Compensation plans explained: Distributors new to network marketing should have a simple understanding of the four most popular types of comp plans:
1. The Breakaway
2. The Unilevel
3. The Matrix
4. The Binary.
There are other hybrid plans that are a combination of these, but in general, these four are the most widespread. Having a basic grasp of these compensation plans will serve you well when you consider a potential Network Marketing Company.
The 4 Types of Network Marketing / MLM Compensation Plans:
1) The Breakaway.
This is the oldest and most traditional of the comp plans. It allows distributors to recruit and be paid on an unlimited number of frontline associates. When leaders emerge by meeting the basic requirements set forth by the company, they “break away” from their up-line executives, thereby forming there own organisations. In a breakaway compensation plan, leaders receive a commission on unlimited levels generated by everyone within their own circle volume and based on the number of “breakaway” leaders on their frontline, they are paid a commission on a designated number of levels of their breakaway groups. Even though a larger percentage is generally paid on the circle volume, the real money is made in the massive numbers generated in the breakaway groups.
2) The Unilevel
The unilevel comp plan essentially pays commissions on a specific number of levels, as opposed to generations that can run to depths of twenty or more, as designated by the company. A unilevel comp plan has no breakaway system. To really succeed with this type of comp plan, you need to recruit significant numbers to your frontline. The more people you have on your frontline, the more people you will have on levels six, seven, eight, or however far down the plan pays.
3) The Matrix
The matrix plan is inherently limiting as a comp plan by its very definition. Let’s consider the 3 x 7 matrix as an example: you are on top, and have 3 on your frontline. Your second level is 9, third 27, and eventually your seventh level is 2,187. Your entire organisation, if filled up would, compensate you for a total of only 3,279 people. Many of the top leaders in this industry have organisations of tens or hundreds of times larger than this. This is literally a case of converting an unlimited opportunity into a limited income position.
4) The Binary.
The binary is the most recent hybrid in the chain of new compensation plans. If you liked the matrix, you will love the original binary. The premise here is that all you need to do is sponsor two frontline individuals , who are called your “Business Centres.” Once you have your two, teach them to duplicate what you have just done, and poof, your rich! Not in most cases as companies require distributors to balance the sales volumes of each leg. If left on their own, each side tends to grow at radically different paces, and distributors are only paid on the lower of the two sides in their binary shaped organisation.