Best Compensation Plans to make MLM Business Successful
MLM Compensation Plan can be defined as the particular structure in which distributor genealogy is formed. Compensation Plans also include methods and formulas to calculate the incomes of MLM distributors.
Hence, Compensation Plans are one of the most crucial factors deciding the success of MLM companies, and it required immense analysis and understanding to choose the best one.
This post will provide you with a detailed guide for choosing the best MLM compensation plan.
What are the best MLM Compensation Plans to make MLM Business Successful?
We have explained the 6 most commonly used compensation plans in the direct selling industry. Before finalizing an MLM compensation plan, you must have advanced MLM Software for your company.
As actual implementation of MLM compensation plan and other business activities are done through MLM Software, hence having the right technology is a mandate.
To make things easier for you, we will recommend you to take a free demo of Ventaforce, an MLM software proving a to z solution for the direct selling industry.
With 20 years of experience, Ventaforce offers 150+ exclusive features. Contact Team Ventaforce to know more about it and choose the best MLM compensation plan for your business.
Binary MLM Compensation Plan
The Binary Plan is the oldest of all the compensation plans. It was developed in the 80s to support all MLM companies. Before getting huge success in the network marketing industry, the initial existence of the plan seemed difficult as it was used in most pyramid schemes.
The Binary Plans have a specific structure that needs to be followed if used. As per Binary Plan, every distributor can have a maximum of two distributors in their direct downline. The earnings through Binary Plan depend on any one side or leg of the distributor’s downline i.e. the leg having lesser earnings known as the lesser earning leg or pay leg.
The leg generating higher incomes is known as the reference leg.
The income generation through lesser earning leg seems strange but works best to achieve teamwork as this forces the distributors to work harder on their weaker legs to generate more income.
The first distributor can have at most 2 downline members and those two downline members can have further two downline members each. This procedure goes on to form a binary structure. The amount or percentage of commission to be paid is decided by the company.
Matrix MLM Compensation Plan
A matrix Plan even known as a Forced Matrix Plan is designed to have a pyramid form. In this structure, there are fixed rows and columns and direct sellers are arranged in the same. The structure has a fixed width whereas the sellers can keep on adding more members in the downline i.e. variable length. The seller receives a commission when any new member is added to the downline.
Generally, the first level of this structure is fixed whereas the remaining structure can include various sizes as decided by the MLM Company.
Matrix plans have a unique structure compared to other plans. Most companies select one from narrower or deep levels of structure to attract different distributors. MLM companies generally have to keep track of commissions and manage the network to run an organization efficiently with the help of innovative matrix software.
Board MLM Compensation Plan
Board Plan is also known as Revolving Matrix Plan or Recycling Matrix Plan and is one of the popular MLM plans. It is called the Board MLM Plan as a group of members who work in a team are known as the board and such board further splits into a tree.
The distributor or the board member who achieves the qualifying criteria set by the company is advanced to a new position on the next board. A board is explained as a new tree which is formed to include all the members who achieve specific criteria.
Multiple boards are designed to meet different criteria achievements based on the company’s decisions. This plan works best for companies that wish to maximize the profit and efforts of the distributors.
Generation MLM Compensation Plan
Generation Plan also known as a Gap Commission Plan or Repurchase Plan is highly used in purely product-based selling businesses. Generation Plan is a powerful plan providing income to many deep levels of the downline structure.
It is supposed to be a motivational direct selling plan as it focuses on forcing the distributors to promote downline sellers to sell more products and receive incentives when the specific target is achieved.
In such a structure, the entire volume right from the leading distributor to the last downline member is known as a generation.
Hybrid MLM Compensation Plan
A Hybrid plan can be defined as a combination of multiple plans in a single structure. One of the most used combinations in MLM companies is Unilevel and Binary Plan.
Binary Plan we already discussed earlier and Unilevel Plan is the one where there is only one business level and rests all the members are added to the distributor’s direct downline. As a result, there is no splitting in the downline providing all the benefits to the leading distributor.
Such combinations make it possible to combine the advantages of both and eliminate the disadvantages.
In such a plan, all the distributors work as a team to boost revenue generation and earn more commission. This unique combination improves the depth of the Unilevel plan and the incentives even get divided into the entire network.
For instance, in Unilevel Plan, only one level is formed having all the downline sellers and in Binary Plan the commission is only divided among the same level members till the leading distributor. Both these disadvantages are removed in the Hybrid plan by allowing multiple levels as Binary Plan and dividing income among all the members as Unilevel Plan.
Differential MLM Compensation Plan
The Differential Plan can be defined as an MLM plan calculating commissions as per the difference of commission between that of the sponsor and members.
As per the structure of the Differential Plan, the distributor earns the commission as a difference between the amounts he qualifies for and the qualifying amount of his first level distributor. As per this plan, the commission is based on the PV and BV which is Personal Value and Business Value decided in advance by the company on each product.
Sometimes commissions are also based on the difference between the PV of upline members and newly added members. The percentage of commission increase with an increase in the total turnover of the company.
In this plan, the “slab” term is also used when there is a pre-defined range of group PVs deciding the percentage of the income distribution. The definition of slabs might also depend on cumulative or fresh PVs.
A Differential Plan is highly useful for companies that are purely based on selling products or repurchasing products.