Anyone who has ever worked with multi-level marketing companies will tell you how hard it is to understand their payment plans and how overwhelming all the information can become. It becomes difficult to digest all the fine print and go beyond all the jargon in the legalese to understand what is really going on.
In this article I am going to discuss on five major types of payment plans that are used by any multi-level marketing company.
There are about five major types of payment plans that are used by any multi-level marketing company. There are various pros and cons to these plans and the most commonly used plan is the Stairstep Breakaway plan.
We will take a look at all these multi-level marketing payment plans here and discuss their pros and cons.
1. Unilevel multi-level marketing plan: This is the simplest type of payment plan and is used by companies who want a simple multi-level marketing plan. In this type of plan the recruit will never be able to advance beyond the level on which he was recruited. The payment will be made according to the multi-level marketing payment plan’s tier and percentage of sales that has been predetermined. Like other plans, this plan may or may not have a fixed sales target that needs to be achieved before the commissions can be paid out. Most multi-level marketing companies start off with this plan as this is really simple to administer and explain to further recruits. However it doesn’t have the flexibility to make it a very popular plan. The primary drawback of this plan is that it doesn’t incentivize hard work beyond a certain level in the hierarchy. By not being able to rise up the ladder, the plan lacks a certain motivation level that the other more popular plans offer. Usually after a multi-level marketing company has got a good number of subscribers, they move to a plan that appears to be fairer such as the Stairstep Breakaway plan.
2. Stairstep Breakaway multi-level marketing plan: This is the most popular type of multi-level marketing payment plan. As probably evident by the name, it lets a members step up the stairs and breakaway from their original hierarchy. At the beginning the member will start from a recruited hierarchy and will receive commissions based on the step in the hierarchy and the multi-level marketing company’s percentage criteria. However, there will be target sales and other parameter based on which a member has the chance to get “promoted”. By meeting the pre-defined criteria of sales and consistency, a member will break away from the hierarchy and move up the link. The member who originally recruited this member will either get a fixed sum or a percentage defined in some other manner when someone under him gets promoted. This is to maintain fairness, as the member who recruited such a star performer will no longer be getting the percentage from this person’s sales after he is promoted.
This is a commonly accepted plan and has been well received by regulatory authorities as well. The prime benefit of this plan is that it provides a strong motivator to every member of the multi-level marketing company.
You could think of this plan as an extension of the simple Unilevel plan, but with the provision of getting up the hierarchy and therefore being a fairer and more reasonable plan.
3. Matrix multi-level marketing plan: The matrix plan is one that is not really popular with multi-level marketing companies and is considered to be a jazzy plan with very little benefit over and above the other plans. The way it works is that the multi-level marketing company will have a matrix or a grid defined, say a 3 by 5 grid and then this grid will determine the limit on the number of recruits at each level. In our example at each level up to level 5 there can only be a maximum of 3 downward recruits. If the limit is exceeded then in that case the fourth recruit will be placed under a new distributor who did not directly recruit this person. This method makes sure that nobody has a considerably bigger pie than the other distributors. However this is not a very popular multi-level marketing plan and has come under attack by regulators also. As you can well imagine, top performers and motivated sales people have a tendency to stay away from this kind of plan. Despite its drawbacks there are still some big companies that use this plan.
4. Binary multi-level marketing plan: This is not a very popular multi-level marketing plan and is even slightly lesser popular than the Matrix multi-level marketing plan. Under this plan one distributor can have only two top line distributors under him. If there are more than two distributors then the additional distributors are placed under the top line distributor of the person who originally recruited the new member. This is a common multi-level marketing plan for a company that is looking to attract new multi-level marketing recruits. It is easier to attract new members to this plan because they are attracted by the spillover effect. They are attracted to the idea of getting commissions from members who they don’t even know! However the flip side is that it is difficult to keep people motivated under such a plan. That is the primary reason why this plan is not so popular.
5. Hybrid multi-level marketing plan: This is the multi-level marketing plan that is a hybrid of one or more of any of the plans that we talked about earlier. It is not uncommon to see them. But the biggest trouble with hybrid plans is that it is difficult to explain it to new multi-level marketing recruits. Typically when a new recruit hears about such a plan, they will ask their friends about such a thing. If their friends say they have never heard of such a thing (which happens often) the new potential recruit completely loses interest in the multi-level marketing plan and moves on.