What is Network Marketing and does it work?
Network Marketing, does it work? You bet it does, but not for everyone because it doesn't work all by its self. It is a process that you have to work on, but it can actually be very easy - you network with people who either want to buy your product or service or want to create a business like you. Stick with it and you can make great money and a lot of friends, and all while you work from home. It is not a get rich quick scheme, but if you are serious and really want to work at home, this may be for you.
Network Marketing (also referred to as MLM or Multi Level Marketing) is real and is one of the fastest growing industries of all time and has made many people very wealthy and many people very comfortable. Network marketing has actually created more millionaires than the dot-com industry did. It is estimated that more than 150,000 people are joining the industry every week. It can create wealth, it has and it still is - today people in network marketing are living wonderful lives and enjoying freedoms that most only dream about or watch others live on Reality TV Shows. It has also not worked for many people, but why not?
Even if you are not really planning on joining a network marketing company, hopefully you can still benefit from the information here. But, even with that said, I encourage you to take the time to learn about network marketing because it is a business model that makes the playing field level and makes it possible for anyone with a desire to gain freedom of time and freedom of money the opportunity to do so.
The compensation plans of network marketing companies determine how you get paid and are therefore very important to know and understand. I explain the most common types of compensation plans further down.
To understand any of the compensation plans, you first need to have a basic understanding of some of the terms associated with network marketing. Some of these terms can include; upline, downline, sponsor, distributor/member/associate, levels, legs, business center, organization, width and depth. There are several others, but I think you will pick up on their meaning in network marketing as you encounter them in context throughout this information.
Sponsor
This is the person responsible for bringing you into a network marketing company. Your sponsor is also the person that is reponsible for making sure you receive the training and support you need to become successful - this is very important!
Distributor/Associate/Member
You become a distributor when you join a network marketing company. The word distributor is sometimes also referred to as member or associate and refers to the people below any given sponsor.
Business Center
You are given a business center when you join a network marketing company and it allows for you to receive compensation in reward for the work that you and your organization achieve. The organization is you and all the members/distributors/associates that you and the rest of your team have brought in - sponsored. You can think of your organization like a farmers market where all the individual stands are independently owned and operated. It is your farmers market and you are not the owner of each stand, they are independently owned and operated, but you receive compensation, or a profit, from their work and resultant sales. So, in network marketing the more work and sales your organization does the more you earn.
Upline and Downline
Two very common terms in network marketing are upline and downline. They make the multi level marketing concept by their design.
Your upline references the distributors/members/associates that are up above you, including your sponsor. As I mentioned earlier, your upline people should be providing mentoring, training and support for you to grow your business - your downline. Your upline has a vested interest in you and as I say again, they should be helping you, especially in the early stages, but depending on the compensation plan, their actual sponsoring of other members may or may not have an impact on your earnings.
Your downline refers to the members below you that are in 'your' organization. These distributors/members/associates directly impact your earnings and since you are in their upline, it is important that you welcome them to your organization and provide them with training and support. You will also make many new and long lasting friends in your downline. Even though you are helping each person in your downline, they are actually duplicating what you are doing and are creating their own organizations.
Width and Depth
The width and depth model of network marketing companies is the largest difference in compensation plans and also can have the greatest impact on your potential earnings in network marketing.
Width references the maximum number of members that you have directly below you (on the first line) on what is called your frontline.
Depth is referring to how many levels deep your organization can go and you still earn commissions from the members efforts. There does have to be a stopping point to the depth because a dollar is a dollar is a dollar and that's all. Meaning, you can only split a commission so many times in order to have anything of significance to spread out.
It used to be only a small percentage of the people involved with network marketing that reached the top money earner positions in any of the companies. It was most often the owners of the company and those few individuals who had marketing skills and knew what it took to get things moving.
Result - it left most of the members in the dark and ultimately in the cold and no better off than they were to begin with. Maybe worse off than they were to begin with.
Are things any different today? Yes, they are very different because there are more resources and tools than ever before to narrow, and possibly even totally diminish, the gap between those that already have marketing experiece and those that don't. There are also a multitude of companies that offer every and anything that you can imagine in products and services.
The main challenge in today's world of network marketing is knowing who to trust and deciding which company and which product or service you really want to work with. How do you decide? Well, what do you feel passionate about - what do you think other people will feel passionate about and how do you think they will perceive your product or service?
Types of Network Marketing Companies
Most of the successful network marketing companies today offer quality consumable products that both retail customers and distributors use and buy on a regular or somewhat regular basis. These include:
Candles
Cookware
Cutlery
Educational Toys
Food Storage Products
Telecom Products and Services
Power and Natural Gas
Clothing
Adult Entertainment Products
Vitamins and other Nutritional Supplements
Travel Industry Products and Services
Cosmetics
Skin and Hair Care Products
Household Cleaners
Food Items and Condiments
Health and Wellness Products
This list should already start to help with 'your' question of, what area should I be involved with in network marketing? Is there something that you are or can be passionate about and you feel others are or can be passionate about? Is there something there that gives you comfort in knowing that it is already something people use and you won't have to create a need for it? Can you not only ask people to purchase that product or service from you, but know that you are asking them to do that at a price that is fair and competitive with what they are already purchasing it for or can purchase it for elsewhere in their community or on the internet? You may not have the answer to this last question yet so you know this is something you need to research and find out from about the network marketing companies that may offer what it is you are thinking about.
Ok, so based on the list above and where your passion and interest may be, what percentage of your/our money is spent where? The answer to this should also help you decide what area you think may be appropriate for you. Read through the article after this sentence and then go to the link at the bottom of the article to look at the information in a pretty detailed pie chart with more breakdown: (source: Consumer Expenditures, U.S. Dept. of Labor, U.S. Bureau of Labor Statistics, April 2009)
The average consumer has a budget that is split into a large number of monthly and yearly spending. The average consumer spends $49,638 a year on a range of necessary and desired expenditures. These expenditures come out of an annual household income of $63,091 per year on average, before taxes. The average consumer owns 1.9 vehicles, and 67 percent of them are homeowners. Households average 2.5 people and 1.3 earners reside in each.
The largest expenditure of the average household is housing. This takes up an average 34.1 percent of the yearly budget of households. This is an average of $16,920 spent on housing. This amount includes $10,023 spent on shelter, $3,477 spent on public services and utilities, $984 spent on household operations, $639 spent on housekeeping supplies and 3.6 Percent spent on household furnishings and equipment.
The second largest expenditure for the average consumer is transportation. The cost of vehicles purchased is an average of $3,244 per year, making it 6.5 percent of the average budget. The cost of oil and gas for vehicles costs the average consumer $2,384 per year, for an average of 4.8 percent of the total yearly budget. Combined, the cost of vehicles and their maintenance costs consumers an average of $8,758 per year. This is a total of 17.6 percent of the yearly budget.
Another large expenditure is healthcare. The average consumer spends $2,853 on healthcare each year. Another physical necessity, food, costs consumers an average of $6,133 per year. An average of $3,465 of that is spent on food that is consumed at home, and $2,668 of it is spent on food consumed away from home. Combines, the money spent on food is 12.4 percent of the entire yearly household budget.
Insurance and pensions are important financial considerations and they cost the average consumer $5,336 per year. This is a total of 10.8 percent of the annual budget. $5,027 f this, 10.1 percent of the yearly budget, is spent on social security and pension contributions. In addition, the average consumer pays an average of $309 each year, making up 0.6 of the annual budget.
Other expenditures include a yearly average of $945 spent on education, making up 1.9 percent of the annual budget. Consumers pay an average of 3.8 percent of their annual income, $1,881, on clothing and related services. Personal care items add up to $588 per year for a total of 1.2 percent of the annual budget.
Entertainment costs $2,698 yearly, making up 5.4 percent of the average consumer’s income. Purchasing reading materials makes up 0.2 percent of the average income, or $118 per year. The average consumer spends $1,821 per year on cash contributions. This makes up 3.7 percent of the consumer’s annual income.
Alcoholic drinks cost an average of $457 per year, or 0.9 percent of the budget. Tobacco and related tobacco supplies cost an average of $323 of the average consumer’s budget, for a total of 0.7 percent of the yearly income. Miscellaneous expenses make up the remaining1.6 percent of the budget with $808 per year.
http://www.visualeconomics.com/how-the-average-us-consumer-spends-their-paycheck/
Are you serious about getting into this industry?
If you are serious about getting into this industry and becoming successful, what will it take once you decide which area you want to work in?
It will take commitment, determination and accountability. In conjunction with these it will take time, money for your marketing and some tools and systems and perseverance. But, it is also important to remember that this business is not just about money, marketing and tools and systems, these are only a part of the process. It is also about honesty, personal development and long lasting relationships with those you bring into your business/downline.
Given the correct information, people will do what? They will make the correct decision...
Network Marketing (also referred to as MLM or Multi Level Marketing) is real and is one of the fastest growing industries of all time and has made many people very wealthy and many people very comfortable. Network marketing has actually created more millionaires than the dot-com industry did. It is estimated that more than 150,000 people are joining the industry every week. It can create wealth, it has and it still is - today people in network marketing are living wonderful lives and enjoying freedoms that most only dream about or watch others live on Reality TV Shows. It has also not worked for many people, but why not?
Even if you are not really planning on joining a network marketing company, hopefully you can still benefit from the information here. But, even with that said, I encourage you to take the time to learn about network marketing because it is a business model that makes the playing field level and makes it possible for anyone with a desire to gain freedom of time and freedom of money the opportunity to do so.
The compensation plans of network marketing companies determine how you get paid and are therefore very important to know and understand. I explain the most common types of compensation plans further down.
To understand any of the compensation plans, you first need to have a basic understanding of some of the terms associated with network marketing. Some of these terms can include; upline, downline, sponsor, distributor/member/associate, levels, legs, business center, organization, width and depth. There are several others, but I think you will pick up on their meaning in network marketing as you encounter them in context throughout this information.
Sponsor
This is the person responsible for bringing you into a network marketing company. Your sponsor is also the person that is reponsible for making sure you receive the training and support you need to become successful - this is very important!
Distributor/Associate/Member
You become a distributor when you join a network marketing company. The word distributor is sometimes also referred to as member or associate and refers to the people below any given sponsor.
Business Center
You are given a business center when you join a network marketing company and it allows for you to receive compensation in reward for the work that you and your organization achieve. The organization is you and all the members/distributors/associates that you and the rest of your team have brought in - sponsored. You can think of your organization like a farmers market where all the individual stands are independently owned and operated. It is your farmers market and you are not the owner of each stand, they are independently owned and operated, but you receive compensation, or a profit, from their work and resultant sales. So, in network marketing the more work and sales your organization does the more you earn.
Upline and Downline
Two very common terms in network marketing are upline and downline. They make the multi level marketing concept by their design.
Your upline references the distributors/members/associates that are up above you, including your sponsor. As I mentioned earlier, your upline people should be providing mentoring, training and support for you to grow your business - your downline. Your upline has a vested interest in you and as I say again, they should be helping you, especially in the early stages, but depending on the compensation plan, their actual sponsoring of other members may or may not have an impact on your earnings.
Your downline refers to the members below you that are in 'your' organization. These distributors/members/associates directly impact your earnings and since you are in their upline, it is important that you welcome them to your organization and provide them with training and support. You will also make many new and long lasting friends in your downline. Even though you are helping each person in your downline, they are actually duplicating what you are doing and are creating their own organizations.
Width and Depth
The width and depth model of network marketing companies is the largest difference in compensation plans and also can have the greatest impact on your potential earnings in network marketing.
Width references the maximum number of members that you have directly below you (on the first line) on what is called your frontline.
Depth is referring to how many levels deep your organization can go and you still earn commissions from the members efforts. There does have to be a stopping point to the depth because a dollar is a dollar is a dollar and that's all. Meaning, you can only split a commission so many times in order to have anything of significance to spread out.
It used to be only a small percentage of the people involved with network marketing that reached the top money earner positions in any of the companies. It was most often the owners of the company and those few individuals who had marketing skills and knew what it took to get things moving.
Result - it left most of the members in the dark and ultimately in the cold and no better off than they were to begin with. Maybe worse off than they were to begin with.
Are things any different today? Yes, they are very different because there are more resources and tools than ever before to narrow, and possibly even totally diminish, the gap between those that already have marketing experiece and those that don't. There are also a multitude of companies that offer every and anything that you can imagine in products and services.
The main challenge in today's world of network marketing is knowing who to trust and deciding which company and which product or service you really want to work with. How do you decide? Well, what do you feel passionate about - what do you think other people will feel passionate about and how do you think they will perceive your product or service?
Types of Network Marketing Companies
Most of the successful network marketing companies today offer quality consumable products that both retail customers and distributors use and buy on a regular or somewhat regular basis. These include:
Candles
Cookware
Cutlery
Educational Toys
Food Storage Products
Telecom Products and Services
Power and Natural Gas
Clothing
Adult Entertainment Products
Vitamins and other Nutritional Supplements
Travel Industry Products and Services
Cosmetics
Skin and Hair Care Products
Household Cleaners
Food Items and Condiments
Health and Wellness Products
This list should already start to help with 'your' question of, what area should I be involved with in network marketing? Is there something that you are or can be passionate about and you feel others are or can be passionate about? Is there something there that gives you comfort in knowing that it is already something people use and you won't have to create a need for it? Can you not only ask people to purchase that product or service from you, but know that you are asking them to do that at a price that is fair and competitive with what they are already purchasing it for or can purchase it for elsewhere in their community or on the internet? You may not have the answer to this last question yet so you know this is something you need to research and find out from about the network marketing companies that may offer what it is you are thinking about.
Ok, so based on the list above and where your passion and interest may be, what percentage of your/our money is spent where? The answer to this should also help you decide what area you think may be appropriate for you. Read through the article after this sentence and then go to the link at the bottom of the article to look at the information in a pretty detailed pie chart with more breakdown: (source: Consumer Expenditures, U.S. Dept. of Labor, U.S. Bureau of Labor Statistics, April 2009)
The average consumer has a budget that is split into a large number of monthly and yearly spending. The average consumer spends $49,638 a year on a range of necessary and desired expenditures. These expenditures come out of an annual household income of $63,091 per year on average, before taxes. The average consumer owns 1.9 vehicles, and 67 percent of them are homeowners. Households average 2.5 people and 1.3 earners reside in each.
The largest expenditure of the average household is housing. This takes up an average 34.1 percent of the yearly budget of households. This is an average of $16,920 spent on housing. This amount includes $10,023 spent on shelter, $3,477 spent on public services and utilities, $984 spent on household operations, $639 spent on housekeeping supplies and 3.6 Percent spent on household furnishings and equipment.
The second largest expenditure for the average consumer is transportation. The cost of vehicles purchased is an average of $3,244 per year, making it 6.5 percent of the average budget. The cost of oil and gas for vehicles costs the average consumer $2,384 per year, for an average of 4.8 percent of the total yearly budget. Combined, the cost of vehicles and their maintenance costs consumers an average of $8,758 per year. This is a total of 17.6 percent of the yearly budget.
Another large expenditure is healthcare. The average consumer spends $2,853 on healthcare each year. Another physical necessity, food, costs consumers an average of $6,133 per year. An average of $3,465 of that is spent on food that is consumed at home, and $2,668 of it is spent on food consumed away from home. Combines, the money spent on food is 12.4 percent of the entire yearly household budget.
Insurance and pensions are important financial considerations and they cost the average consumer $5,336 per year. This is a total of 10.8 percent of the annual budget. $5,027 f this, 10.1 percent of the yearly budget, is spent on social security and pension contributions. In addition, the average consumer pays an average of $309 each year, making up 0.6 of the annual budget.
Other expenditures include a yearly average of $945 spent on education, making up 1.9 percent of the annual budget. Consumers pay an average of 3.8 percent of their annual income, $1,881, on clothing and related services. Personal care items add up to $588 per year for a total of 1.2 percent of the annual budget.
Entertainment costs $2,698 yearly, making up 5.4 percent of the average consumer’s income. Purchasing reading materials makes up 0.2 percent of the average income, or $118 per year. The average consumer spends $1,821 per year on cash contributions. This makes up 3.7 percent of the consumer’s annual income.
Alcoholic drinks cost an average of $457 per year, or 0.9 percent of the budget. Tobacco and related tobacco supplies cost an average of $323 of the average consumer’s budget, for a total of 0.7 percent of the yearly income. Miscellaneous expenses make up the remaining1.6 percent of the budget with $808 per year.
http://www.visualeconomics.com/how-the-average-us-consumer-spends-their-paycheck/
Are you serious about getting into this industry?
If you are serious about getting into this industry and becoming successful, what will it take once you decide which area you want to work in?
It will take commitment, determination and accountability. In conjunction with these it will take time, money for your marketing and some tools and systems and perseverance. But, it is also important to remember that this business is not just about money, marketing and tools and systems, these are only a part of the process. It is also about honesty, personal development and long lasting relationships with those you bring into your business/downline.
Given the correct information, people will do what? They will make the correct decision...
Types of Network Marketing Compensation Plans
The Four Main Types of Compensation Plans:
Unilevel
Matrixes
Binary
Stair Step/Generational
Unilevel
The Unilevel compensation plan has been in use and around for a long time and because of its success is still being used by network marketing companies today. Probably the main benefit is that it is easy to use and understand, however there are also some negatives about it.
A Unilevel compensation plan only allows you to sponsor one line of distributors, so everyone you sponsor is on your frontline - your only line. There is usually not a limit to the amount of people you can put on your frontline so the goal is normally for you and each person on your frontline to recruit a large number of people.
One of the drawbacks, or disadvantages, of this type of plan is that everyone on a frontline is in direct competition with everyone else and it is difficult for the top person to equally spread their time and resources. This can create perceived favortism and ill feelings horizontally along the line.
The Unilevel compensation plan does, however, have its advantages too. First off, it is simple and easy to explain to a new prospect. Generally speaking, the more people you have on your frontline, the more money you are going to make. This can make network marketing companies with this type of plan appealing to experienced network marketers because they more than likely have a large crowd that they can draw from to get started.
Matrix Plans
A Matrix Plan is sometimes also referred to as a Forced Matrix Plan and is set around a compensation plan that has a set width and depth for the downline people or distributors. There are actually several types of Matrix Plans with variations to their structure, but for the most part, the basic concept is the same.
This compensation plan is most often identified by an equation that tells the width and depth. For example, a 4 x 6 plan would mean that you can sponsor no more than four frontline representatives and you have the potential to earn commissions to six levels deep. Since there is limitations on the width of this plan, sponsoring person is more easily able to assist their downline/frontline members and help the organization grow. So, an advantage of the Matrix Plan is that once your frontline is full, you tend to focus on helping your frontline members to find and train their frontline members and so on.
A disadvantage can be that the amount of commissions paid on each level can be variable to the you, the top person. This can make it more advantageous for you and/or other distributors/members in the system to assist some levels on their downline and not others.
With this in mind, when you are contemplating a network marketing company with a Matrix Plan you should take into account that the narrower and deeper the plan is the more support the upline people will normally give to the downline people. As an example, a 2 x 1o plan will encourage more teamwork and hands on support from upline people than a 7 x 5 plan will. But, some wider plans will have compensation level incentives for members to focus on assisting different levels of downline members below their frontline.
Binary Pay Plans
Binary Pay Plans are fairly new to network marketing - they came out in the 90's, but are already a very popular compensation plan in network marketing. The simplicity of their plan also offers a number of advantages that make it attractive to network marketers, including those people new to network marketing, and even to your more experience network marketers.
As the name will lead you to believe, the plan is based around the number 2, which is the maximum number of frontline members that a business center can have. Additional members are then placed under on of your existing frontline members and so on under one of their two frontline members. By design, this creates a more supportive business unit, or team, than other compensation plans may offer and allows for easy and natual assistance and support to new members in building their organization.
Since the goal is to balance the downline legs, so to speak, the Binary Plan by design encourages members to help their new and/or weaker downline members to build their organization - thus promoting teamwork. Having a balanced downline gives a more consistent and higher payout in commissions too. Another positive of a Binary Plan is that it is volume driven and not level driven - which means you don't have to have a large organization to be successful. This again adds to the incentive to help new members in your dowline, no matter how far down or deep they may be.
A problem, or disadvantage, with a Binary Plan can be that after they mature they can creep and ultimately end up paying out too much, if there isn't protection and/or limits set on how the compensation pieces work. I read about one plan that died because it was paying out 133% and no one caught it in time. Before you know it, a company can be upside down and out of business if this happens.
In a nutshell, because of the structure and small sponsor requirements for a downline (members most often only need to recruit 2-3 frontline down members before they start adding new members to the downline of others below them) this plan means that even your new and/or average network marketer still has the potential to achieve success and financial freedom with a company using this compensation model. This plan is also known to be one of the fairest compensation plans in network marketing.
Stair Step and Generational Breakaway
This was one of the original network marketing compensation plans and is still being used by some of the long standing companies today. One might hear of them or think of them as the most popular pay plans in network marketing because of this, but they can actually create conflict between the upline and downline, so I wouldn't really call them the best pay plan there is.
The name Stair Step Breakaway Plan comes from the concept that members climb a ladder to success and they can break away from their upline when they reach certain levels and run their organization independent of those who were at one time above them. As members break away from their upline they may be able to earn a greater commission. This plan has some similarities to that of the Unilevel Plan by way of each member only being allowed to sponsor one level, or frontline, of distributors/members under them. Again, there is usually no limit to the width or number of frontline members you can have, but it can offer limited incentive for teamwork in your organization.
As members do climb the ladder and create a nice organization with their frontline they can breakaway, but as they do the original sponsor is usually entitled to receive a small percentage of commissions from the continued sale of product and/or services of that breadaway faction. These are commonly referred to as override commissions. Each breakaway group is thought of as a generation. This sounds ok, but in reality the override commissions are only a small percentage of what the original sponsor was earning while all were still attached to their downline. Another setback can be that although this may sound ok for you, you have to remember that your frontline recruits can also breakaway from you.
The Stair Step Breakaway Plan does have some advantages too. It does have a history and a good track record, which can make it attractive to new companies that are looking for a compensation plan to start their new network marketing company, and it is a good plan for members that have strong selling and recruiting skills.
While potential commissions paid under this type of plan can be very rewarding, the Binary Plan and Matrix Plan are generally thought of as more user friendly and supportive for new members of network marketing.
Unilevel
Matrixes
Binary
Stair Step/Generational
Unilevel
The Unilevel compensation plan has been in use and around for a long time and because of its success is still being used by network marketing companies today. Probably the main benefit is that it is easy to use and understand, however there are also some negatives about it.
A Unilevel compensation plan only allows you to sponsor one line of distributors, so everyone you sponsor is on your frontline - your only line. There is usually not a limit to the amount of people you can put on your frontline so the goal is normally for you and each person on your frontline to recruit a large number of people.
One of the drawbacks, or disadvantages, of this type of plan is that everyone on a frontline is in direct competition with everyone else and it is difficult for the top person to equally spread their time and resources. This can create perceived favortism and ill feelings horizontally along the line.
The Unilevel compensation plan does, however, have its advantages too. First off, it is simple and easy to explain to a new prospect. Generally speaking, the more people you have on your frontline, the more money you are going to make. This can make network marketing companies with this type of plan appealing to experienced network marketers because they more than likely have a large crowd that they can draw from to get started.
Matrix Plans
A Matrix Plan is sometimes also referred to as a Forced Matrix Plan and is set around a compensation plan that has a set width and depth for the downline people or distributors. There are actually several types of Matrix Plans with variations to their structure, but for the most part, the basic concept is the same.
This compensation plan is most often identified by an equation that tells the width and depth. For example, a 4 x 6 plan would mean that you can sponsor no more than four frontline representatives and you have the potential to earn commissions to six levels deep. Since there is limitations on the width of this plan, sponsoring person is more easily able to assist their downline/frontline members and help the organization grow. So, an advantage of the Matrix Plan is that once your frontline is full, you tend to focus on helping your frontline members to find and train their frontline members and so on.
A disadvantage can be that the amount of commissions paid on each level can be variable to the you, the top person. This can make it more advantageous for you and/or other distributors/members in the system to assist some levels on their downline and not others.
With this in mind, when you are contemplating a network marketing company with a Matrix Plan you should take into account that the narrower and deeper the plan is the more support the upline people will normally give to the downline people. As an example, a 2 x 1o plan will encourage more teamwork and hands on support from upline people than a 7 x 5 plan will. But, some wider plans will have compensation level incentives for members to focus on assisting different levels of downline members below their frontline.
Binary Pay Plans
Binary Pay Plans are fairly new to network marketing - they came out in the 90's, but are already a very popular compensation plan in network marketing. The simplicity of their plan also offers a number of advantages that make it attractive to network marketers, including those people new to network marketing, and even to your more experience network marketers.
As the name will lead you to believe, the plan is based around the number 2, which is the maximum number of frontline members that a business center can have. Additional members are then placed under on of your existing frontline members and so on under one of their two frontline members. By design, this creates a more supportive business unit, or team, than other compensation plans may offer and allows for easy and natual assistance and support to new members in building their organization.
Since the goal is to balance the downline legs, so to speak, the Binary Plan by design encourages members to help their new and/or weaker downline members to build their organization - thus promoting teamwork. Having a balanced downline gives a more consistent and higher payout in commissions too. Another positive of a Binary Plan is that it is volume driven and not level driven - which means you don't have to have a large organization to be successful. This again adds to the incentive to help new members in your dowline, no matter how far down or deep they may be.
A problem, or disadvantage, with a Binary Plan can be that after they mature they can creep and ultimately end up paying out too much, if there isn't protection and/or limits set on how the compensation pieces work. I read about one plan that died because it was paying out 133% and no one caught it in time. Before you know it, a company can be upside down and out of business if this happens.
In a nutshell, because of the structure and small sponsor requirements for a downline (members most often only need to recruit 2-3 frontline down members before they start adding new members to the downline of others below them) this plan means that even your new and/or average network marketer still has the potential to achieve success and financial freedom with a company using this compensation model. This plan is also known to be one of the fairest compensation plans in network marketing.
Stair Step and Generational Breakaway
This was one of the original network marketing compensation plans and is still being used by some of the long standing companies today. One might hear of them or think of them as the most popular pay plans in network marketing because of this, but they can actually create conflict between the upline and downline, so I wouldn't really call them the best pay plan there is.
The name Stair Step Breakaway Plan comes from the concept that members climb a ladder to success and they can break away from their upline when they reach certain levels and run their organization independent of those who were at one time above them. As members break away from their upline they may be able to earn a greater commission. This plan has some similarities to that of the Unilevel Plan by way of each member only being allowed to sponsor one level, or frontline, of distributors/members under them. Again, there is usually no limit to the width or number of frontline members you can have, but it can offer limited incentive for teamwork in your organization.
As members do climb the ladder and create a nice organization with their frontline they can breakaway, but as they do the original sponsor is usually entitled to receive a small percentage of commissions from the continued sale of product and/or services of that breadaway faction. These are commonly referred to as override commissions. Each breakaway group is thought of as a generation. This sounds ok, but in reality the override commissions are only a small percentage of what the original sponsor was earning while all were still attached to their downline. Another setback can be that although this may sound ok for you, you have to remember that your frontline recruits can also breakaway from you.
The Stair Step Breakaway Plan does have some advantages too. It does have a history and a good track record, which can make it attractive to new companies that are looking for a compensation plan to start their new network marketing company, and it is a good plan for members that have strong selling and recruiting skills.
While potential commissions paid under this type of plan can be very rewarding, the Binary Plan and Matrix Plan are generally thought of as more user friendly and supportive for new members of network marketing.
I hope this has provided you with a basic understanding of what network marketing is and how it works. If you are looking for your own business that you can get into with a relatively small investment and have little or no overheads and have the potential to attain freedom of time and freedom of money - a network marketing company really is something you should look into. As I mentioned earlier, find something that you and others have a pasion and excitement for and more than half the battle is done. Your sponsor is also extremely important - they need to be there to help and guide you so you can avoid the money traps and pitfalls that you will otherwise undoubtedly fall into.
Given the correct information people will make the correct decision. Best of luck in your pursuit of happiness!
Given the correct information people will make the correct decision. Best of luck in your pursuit of happiness!
