A marketing plan is the basis for the viability of an MLM business, determining the structure of the network and the mechanisms for motivating its members. A properly selected and calculated bonus plan can not only stimulate the growth and development of the network, but also ensure its long-term sustainability and the overall financial stability of the MLM company.
In this article, we have reviewed different types of bonus plans and provided recommendations on how to choose and optimize them for your network business.
Types of MLM compensation plans
A marketing plan or bonus plan is a system of rewards for distributors of an MLM company that determines how and for what they receive income. It contains the rules and conditions for receiving commissions for personal sales of products and sales of recruited members, as well as bonuses for achieving certain sales or recruitment goals.
The MLM industry uses several types of marketing plans, each of which has its own characteristics and mechanisms for rewarding network members. The most popular among them are:
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Unilevel
The classic compensation plan, when each distributor forms only one level of the network and all the participants involved are put on the same level. It has absolutely no restrictions on its width. Commission payments here depend on personal sales, sales of direct referrals, and the level of the structure. MLM companies determine how many levels and what percentage of commissions distributors will receive.
The unilevel bonus plan is the easiest to understand and the most flexible, so it is suitable for companies of any size. However, the unlimited width of the network can cause difficulties in building a strong team.
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Stair Step
This MLM marketing plan is based on target ranks or so-called "steps". Upon reaching a certain level of sales and productivity, a distributor receives a higher rank and the opportunity to separate from his/her original team. He moves to a higher position in the structure and builds a new network of partners under the guidance of an administrator. Moving to a higher rank also provides higher commission percentages and additional bonuses.
The stair step compensation plan is the most effective way to motivate distributors to increase sales and attract new members. At the same time, due to the focus on promotion to higher ranks, attention to the development of lower ranks is often reduced.
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Binary
A common type of MLM plan that provides only 2 places in the first line of the distributor. If a distributor attracts a third participant, he or she is automatically placed on the next available seat under one of the existing partners of the structure. This creates a binary tree with two branches - left and right. Each branch has its own sales volume, which determines the income of distributors. They receive commissions based on the turnover of the "weak branch", which encourages them to maintain a balance between the two branches.
The binary marketing plan has no restrictions on the depth of the network and promotes high-quality teamwork. On the other hand, due to the emphasis on group volume, it is difficult to control the efforts of each partner, and distributors with managerial skills are required to develop binaries.
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Hybrid
Combines elements of different types of compensation plans (for example, single-level and binary), combining their advantages in one structure. Such a combination is achieved by combining the genealogical structure of one MLM plan with the reward system of another or by integrating the payment system of two bonus plans within the hierarchy of one of them.
A hybrid marketing plan allows you to create a unique reward scheme that clearly reflects the goals and values of your MLM company. However, it is much more difficult to manage.
How to create an effective MLM bonus plan
There are several important factors to consider when choosing the most appropriate type and designing a compensation plan for your network business:
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Product margin
It affects not only the overall profitability of the project but also determines how large the compensation fund can be for payments to distributors. A high product margin gives you the flexibility to formulate a marketing plan and the opportunity to set more generous rewards for network members.
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Total payout
Too low a percentage of return to the network can reduce the motivation of partners, and too high a percentage can lead to the bankruptcy of the project. Therefore, accurately determining the share of profit to be allocated for commission payments allows maintaining a balance between distributors satisfaction and business profitability.
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Distribution of payments
To increase the trust and retention of distributors, you should make sure that everyone is rewarded as they deserve. The structure of the bonus plan should be designed so that each participant receives commissions according to their efforts. It is often necessary to combine elements of different plans to create an optimal distribution of payments.
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Business goals
The MLM marketing plan directly depends on the overall development strategy of the company, its mission, and values. To quickly attract a large number of participants and stimulate sales, it is better to choose a more aggressive plan. At the same time, sustainable long-term development requires a plan that stimulates high-quality network building.
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Region of launch
Cultural, economic, and legislative norms significantly differ depending on the country, and moreover, your target audience has its expectations regarding the desired level of rewards. Therefore, it is practically impossible to create an effective bonus plan without considering the specifics of the selected market and the preferences of the audience.
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Scalability
An extremely important aspect for maintaining business sustainability as it grows without radical changes in the compensation structure and financial strains. Your marketing plan must adapt to the increasing number of distributors without reducing rewards and support stable commission payouts in the long term.
A competent bonus plan is a powerful tool for motivating distributors, increasing sales, and strengthening your company's market position. Accordingly, choosing and developing such a plan is a key success factor in the MLM industry and a difficult task. It requires detailed analysis and planning, an understanding of your project's specifics, and, most importantly, in-depth knowledge of network marketing. In order to avoid common mistakes and create a reliable MLM plan, it is better to seek professional help.
The FlawlessMLM team creates impeccable compensation plans for MLM companies across various niches. Reach out to experts in our chat by following the link https://flawlessmlm.com/en/mlm_consulting and receive a free consultation on creating a quality marketing plan.