Reward Plans

MLM Reward Plans

There are many different kinds of reward plans in network marketing. Some work better than others, as you can imagine. Some are complex, others are relatively simple. Many start out simple, then end up with lots of enhancements to make up for deficiencies not anticipated by their creators.

Regardless of the type of reward plan you're considering, there’s one important point to note: people succeed and fail in every kind of reward plan.

In this section, we’re not going to analyse or compare all the different types of reward plans. Apart from lack of space, new variations keep appearing regularly — so any comparative analysis could easily be out of date before it was posted.

Instead, we’ve outlined some guidelines you should bear in mind when doing your own analysis. These are important attributes that will ensure fair reward for effort at every stage of your progress.

Why are there so many plans?

Basically, because MLM is evolving constantly, and people are constantly trying to find better, more effective and more attractive ways to reward distributors.

Sometimes a new company wants to minimise its investment in data processing technology, so it introduces a plan that throws responsibility for rewards back to its network. This was sometimes the case with what are known as ‘Wholesale Discount” plans, which became popular for a while in the mid-1980s.

Still other plans seek to make the opportunity more attractive by building in very high numbers of override levels, or generations, to reward those who build large networks. This can have the undesirable effect of forcing product prices so high that nobody can sell them.

What should I look for in a reward plan?

For a start, discount all the miracle claims of instant, overnight riches for no effort. Be wary, too, of promoters who claim that they’ll build your downline for you. Why would they if they didn’t expect to make more money than you from their efforts? Why do they need you at all? Use common sense. If it sounds too good to be true, it probably is.

Look for these features in any reward plans you’re asked to consider. You’ll discover that they’re often interrelated and may overlap:

Balance
Fairness
Reward in proportion to effort
Sustainable levels of rewards
Exponential growth factor
Clear differentiation between reward and recognition

Balance

There should be a balance between your rewards for personal selling and sales made by your downline network.
There should be a balance between the horizontal and vertical aspects of your personal group. In other words, rewards generated by sales from your personally-sponsored distributors (horizontal growth, or width) and those further downline should be balanced to encourage you to work with both. You should continue to sponsor personally into your front line, as well as working deeper downline. There should be no penalty or disincentive for either.

Of course, some plans — such as binary plans — simply don’t allow you to build wide by their very nature. You have to build depth.

Fairness

The plan should not reward “heavy hitters” (super recruiters with mega networks) at the expense of those distributors just starting out in business or still growing. Too often, in plans that pay large overrides on many levels, the product price has to be set very high to be able to pay those higher rewards. This can result in loss of leverage, because retail prices become too high for anyone to sell. So distributors end up having to recruit their customers to buy at wholesale.
Other types of plans reward people simply for persisting — for not quitting. Whether or not distributors sponsor others, build a customer base or increase their volume over time, some plans still increase the level of reward when your cumulative purchases, over a set period of time, reach higher qualification levels. Sort of like being in the public service… stick around long enough and you’ll reach the top, regardless of merit! In reality, it’s a reward for not building your business.

The only way you can reward people for not building sales volume, either through selling more to customers or sponsoring more productive downline distributors, is by robbing their upline leaders! (Think carefully about this. When mediocrity can rob enterprise, it can become a serious disincentive to achievement and growth.)

Reward in proportion to effort

There should be very clear connection between reward and effort, especially in the early stages of a business. Not only must justice be done, it must be seen to be done.
As you grow in your business, your rewards will be connected more for finding people, training, supporting and encouraging them to grow and develop as part of your downline network. But the connection will still exist between reward and effort.

Sustainable levels of rewards

Companies must be able to cover costs like research and development, plant and equipment, support services and resources (including reliable, fast data processing), logistical support, adequate stocks of products and packaging and much more.
There’s no point in a company paying out such a high percentage of the product price that it threatens the very existence of the company. If the company collapses, nobody earns anything, and the entire industry suffers, not just those left with products and literature, kits, etc they can’t use any more.

Exponential growth factor

Once your business reaches its point of critical mass, when leverage takes effect through increased knowledge and skill on your own part, and duplication through sponsoring and training others to do the same, the rewards should grow exponentially as your volume grows.
In other words, this is a business where you get paid a little for a lot of initial effort (learning, practising, growing), then you get paid a lot more for no more effort once your network becomes self-perpetuating.

Clear differentiation between reward and recognition

Too many plans confuse these important, complementary aspects of compensation..
Rewards should only be given for results. The only result in MLM is sales volume, whether through retail sales or wholesale consumption. This is the only point at which money comes into the system to pay your rewards. (It’s illegal to be rewarded simply for recruiting others.)

On the other hand, results are the product of directed, productive activity. But until such time as activity is transformed into results, there should be no reward just for activity. Activity should be recognised through non-monetary means, such as certificates, pins, badges, listing in company magazines, taking the stage at meetings and so on.

For many people, recognition can be as important (sometimes more important) as monetary rewards.

Some plans confuse the two and reward activity. Cumulative plans often make this fundamental mistake.

Sponsoring is not a result. It’s an activity. It should be recognised, not rewarded. The rewards — in the form of higher bonuses — will come when your sponsored distributors begin producing sales volume.

In the section on Present Trends you’ll discover an important insight that will help you in your evaluation of reward plans — especially those created in recent years. Be sure not to miss it. And explore the Checklist for evaluating MLM opportunities for even more helpful insights.

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