The Network Marketing Compensation Plan: . . . How It Works!

A Network Marketing compensation plan allows you to get paid in many different ways.

Regardless of the compensation plan that your company chooses, ALL companies MLM plans pay out good money to those who work them. You still may hear individuals in various network marketing companies talk about their compensation plan and say things like,

". . . We have the best comp plan in the industry."

I said before that network marketing is when you market to your network. However, multilevel marketing is when compensation or commission is passed through multiple levels of the company.  There are several different methods of compensation.

They are the following:


The Unilevel Network Marketing Compensation Plan


The Binary Network Marketing Compensation Plan


The Matrix Network Marketing Compensation Plan


The Monoline Network Marketing Compensation Plan

There are many more but these are the most popular. If you're not familiar with the network marketing industry you may not know what any of these terms mean. There's a big chance that you are thinking of which one might be the best. There is no one compensation plan better than the other.

It goes according to what suits you or your company's needs. Mainly this is out of your hands because once you join a network marketing company you go by whatever compensation plan they feel is best for their representatives.

However, regardless of whose compensation plan is the best in the industry you always find people in each company who fail to make any money.  You also find many people in that same company make thousands of dollars.

I say this because you'll find many people in several network marketing companies who jumped from organization to organization thinking that they'll be paid better.

If you bring the same work ethic to a different company, Most likely your financial results will be the same.

How Does a Network Marketing Compensation Plan Work

Many people leave for the company that seemingly pays more OR because they don't think their current company pays them enough. But if your company pays you more than what you expect it may be a dangerous thing as well and this is why.  The majority of network marketing companies will pay in the 50% range on average. What that means is every dollar that the company makes, $0.50 of it (50%) goes toward commissions for the representatives.

What is done with the other 50%?  It goes toward operational costs such as:

  • Employees 
  • Accounts payable
  • Taxes
  • Information technology
  • Manufacturing of their products
  • Rent for venues
  • Salaries or wages
  • Promotional products, etc.

Just like a traditional business, if the company pays too much money to its representatives, they won’t have enough revenue to operate efficiently.  You may see your company offer fewer products, Less promotional materials, employees from their main office start losing their jobs up, etc.  As a result, the business may ultimately fail.

The Best Comp Plan

One comp plan is no better than the other in general. There are many people who like the binary while some others prefer the matrix. It just comes down to what compensation plan the company chooses to offer.  If the compensation plan is that important to you, you may find yourself choosing which company to join based on the compensation plan.  I encourage you not to do that.

The more critical reasons to decide what network marketing company to join would be the:

  • Quality of Management
  • The viability of the product
  • The simplicity of the system
  • Quality of support
  • The integrity of the owners

How Do You Know What Is Good

How do you know what to look for to determine if an MLM compensation plan is good or not?  In shouldn't only be who pays the most. Take the following into consideration:

  • Does your comp plan reward you for direct sales?
  • Does your comp plan reward you override commissions?
  • Are you rewarded for volume at a certain level?
  • Do you have the opportunity for residual income?
  • Is it simple to get started in the program (initial fee)?
  • Are there bonuses available for personal sponsors?
  • Do you get commissions for selling products rather than recruiting?
  • Are they focused on selling to the general public rather than members?
  • Does your comp plan provide an opportunity for recognition?
  • Are you rewarded for sponsoring and maintaining a team?

In Addition . . . 

Many multilevel marketing companies offer more than just their specific comp plan. They may offer perks such as:

  • Health insurance (pics)
  • Trips
  • Home bonuses
  • Free training.
  • Car allowances
  • Dental insurance
  • Stock options (if it is a public company)

In addition to those perks, if your company offers promotions at certain levels they may offer something called a “Lock-in” promotion. This is if you had a certain rank in the company you will be locked into that rank regardless of how many people download quit or fall off.

All Has Its Pros and Cons

Every comp plan may not have every single feature that was mentioned above. However once you join your company make sure you study the compensation plan so you know what you have and how it works.

Most important of all, make sure your compensation plan does not ONLY reward you for recruiting representatives and the opportunity.

According to the Federal Trade Commission at least 70% of your customer base cannot be representatives of the company. If so, the company is walking a very thin line between being a legit company and a pyramid scam.

Now you may get experience in the multilevel marketing industry, start attending more events and get close to certain leaders.  Then they will leave for another company. If you have grown close to this person as a mentor . . .  when they leave, you may be left feeling hurt or betrayed.  You have these feelings especially if the person who switched companies was a personal leader of yours (that is if you don’t decide to go along with them to the new company).

They may claim that they saw a better opportunity at another company as well as a better commission structure. They may see things that stand out in the commission structure of the other company but they’re not taking into the consideration the other factors that are not offered in the commission.

The grass may only APPEAR to be greener on the other side

Remember if a network marketing compensation plan seems to be very generous to its representatives, the company may be very blessed to be able to do so. However, some companies may not be able to afford to do so and they may unknowingly financially run the company into the ground.

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