How does a step marketing plan MLM work

One of the earliest marketing plans for network companies is the stair-step marketing plan, distinguished by its unique structure and used by most large MLM projects launched in the mid-20th century. But what are the key features of the stair-step plan, and how relevant is it today?

What is a Stair-Step MLM Marketing Plan

A stair-step marketing plan (also known as a "breakaway stair-step plan") - is a type of compensation system in network business, built on the concept of career progression through achieving specific ranks. This plan has certain similarities with the linear plan in that:

• Each partner sponsors and trains only one line of distributors;

• There are no limitations on the width of the structure—the number of partners in the first line.

The “stair-step” aspect here comes from each participant in the partner structure seemingly climbing a ladder of success, moving to a higher level. For each distributor, the level is determined by the volume of their personal sales and the sales volume of their created team. With each new level, the distributor increases the percentage of their personal discount on products.

In a stair-step marketing plan with a breakaway, a distributor has the opportunity to separate from their mentor's team upon reaching a level higher than the MLM leader above them. After breaking away, the partner independently manages their structure and receives higher commissions from their group's sales volume. The former upline sponsor will then receive a passive “leadership” income from the structure of the leader they “cultivated”.

Thus, in a marketing plan with a breakaway, you can achieve absolutely passive income by having leaders with separated structures in your downline. In a plan without a breakaway, the structure develops for an infinite amount of time.

For example, your personal product discount is 21%. From the volume of those with a 3% discount, you receive 18% (21% – 3%); from the volume of those with a 12% discount, you receive 9% (21% – 12%); and from the volume of those with a 21% discount, you stop receiving a percentage, as the leg breaks away. In this case, you receive passive income for “cultivating” a leader—for example, 5% of the sales volume of the broken-away leg.

Calculation of Commissions in Stair-Step Marketing

In companies with a stair-step MLM marketing plan, distributors receive monetary compensation for their work through product discounts. The discount size depends on the level (qualification), as mentioned earlier. A percentage is also accrued from the sales of people in the first line (those personally recruited) and the sales volume of distributors on the second, third, and subsequent levels down. Often, the amount of accruals is higher for people on deeper levels. This incentivizes training your team to bring people into the structure and initiates the process of duplication.

Some network companies also introduce an additional condition that the structure leader will receive profit from their team's/structure's sales only if it achieves a certain sales volume. There might also be a time limit within which this sales plan must be completed (month, quarter, half-year). If there is no time limit, the reward is called «cumulative».

To increase the productivity of the partner structure, the stair-step MLM marketing plan includes several types of rewards:

1. Team Sales Commissions - network participants receive a percentage of sales made by their downlines. The higher the distributor's level, the higher the commission percentage from sales.

2. Fast Start Bonus - awarded for achieving a specific sales or recruiting goal in a short period. The bonus is received by both the partner and the mentor who brought them in.

3. Leadership Bonus - paid to the mentor as passive income for the separated structure of the leader they "cultivated". This is relevant for stair-step marketing with a breakaway.

4. Infinity Bonus - this implies that bonuses are paid from an infinite number of levels deep. It is relevant for stair-step marketing without a breakaway.

5. Rank Advancement Bonus - a one-time payment accrued to distributors upon achieving a certain sales goal and moving to a higher level in the structure.

Globally renowned MLM companies promoting health, beauty, and home products use a stair-step structure as the basis of their marketing plan, including Mary Kay, Oriflame, Herbalife, Amway, and Tupperware.

Advantages and Disadvantages of Stair-Step Marketing

Every basic type of MLM marketing plan has both its advantages and disadvantages. Among the strengths of stair-step marketing are:

1. High earning potential for participants, who are willing to put in maximum effort in their work. This allows the company to form a network of active and goal-oriented partners.

2. Motivation and rapid business growth. Each distributor strives to actively increase sales and attract newcomers to the structure to move to a higher level and earn higher income.

When it comes to the weaknesses of the stair-step marketing plan, the following should be highlighted:

1. Internal competition within the structure. The constant desire to achieve higher levels and bonuses can provoke tension and conflicts among partners.

2. High participant churn rate. The competitive nature and demands of constantly achieving set goals create pressure on distributors, which often leads to burnout and departure from the MLM company.

To avoid potential risks, stair-step marketing is very rarely used in its pure form today and, most often, serves as part of a hybrid plan. This approach and a deep understanding of various types of MLM marketing plans allow for a more flexible approach to motivating distributors and ensuring long-term growth of a network business.

Our FlawlessMLM team has 20 years of experience in creating attractive marketing plans and launching successful network projects in various niches. Contact our experts for a consultation and we will help you choose the optimal type and correctly calculate a marketing plan that will contribute to the prosperity of your business in the MLM market.