Network Marketing Reviewed 3 – Recurring Income

Here is the third – five very important pointers that would guide you in the right direction. Any company that you can find passing these criteria will be a great company to line up with.

3. A Compensation Plan that is fair to both fulltime and part-time distributors alike with leadership bonuses for those who build large and productive teams.

We have already mentioned that a successful Network Marketing company will have a “distributor first” philosophy. In no other place should this be exhibited more than in the compensation plan. It takes only some simple arithmetic to see how many sales or distributors you need in your organization in order to be in profit. Most people don’t take the time to do the math and sometimes are “deceived” by the fancy potential income charts that are put out by the company.

The point here is that you need to read between the lines and the fine print to be sure what you are paid for your effort. Most people will skim this section because it may read like a tax code and who likes to do their taxes? That’s why we hire accountants.

Compensation plans fall into basically four types:

  1. The Break Away Plan. This is the oldest and most traditional plan and allows distributors to build and be paid on an unlimited number of frontline associates. When the frontline associates reach a certain predetermined volume they can “break away” from their up line and form their own organization. In this break away plan the leaders are paid on all their frontline and also certain levels down in their break away groups. In this model if you don’t work you don’t eat. You have to recruit in order to be compensated.

  1. The Unilevel Plan. Here you are only paid on a certain number of levels determined by the company. In this case there are no ‘break away’ groups. The larger your frontline the larger will be your total group size. The lower levels would therefore be much larger than the upper ones. Again if you don’t recruit you don’t get a check.

    1. The Matrix Plan. In this plan you are limited to the number of recruits you could have on your frontline. So in a 3 X 5 matrix you’ll have 3 on your front line then 9 on the second level, then 27 on the next and so on. Compared to the two other plans we’ve looked at the matrix plan limits your success to a certain level. What’s so appealing about this plan though is that recruits are told they only need to get 3 and are even promised “spill-over” from a “heavy hitter” in their up line. The results are that everyone joins looking for spillover and never makes any personal effort. Results? Certain failure. A matrix, though limited, can work but the distributors must depend on their personal efforts and allow the spillover (if any) to be just an added bonus.

    1. The Binary Plan. This plan is a special case of the matrix where you can only have two on your frontline, hence ‘binary’. The only caveat here is that many such plans require you to balance both sides of your organization before you can get paid. This is really a trick so that the company can keep your money as long as possible and sometimes forever. Some dishonest companies will start off by opening only one side of the binary—called a ‘power leg’—as there is no possibility of you getting paid until the other side is opened. By the time the other side is opened many people may have left the company leaving their commission checks behind as well. You are forever left, not only with recruiting, but trying to balance the sides of your team. Beware of such plans!

    There are variations of these plans that have come along such as the straight-line plan where you are paid on every one that comes in after you.

    Companies that follow these plans don’t seem to survive very long since most people just join and stand by waiting on their checks. There is no real incentive to work the plan.

    Warning: You should always be particularly suspicious of compensation plans that pay out over 60%. This normally means that the product is overpriced, qualification quotas or volumes are almost unreachable or the breakaway structure can rob you of your investment and hard work. If the company uses the breakaway plan you may find your down line disappearing just as you are about to hit the big numbers. If a company intends to be deceptive it will be in the compensation plan; so study it well!

    4. Training and solid up line support for your team.

    Many companies provide training and promotional materials for their distributors but it is often difficult to strike a balance between product promotion and distributor training. And distributor training normally takes a backseat. You should be wary of companies that charge exorbitant prices for their promotional materials. You are investing your advertising dollars so the company should not seek to make a profit from you here—although many do.

    You should seek to align yourself with an experienced leader and learn as much as possible from his or her recruiting methods. Be sure to investigate your up line because that can be the one factor that determines success or failure for you. Study the company literature to see who the ‘big hitters’ are and join their group. It is said that misery loves company; so does success.

    5. A wide and even global market if possible.

    You may find a company with all the great characteristics that we have looked at so far and then discover that it is not available in your area—ouch! With the advent of the Internet you find that many more companies are going global. This means that your market reach will be wider and chances of building a solid team greatly improved.

    Apart from the sheer geography of the company’s market reach, is the potential customer base as well. For example, many American nutritional companies are aiming for the ‘baby boomers’ who are now in their midlife years and make up a good percentage of the buying public—in means and numbers. This demographic of customers want to look younger and are very health conscious. Any product that caters to their needs will most likely have a ready market.

    Another big “bubble” when looking at population demographics is the children of the baby boomers. Look at what they are spending money on!

    Choosing a company that has a product or service for which there is no ready market will make it very difficult on the distributor. And in this industry one needs a lot of encouragement.

    Okay, that’s it on that subject.  Next part of these posts is about Network Marketer’s Survival Guide.   

Talk at ya soon…

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