Clearing Out Common Misconceptions
Let’s clear up some common misconceptions regarding compensation plans both for the distributor and the company.
The compensation plan is not important; all I need to do is recruit people
A good plan will make or break a company. Survivability among distributors is one of the main causes of attrition. Would you be as excited as when you first started if you are not making money?
Factors like payout, maintenance and even the joining fee are crucial. If a company has quite a high maintenance and their distributors are not making money, they will drop out even faster.
I will only be a serious builder once I find the best compensation plan
There are people who do not work hard enough in their business, that they blame the plan for their failure.
They blame the plan, the management, or even call them a scam. If you decide to leave a company for a better plan, make sure you leave strictly based on business reasons and not to justify your failure!
I must explain the entire plan to the prospect so that he understands
If you explain the plan to a new person, chances are he will get very confused and he might not sign up.
Keep the plan simple and explain in terms of benefits instead of features.
If you are starting your own network marketing company, outlining the benefits and writing in terms of potential earnings is more advisable because most people want don’t want to think too much.
If I want to start my own network marketing company, all I need is a good plan only.
Ultimately, the success of a network marketing company depends on many factors. The most important factor is who is managing the company. Even a company that is making the most money will still fall apart if it is not backed by a solid management team.
Other factors also include having a viable product. A good product ensures repeat sales and cash flow for both the company and the distributors. The plan should be designed to complement and synergize with all the other elements. At any time, each element should not be designed at the expense of the other.
If the company has a high payout to the distributors, everyone will join the company
If everyone in the company is enjoying extremely high commissions, you must observe the product more carefully. If a product’s mark-up is too high, it may be good for the distributors in the short term, but in the long run, high retail mark-up will hurt the consumers and devalue the product.
A product must rely on good repeat sales and reasonable mark-up at the retail level or else the company will not survive long. Most companies simply grab any product and give it a crazy mark-up so that it attracts many builders without any thought of its long term survivability.
Next up: Recognizing Basic Plan Mechanics and Point Value to Cash Calculation
Until then, see ya soon…