Tuesday, October 16, 2012

The "Compensation Plan" in Network Marketing

Most people who select an opportunity in Network Marketing focus almost exclusively on the "Compensation Plan".In reality it takes more than a compensation plan to produce adequate financial results.
A compensation plan alone is something static and only one element of a "Compensation Program" (something more comprehensive and that "goes beyond").

It takes other factors beyond the compensation plan to activate the "Compensation Program", such as: owners of the company, economic soundness of the company, the product support team, training system, philosophy and market strategies.
Only when these factors are working together it is possible for an organization to experience a strong and sustainable growth.
Companies that promoted the compensation plan as major factor did not understand the principles on which Network Marketing is based.
If we look at it in simple terms, all compensation plans are a multiplication, percentages set or pre-established, multiplied by the volume points that distributors move.
This means that the compensation plan of any Network Marketing company is maximized to the extent that the distributor knows how to create a network which is constantly growing reflecting the growth of people and thus volume points. 
So what is really important?
It is important to have a good compensation plan but it is crucial to have the knowledge to maximize and activate this plan.

The main "types" of compensation plans in Network Marketing are:


Matrix
Created in the 80s, this type of plan is losing popularity because it has limited width and depth in the network that one can creat, which limitis your income (the amount of money you can make) and fosters lazy "downlines".

Stepped or rupture
The oldest and, statistically, the most used plan in the industry.
As you go "up the ladder", you get higher and higher product discounts and commissions on product sales but at the same time greater obligations to purchase products for you.
As your "downlines" obtain higher commissions by volume group, yours are decreasing on average 2% to 5%.
The fact that it pays more for your "frontlines" than depth, leads to distributors to be focusing mainly on recruiting all the time.
It is called "rupture" because at times some of the people who are in your network reach certain qualifications and break or become separated from their group along with its members.
Often, to achieve the required volume and earn their commissions, distributors purchase of a surplus of product.
This plan is more focused on direct sales and recruiting frontlines than on teamwork and duplication.
Its use is declining rapidly and none of the many companies created after the 90s are using it.

Binary
It is based on the principle of two arms or two legs.
This type of plan has limited width.
In this type of plan the emphasis is on recruiting people (for you to capitalize on it you have to have balance the right and left lines). If you don't do it, you cease to receive commissions.
This is the biggest disadvantage of this plan, if the member has not leveled their two organizations (the right leg and left leg) he will not receive large checks since the company pays based on the weakest organization.
This is unfair. Why charge only the weaker leg if there are plans in the industry that pay for all legs including the strongest?
Another disadvantage of this type of plan is that it attracts many people with false expectations, saying that the person only has to enroll two people and other people will fall in their organization from their sponsor's surplus. These type of people come into Network Marketing with the belief that there is no need to do anything because your "upline" will do everything; they will lose motivation with ease and abandon the business. This is why binaries have little retention, recruiting many people but retaining very few.
For most of the leaders, their income comes from the "starters kit" when recruiting people, and because of that they do not produce true residual income in the medium and long term.

Unilevel
All distributors you affiliate are your first level, those affiliated by people in your 1st level are your 2nd level and so on.
At present, "hybrid unilevel" allows unlimited frontlines and depth when a series of requirements are met, according to each company, when you have a certain volume or reach a certain qualification.
It is a just plan, it does not require the purchase of a high volume, therefore allowing for a greater retention. There are bonus payments for the excess volume you move monthly. It applies "dynamic compression", which provides the organization with a great synergy increasing the income capacity of the distributors.
Currently 37% of companies in Network Marketing us this type of plan.

4Life offers us a plan "balanced and with dynamic compression", with a potential to earn good income in its depth. This balance allows both the least experienced distributors as well as the most experienced ones to benefit uniformly.
The 4Life compensation plan is structured in such a way that it balances the commissions between the 3 main categories of distributors (small, medium and large), ensuring a more just and secure income for all.





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