MLM businesses develop with the growth of its distributors. Distributors encourage teamwork, achieve sales targets and expand their business. What keeps them motivated? An attractive compensation, of course! Network marketing incentivizes distributors based on its compensation plan. An MLM compensation plan defines how far the distributors can push their limits. Of the compensation plans, the Binary MLM plan is often adopted by MLM organizations.
Top MLM companies with a binary MLM plan are:
Distributors engage in marketing activities with enthusiasm when compensated enough. Binary MLM businesses show great incentivization potential. As the word suggests, a binary MLM plan works in twos. Each distributor gets to have only two frontline distributors. But that doesn’t stop them from growing. New distributors come under the next frontlines, their downlines, and so on. 'Spillover' is the word for this process. Thus, the efforts of uplines will benefit the downlines as well. This process goes on to unlimited depths. Yet, companies can limit incentives generally to a specific depth.
The binary MLM plan is simple and easy to understand. The work of every distributor in a binary MLM tree has a collective impact on the team. Binary MLM thus encourages balance and teamwork among the distributors.
Summing up the key benefits of Binary MLM Plan:
- Unlimited downlines - Distributors can have an unlimited depth of downlines, though limited to two frontlines
- Spillover feature - Spilling over newcomers to deeper downlines so as to balance the legs
- Easy to understand - Simple and easy-to-understand business model
- Work of the upline benefits downlines - Referrals of uplines come under downlines, thus helping them to expand their business
- Encourages teamwork more than other MLM plans - A collective goal so as to involve every distributor
- Group commissions
- Promotes the balance between ‘pay’ and ‘reference’ legs - With weaker leg sales as the criterion for commissions, balancing the legs is a priority
How are the commissions calculated?
Binary commissions are calculated about the weaker legs of the sponsors. Based on the sales volume it can either be the left or right leg. With the weaker leg as the ‘Pay leg’, distributors work to maintain the balance in the team. Working for the weaker legs becomes a priority for distributors.
Another method of calculation is the commission based on the sales ratio. A ratio is preset for the sales volumes of the two legs. Commissions are paid once the sales ratio criterion is met. For a 1:1 sales ratio, commissions are paid when the ratio of sales volumes of the left and right legs becomes 1:1.
Compensation in a binary MLM plan
Compensation structure in a binary MLM plan consists of the following:
- Binary bonus: Bonus based on the weaker leg sales volume
- Pairing bonus: Bonus paid when balanced sales volume is achieved in each leg
- Matching bonus: Sponsors are paid a percentage of the bonus achieved by downlines
- Direct referral bonus: Bonus received for direct referrals
- Return Of Investment (ROI): A fixed amount or percentage of the investment made in the business
- Custom bonus: Bonus customized by the companies to attract more prospects
Teamwork has a lot to do with the productivity of individual distributors. Facing business challenges as a team is important. An ideal compensation plan encourages teamwork in an organization. Binary MLM emphasizes the balance between sales and distribution. This 2-tier system is easier for new distributors to learn, and plan their strategies.
A lot of network marketing companies have surfaced in the recent past. Coupling individual goals with collective goals are important for these companies to survive. Distributors must be well aware of the various aspects of the business. Unity among distributors is the ultimate strategy in an MLM business. Network marketing companies must understand and put in place the right compensation plan.
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