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Multi Level Marketing Compensation Plans Review

Compensation plan of a multi level marketing company is one of the significant parameters to consider when choosing a network marketing company. The combination of the products and the compensation plan is what differ one MLM company from another.

There are four major compensation types:

Breakaway or Stair Step
Binary
Matrix
Unilevel

Breakaway or Stair Step is the most common compensation plan of the multi level marketing industry. The plan contains several ranks (3 or 4 are very common). The requirements for achieving the ranks are based on sales volume per predefined period. Your downline is defined as your personal group. The sales volume of the entire group helps you to climb the stairs for higher rank. Usually the commission that you will get from lower rank distributors in your downline is higher then from those distributors with higher rank. When you reach to the rank that enables you to make a Breakaway, your entire downline goes with you. There are some obligations along to the benefits of a breakaway. Many plans require that the breakaway group will meet a certain monthly sales volume in order to be entitled for commissions from other breakaways groups. In addition to the group required sales volume prerequisite there is a personal sales volume that you as a group leader have to reach.

Binary plan is when the first level is limited to two distributors and the depth (vertical) is unlimited. Practically, a downline of more than 15 levels is not relevant since mathematically the commission will be a fraction of cents.

Matrix compensation plan usually, has limits on the horizontal and vertical. The common horizontal level is limited to several positions (2 to 7) and the depth (vertical) levels are limited to 4 to 20. The commissions are linear in a way that the closer you are to the level that a sale was made you receive a higher commission percentage of the total commission amount splitted.

Unilevel compensation plan is has the simplest structure. This one is characterized with unlimited first level of width and with a depth (vertical) of 5 to 10 levels. Each level has a defined percentage of commission. The concept of this plan is very clear, the more sales and money volume you and your downline produce the more you will earn. Many times network marketing companies add to this plan some bonuses for achieving goals in order to motivate their distributors.

These were the most common types of compensation plans that most of the multi level marketing companies use. An obvious "Be Careful" sign, when you look at a network company's compensation plan, is when a company's paying plan pays more than what they get. This company will not last long but it gives the entire network marketing industry a bad name and to you a bad experience.