Compensation Plans -- Cutting Through the Confusion
If you want to get totally
frustrated,
spend an hour or two reading the compensation plans of a few network
marketing
companies. Here are some
guidelines that will help you cut through the murky mire of
confusing terms and acronyms and get to what's important. Does the compensation plan make it easy to start making significant income right away? One of the biggest reasons for the high drop-out rate among new network marketers is the frustration they feel from months of hard work with only tiny little checks to show for it. Big checks, coming early, definitely make it a lot more fun! Does the compensation plan require you to purchase more products every month than you can reasonably expect to use yourself? If it does, then every month will be a scramble to sell the excess. Or you will end up with a pile of unopened products in your garage. Possibly for years to come. Do you know anyone in this situation? What
percentage of the
company's revenues is actually paid back to the distributors? This "Actual Payout" is the
total of all the bonuses and
commissions earned by all the company's associates.
The higher up you go in the organization, of
course, the bigger the piece of the Actual Payout Pie you personally
will get,
but the combined total payout is usually capped at a fixed percentage. The Actual Payout varies from
one network marketing company to
another. I have
never investigated other
companies' percentages, but I do know that the company I work with
gives back a
total of 40%. I am
told that this is
pretty generous, so you might want to use this as a benchmark. Does the compensation
plan encourage you to
“go wide” or “go deep”? “Going wide” means putting all your new enrollees directly under you in the first level of your organizational structure. When the compensation plan pays much higher bonuses on your first level than on the levels below it, you will naturally want to sign up as many people as possible right under you, thus going wide. So will your sponsor, and if the two of you are prospecting together, there will be a constant temptation to try to rationalize why you should get the prospect instead of her, and vice versa. It could occasionally lead to hard feelings. I got "burned" once by a sponsor (a personal friend, no less!) a long time ago, and I still wonder what he was thinking when he did it. Of course, if you and your sponsor are both saints, this might not happen. “Going deep”, on the other hand, means putting new signups one under the other. Some companies pay higher bonuses the farther down you go in your organization, thus encouraging depth. Personally, I prefer plans that require just a few legs and encourage going deep. They result in better teamwork – your upline will be more likely to help you by enrolling people under you, and you will do the same for your downline. Everybody wins! And remember! The
best compensation plan in the world will not compensate for outdated
marketing strategies.
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