing strategy. A good company regularly review its compensation plan and revise it according to current best suitable plan for growth.

  • Unilevel 
  • Binary 
  • Matrix 
  • Breakaway 
  • Australian 

A unilevel compensation plan is simplest kind of payment plan in network marketing. In this level of network or direct selling marketing, you can place as many of recruits in your first level and you get a percentage of money from purchase they conduct. Further you get a certain amount of money from purchase of recruits of your first level recruits. Usually 3 to 9 level compensation, you get.

Unlike unilevel, Binary has limited number of recruits you can place at first level. Generally you can sponsor only two recruits below you as first level and these two will sponsor further two recruit each. This will results in left and right leg. Further these legs will recruits. In this compensation type a recruiter get compensation against value of weaker leg recruits.

It is also known as Forced Matrix. In this compensation system, company sets a predefined width and depth. Suppose a company sets 3 by 4 matrixes which means a distributor can only recruit 4 persons as first level/front line. These four recruits further recruit four persons. Distributor gets compensation against predefined level by company generally 6 to 9 levels.

In this compensation plan, unlimited first level recruiting can be made. It has unlimited width but limited dept depend at company compensation policy. After achieving a certain level in this type of compensation plan, distributor/person breaks away from chain to avoid giving commission to original recruiter. This is one of the most famous compensation method used by many famous companies like Amway etc. 

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