The Matrix Compensation Plan is one of the most popular and most used plans in the multilevel marketing industry. The matrix plan it is set up to have a pyramid structure with a fix number in the width and columns.
It is easy to recognize a Matrix plan when you see one because many people use it as an example of how you're paid when you do network marketing. Due to the fact that the matrix compensation plan restricts the number of people that you are allowed to sponsor on your first level as well as restricts the depth of you are able to be paid on.
You may hear representatives during the presentation describe how you get paid in the following terms:
So in the above example, if 2187 representatives of level 7 have 3 customers each, that equals 6561 customers
If those 6561 customers have a monthly subscription of $25 per month that equals $164,025
You'll get paid 7% of $164,025 which equals = $11,481 per month
Another example is:
So in the above example, if 64 representatives of level 6 have 3 customers each, that equals 192 customers
If those 192 customers have a monthly subscription of $100 per month that equals $19,200
You'll get paid 1% of $19,200 which equals = $192 per month
The MLM company will determine your compensation according to what they think is fair. Every company pays differently and can adjust the compensaiton as the their company grows and expands into different markets
Even though you aren't allowed to primarily ONLY get paid for introducing others to the opportunity there are bonuses potentially available for adding people to your downline. For example your company may say:
For every three people you personally sponsored you'll get a bonus of $100.
Then there's the downline commission. These are commissions earned when individuals in your downline introduce others to the product and get a commission from their sale.
These commissions usually aren't much until you grow your team to a considerable amount of people.
An example of how this works is if you are in a network marketing company that requires a monthly subscription or autoship for a particular product, every time the customer pays the monthly subscription you get a small percentage of the sale.
Due to the fact that you are a limited on your first level as to how many people you can add on to your team, what if you have more than three people that were interested in your opportunity.
After the third person is signed on any additional people that signs on will be positioned under one of your existing three that you already put in. When this happens this is known as a term in the industry called spill over . . . because Your extra people spill over into the next level.
Advantages to the matrix compensation plan is that once you introduce the required number of people on your first level (whether it be 3 or 5 sponsors) to the business opportunity you can then focus on turning your frontline distributors into leaders. What this does is help you to duplicate faster as well as help your organization grow faster.
Another advantage is people are encouraged to help each other. This is because they know they increase each others business when spill over happens.
A disadvantage in the matrix compensation plan is the method will help those on a higher level get paid more than those on a lesser level. For example, if those on level 2 and 3 introduce the opportunity to others (OR get a spillover to others), each of those people on level 2 and 3 only received credit for 2 sponsors each, but the person on level 1 received credit for four.
Most likely this is why uplines only get paid to a certain depth. The less you are allowed on the front level, the deeper the levels you can build your team. For example, if you're allowed 2 on your front line you may be able to only get paid on 12 levels deep. If you only are allowed 3 on your front level, you may be only able to get paid on seven levels deep, and so on and so forth.
This is the general explanation of the Matrix compensation plan. Depending on the network marketing company that decides to incorporate it, they can determine what bonuses you get or how much you get paid. They can determine how many people are required for bonus’s on different levels OR how many levels you're able to get paid on.
Once you join a network marketing company that adopts this compensation plan, be aware of all the perks and how your commission structure works so you know how you're getting paid.
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