Network Marketing Compensation Plans Part 2

Compensation Plans 101

Unilevel, Stairstep, Forced Matrix

Back to our discussion of the differences between the different Network Marketing Compensation Plans that we see today in the network marketing world . . .

Last compensation plan email we discussed the Binary Plan.

Today we are going to go through the basics of the other three basic network marketing compensation structures.

Without further ado . . .

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Unilevel Plans:

These plans pay a fixed percentage per each level within the plan. A basic example of a unilevel plan is one in which you are paid 7 levels deep and you are paid 10% for each level. If there ever was a democratic compensation plan, it’s the unilevel. It’s fair in that you get paid a set amount per level.

Traditionally, the downside to unilevel plans is that they can be less than exciting if left in their most basic state.

As you can see from the example above it will take quite a few people before you can ever really make any big money with a basic unilevel plan.

In reaction to this, many new companies that use the unilevel compensation structure will set their commission percentage higher up on the higher levels or even set up the plan such that there are less than 5 payable levels, but each level has a high percentage payout.

This is good and bad. It’s good in that it helps the new rep get into profit quicker than with a more traditional unilevel plan, but it’s at a price – The less levels that you are paid on the less stable your long term income.

Stairstep Breakaway Plans:

The stairstep breakaway plan is one of network marketing’s oldest compensation structures and is used by some of network marketing’s oldest and best known companies.

Unfortunately, it’s one of the hardest to explain.

But let’s give it a go!

Stairstep breakaway plans are used mostly by network marketing companies that sell physical products like nutritional products.

With stairstep breakaway plans new distributors are given discounts on their wholesale product purchases based on their level within the company.

Your level within the company is defined by the number of “legs” or organizations that you personally grow within your team and your total sales volume.

What this means is as a new rep you may get a discount of 20% for your wholesale product purchase for resell, but as you move up the ranks you may achieve a point where you actually receive a discount of 40% for your product purchase.

A great thing about stairstep breakaways is that a distributor can make a single large sale of their company’s product or service and generate a huge commission for that sale, but this is also a great danger.

If you’ve ever had a friend or family member that got taken to the cleaners in network marketing only to be left with a garage full of product that they couldn’t sell, it was probably the result of them being taken advantage of by a less than ethical distributor of a company that used a stairstep breakaway plan.

These plans can encourage huge front end loading purchases to qualify for payment, and as such should be approached with caution.

Forced Matrix Plans:

Forced Matrix plans are easy to spot as they normally are denoted by numbers like 3 X 5.

They have been very popular in the last few years.

The benefit of a forced matrix plan is that as a new distributor recruits new people into his or her organization they are “forced” into the next open spot within the person’s matrix.

As with binary plans this can create what is known as “Spillover” and can create a huge amount of excitement. But the downfall here is that it can attract people who want something for nothing.

Because of the leverage of spillover as help in growing an organization a new rep may just sit back and wait for their upline to place people under them. As you and I both know, that’s not how to run a business.

The other big pitfall with forced matrix plans is that they set to a predefined size. Once a person’s 3 X 5 matrix is full they have capped out their earning potential.

All compensation plans have their pluses and minuses and most likely in today’s network marketing world you won’t come across a compensation plan as basic as the ones discussed here today. But rather a mixed compensation plan based on the strengths of the above mentioned plans.

As long as you know the mechanics behind your company’s compensation plan you can set proper expectations for your success, and this is very important!

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