If you wonder how the payment flows in multi-level marketing, then it is through various compensation plans it has to offer. MLM businesses come with not just one type of compensation plan, but various types that suit different types of potential members. Different compensation plans have different features. MLM Enterprises offer various compensation plans according to their choice. In multi-level marketing, compensation plans are very well laid-out.
Different MLM compensation plans
- Binary MLM Compensation Plan
A binary MLM compensation plan is one of the simplest plans and this is used by many MLM businesses. In a binary plan, a member recruits two members to his downline. The new members can be on the left or right of the subtree.
The profit margin of the binary plan depends on the downlines being active. It urges both uplines and downlines to be active in the growth of the organization. For most of the mlm businesses with a binary plan, compensations are paid based on the weaker leg. Just to give an example, if a left team of a binary tree has fewer sales than the right team, then a binary bonus is paid based on the left team’s performance.
In a binary plan, a member has to deal with only his sponsor and his two distributors and profit flows from distributors to sponsors.
- Unilevel MLM Compensation Plan
Another very popular MLM compensation plan that many MLM businesses use is the Unilevel MLM compensation plan. In a Unilevel MLM compensation plan, a sponsor can have many distributors to the next level. This plan has unlimited width and it is easy for new members to join.
As some people think, this is not a one-level plan. It can have two to ten levels in depth.
Calculations are simple in a Unilevel Plan and so every distributor knows about the profit that he will receive. The sponsor gets a dividend from the business volume of each of his distributors.
- Matrix MLM Compensation Plan
Another common MLM compensation plan is the matrix mlm compensation plan. This plan has a fixed number of width and depth or rows and columns.
This is also called a forced matrix plan or ladder plan. The most common matrix plan are 2*12, 3*9, 4*7, 5*7, etc.
A unique feature of this plan is that the number of additional distributors per original distributor is limited. If a distributor recruits another distributor, when the capacity is reached, the recruit overflows to the next distributor down the line.
- Stair-Step Breakaway MLM Compensation Plan
In a Stair Step Breakaway MLM Plan, a member can move up the ladder and break away from his upline if he meets a certain percentage. As he grows in ranks, he enjoys greater commission too. Also, to break away he needs to have good sales and a downline team.
This plan has unlimited frontlines. Amway, number one in the MLM business, works on Stair-Step plan.
- Board MLM Compensation Plan
The board plan is also called the Revolving Matrix Plan or Matrix cycle plan. A blank board is given to a member when he joins and he needs to fill his associates. This plan allows a member to gain from the efforts of all other members of the plan. Once a board cycle is finalized, a member will get his compensation.
- Party MLM Compensation Plan
In a Party MLM compensation plan, marketers and business administrators promote and market their products in social events like get-together parties, home-based parties, etc.
A marketer in an MLM business gets orders from the company and he/she then organizes a party. The party might be jovial or an avenue to recruit new members. But the main focus is on selling the products.
- Hybrid MLM Compensation Plan
A hybrid MLM Compensation plan is a combination of a Uni-level and Binary plans. It combines the best features of both the plans and eliminates the flaws of binary and uni-level.
The plan starts with a user recruiting two members to the next level; on the right and left of the subtree. Other members are pushed to the next levels and the levels continue to grow in depth. A balance is needed to find between both the legs. New recruits, in the beginning, receive lower revenue, and then it will scale up in the course of time.
- Flower-looming Gift MLM Compensation Plan
Flower-looming gift plan is quite different from other MLM plans. It is like a rotating flower-like structure. There are four levels-fire, air, earth, and water; fire has 8 slots, air-4 slots, earth- has 2 slots, and water-1 slot. A member who enters the first level gives a gift to the member in the fourth level and rotates through each level and reaches the fourth level. He then receives gifts from other members when he reaches the fourth slot from members of the first slot. This plan has good earning potential and people are attracted to this plan.
- Monoline MLM Compensation Plan
In a Monoline MLM Compensation Plan, there is only one leg for every new recruit. When a new member is recruited, he/she falls under a sponsor in a single line and the chain continues to grow. At a particular point, the member is able to re-enter the chain and the cycle continues.
The Monoline MLM compensation plan is simple and can work with any number of recruits and profits. It permits every user to earn from new recruits without any hard work.
It is also called a Straight line, Linear, or Single Leg plan.
- Spillover Binary MLM Compensation Plan
Spillover Binary MLM Plan has more than two downlines, unlike the forced Binary plan. The Spillover Binary MLM Plan allows a member to exercise full control over his sales. Members are able to have two downlines in the binary fashion, left and right; also able to recruit new members as spillovers.
Choosing an MLM compensation plan
A person can decide to join an MLM compensation plan after carefully analyzing the features and knowing which plan suits his/her interest the best.