Differential plan, is a direct selling compensation plan that runs on the difference of the commission between the sponsor and the members. In this plan, a distributor receives the difference between the amounts for which he himself qualifies and the amount for which his first level distributor qualifies. In this plan, commission in calculated on the purchase of PV/BV – Personal Value (Point Value)/Business Volume which is pre-defined on products. PV are the points that you have to earn for achieving your bonus. BV is the price that the company will pay you. Also, the commissions depend upon the difference between the existing members (upline) and newly added members (downline) PV percentage and so it is called as “Differential Plan.” The percentage of commission can increase as per generation level and total turnover of re-purchase.
In this compensation plan, a term ‘slab’ is also being used wherein there is pre-defined range of group PVs to decide the percentage of the income distribution. For example: members with group PVs in the range of 100-200 can avail 5% PVs. In this case, the slabs are – 100-200 and 0-5%. Differential income is always distributed as per fresh (New) PVs in the payout period. Also, defining slabs may depend on either cumulative or fresh PVs depending upon the business.
This plan is more beneficial for companies who are dependent on product selling as well as on the re-purchase of products from existing distributors or franchise.
Differential plan is extremely predictable and has the strongest potential.
Differential plan is one of the popular plan used in US market. Most of the reputed direct selling companies refer this business plan to run their business. As this business is based on the difference of the commission distribution of the upline & downline so accurate commission calculation is the most important part for this business plan.
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