MLM Compensation Plans - It Better Be Good!
Does a compensation plan make or break a startup MLM company? History suggests that a good one is helpful and
a must. Does it drive success? Probably not. Will a bad plan contribute to failure? Probably, together with other
unlucky breaks. As industry expert Michael Sheffield notes with respect to a "good" compensation plan, "its absence
will be noticed more than its presence."
Is there anything new under the sun as far as compensation plans? Probably not. Whether the plan is a unilevel,
breakaway, binary, party plan, Australian two up or utilizes enroller, infinity or coding bonuses, the goal is the
same…motivate varying behaviors of distributors ranging from direct sales to building wide to building deep to
supporting downline to maximizing sales volume production and retention. Of key importance is that the plan is easy
to explain to recruits and that it is perceived as fair and balanced.
Typical plans may pay out upwards of 30% to 50% of sales volume in commissions to distributors. Various plans
merely divide the pie differently. As long as the perception is that the plan is competitive within the industry, it
appears that other factors, including bonding with the product, management, field leaders, company philosophy and
corporate communication will be a more significant driving force for recruits and distributors. In fact, companies
whose pitch leads with the compensation plan are often merely hiding the weaknesses of other key components
such as quality of product or stability of management. In designing plans, leading MLM management consultants
serve a vital role in balancing all of these factors.
There are obviously significant legal issues in evaluating and implementing the compensation plans. Review and
input by a competent MLM Lawyer is essential.
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