What Compensation Plan Is The Best For My MLM?

Posted by naxumadmin / October 14, 2014

Last week in a session with a client from Europe, I was asked the question “What compensation plan is the best?” I chuckled at the notion of the “best” compensation plan and turned around to ask my client “What kind of behaviors do you want to reward?”

There was nothing wrong with my clients question. Thousands of direct sales and network marketing professionals around the world debate this topic as they grow their businesses daily. The key for you as a network marketing or affiliate marketing company is deciding the types of behaviors you would like to reward.

This article is not about the differences between a Aussie-2-Up, Binary, Unilevel, Breakaway, or Matrix compensation plan. Even though these are the most common plans in the direct sales and network marketing arena, choosing the right plan for your company is a much deeper question then the merits of each plan.

It comes down to behaviors. Different plans reward and incentivize different behaviors amongst your affiliates and sales people so there are a number of factors to consider.

Factor #1: Cost of Goods Sold

“Tell me more about your product” I asked on our webinar. This is key to navigating the plan that is best for you. Are you a product-based-company or a service-based-company? Do people consume your product or do they only need it once? What are the margins? To scale your company to a million units sold each month what would your cost of goods sold be?

Understanding these numbers first is the foundation any successful, longterm plan is built on.

Factor #2: Customer Acquisition Strategy

How are people going to share your product with others? Is it a high-ticket item that will be explained one-on-one both online and offline? Does it require a lot of education to make a decision to purchase? Is the product a cost savings to the end consumer with little or no additional education required to make a purchase decision?

Understanding the barriers to actually creating the sale will warrant a different type of compensation. For example, if it requires a 2 hour session of personal one-on-one selling to close the sale, a plan that rewards team building above personal production would not be a wise move.

Factor #3: Culture

What does your perfect brand promoter, affiliate, or distributor look like? What types of activities do you want them to embody? Is this a full-time endeavor for them or a part-time project? What type of career path do you want made available to them? What type of earning potential?

Understanding culture will allow you to select a plan that compliments and inspires your culture to occur naturally for your company.

You’ll notice that no where in my questions did I ask the client “What can you afford to pay out?” That is putting the cart-before-the-horse as some might say. Affiliates and Network Marketers are seeking offers and opportunities that are sustainable. Companies that will be around for a long time. You must start with the end in mind to navigate this jungle for yourself. When you do it right, you’ll never have to change it. And that goes a long way for the integrity of your opportunity.

If you’re reading this article and you are seeking a compensation plan review or a complete system overhaul for an existing company or simply want to start your new company on the right foot, feel free to contact our Naxum team. We are professionals who have been serving this industry FULL-TIME for over 14 years. We have the wisdom to guide you through the jungle so you can come out on top.

Contact us here for a free 30 minute consultation on your direct sales, mlm, or affiliate marketing business – Contact Us


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BEN DIXON Chief Executive Officer

Ben Dixon is the CEO of the referral marketing technology company www.naxum.com and works with companies spanning the globe in mlm, direct sales, and affiliate marketing. For more information on Gamification and using real-time notifications to engage your affiliates in the sales process create your FREE NaXum account.

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