One of the most important factors for Multilevel Companies is the compensation plan. How do the different types of compensation plan work?
STAIRSTEP OR BREAKAWAY COMPESANTION PLAN
The Stairstep or Breakaway is the oldest compensation plan type. It is used by a limited percentage of Multilevel companies that have been for many years in the direct selling industry. The new companies of the industry do not take the risk to use this compensation plan model, because it is designed with a special focus in the selling of the products and not in the creation of commercial networks. It is characterized by having a limitation in the depth of the network and being open in the number of people in the first level.
This compensation plan is differentiated in two different segments:
-StairStep: When the number of people in the team (upline and downlines) is growing, the sponsor of the network will have greater benefits and discounts in the products. Generally, there are 3 or 4 climbs to higher ranks that can be achieved by increasing the sales volume. All the distributors in the sponsor’s downline constitute his/her personal group. The combination of the personal sales and the group sales will boost the rank escalation of the sponsor.
-BreakAway: When reaching the highest sales volume and rank, the BreakAway comes to action. When the sponsor gets a BreakAway his/her downline will go with him/her, as well as the sales volume.
UNILEVEL COMPENSATION PLAN
The unilevel compensation plan started to be used by MLM companies in the 80’s. According to statistics, nowadays, this type of compensation plan is the most frequently used with approximately 37% of Multi-Level Marketing companies using it. This compensation plan has an unlimited width extension and a limited depth.
Due to the inability of creating a big descending network, distributors create their front line as width as possible.
The depth of the network varies among companies. Generally, the number of levels ranges between 3 and 7.
Moreover, the benefits that the sponsor can obtain from the volume generated by the different levels in his/her downline may vary between 2% and 5%, approximately. Those benefits are considered residual income.
Evolution – Hybrid Unilevel Compensation Pan
HYBRID BINARY COMPENSATION PLAN (UNLEVEL BINARY)
It is the most modern compensation plan and is being used by most companies today.
This plan refers to a network marketing structure whose premise is to limit the width to two fronts or affiliates. Instead of limiting depth, it limits as to profits.
“There are those who think that it is unfair to win by the weak leg and not by the power, but this structure encourages 100% teamwork. It is a synergistic plan and cataloged as one of the most lucrative based on its level of infinite depth as well as that of sponsored. That's right, you can bring the guests you want to your team and everyone will be working side-by-side with you thanks to the leverage that is formed in this type of plan and of course all will generate income for you.” Esteban Bautista.
In this binary compensation plan, a balance is sought between both right and left legs, taking into account that approximately 10% to 20% of the weaker leg is paid.
MATRIX COMPENSATION PLAN OR FORCED MATRIX
Like the staggered or split compensation plan, the matrix or forced matrix is one of the oldest in the multilevel marketing industry. A plan that emerged in the 80's and has lost its validity and popularity because of its limitations.
As its name indicates is based on forming a matrix with various dimensions. Examples of this are: matrix of 2x9, 2x12, 3x9, 4x7, 5x7, 7x2, etc. The first parameter of the matrix being the width and the second parameter the depth or number of levels that can be taken down.
Taking one of the most common matrices (5x7), the number of people that could be enrolled is 97,655, completing the entire matrix with maximum number to sponsor.
Another important feature is the "spill-over". Once an "Distributor’s up line" enters the maximum number of distributors allowed on their first level (Example: 5), all new distributors who personally sponsor in the future should be propagated to their second level, and possibly to the highest levels of the matrix. In this way the "Distributor’s up line" is helping their downlines to fill the available positions of their frontlines.