Let’s Understand MLM Compensation Plans — Part 5
Sep 26th, 2008 by admin
As I promised in Part 4, I’ll start to talk about the vertical growth of your MLM home business now.
Horizontal growth in MLM goes from side to side across the paper. Vertical growth goes down. Think about just one of your personal recruits, who is in the first level beneath you. Call her Louise.
If Louise recruits somebody else, Alan let’s say, he will go into the first level beneath her. That’s the second level down from you, right? And after Alan recruits Susie and she goes one level under Alan, you’ll have a third level or tier beneath you. Do you see that?
Okay, let’s stretch this out. Susie recruits Nathan, who recruits Laurie, who recruits Carl, who recruits Ashley, who recruits Victor, who recruits Olivia, who recruits Oliver, who recruits Mary, who recruits Darcy, who recruits Elizabeth.
Pop quiz. How many levels down does your group go now? All you have to do is count the names. Your group has twelve levels or tiers. That’s beginning to get pretty deep.
Bear in mind that starting from you, there’s a line connecting each circle to the one below it. As I said in Part 4, commissions flow along lines. To put that more properly, they flow up lines. If Alan makes a sale, Louise is likely to get a commission. And so are you depending on the plan. But Susie isn’t going to get anything from that sale, nor is anybody below her.
What happens when Elizabeth makes a sale? Will Darcy get a commission from that? Probably. How about Mary? Maybe. How about Oliver and Olivia and Victor? How about you?
Are you beginning to see the problem from the company’s point of view? How many commissions can it squeeze out of a single sale?
Vertical growth, not horizontal growth, poses the threat of infinite commissions in MLM or network marketing. Both you and the company are hoping that the recruiting continues indefinitely, well off the bottom of the page and into eternity. But the company can’t pay eternal commissions back up that line on individual sales, can it?
I pointed out in Part 4 that the company is not mathematically bound to limiting horizontal growth. But the laws of math are going to get them when it comes to vertical growth. They’re going to have to do something about it.
This is where the creativity of MLM compensation plans begins. In Part 6 we’ll put horizontal and vertical together and start seeing the plans take shape.
