Why Binary Network Marketing Compensation Plans Suck
74- Residual Focused Compensation
In network marketing your goal is to create ongoing residual income. The right compensation plan and company philosophy makes this easier to accomplish. - Understanding MLM Compensation Plans
Thorough introduction to network marketing compensation plans. Well written and easy to understand. - Generate Free Targeted Leads
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Understand why most people struggle in binary compensation plans
There is a an appeal to the binary compensation plans for newcomers to the field of network marketing. Binaries are easy to understand. The amount of money paid out to distributors is often a flat rate based on volume of product sold. Newbies are sold on the idea that their upline can only place people in one of two places and thus a new person's business will be "fed" from above. If you are one of the lucky people to be placed on a very succesful upline's "power leg", then in reality you only have to work one leg. Unfortunately, many people do not end up in this situation and that is where the trouble begins.
Binary MLM compensation plans pay out a percentage based on the total volume on the lessor (least profitable) leg. You do not get paid on your greater leg. The company keeps all that money. So let us say that you end up on someone's inside leg. What that means is that no one from above you will place anyone on that leg but the person who enrolled you. If your enroller is not actively and successfully growing his or her business, you will receive no people place below low from anyone but yourself.
All those in network marketing know that successful businesses are built by building a good, strong downline, not relying on an upline. But here is the problem in a binary. If you have to build both your legs on your own, you go out and start recruitng people. You alternate where you place them, in order to keep your two legs balanced. In binary plans, balance is crucial. After a few month you've placed ten people on your right leg and 14 on you left leg. Of these, seven on the right and nine on the left are starting to build their businesses. Your network is growing. Things are relatively balanced. You're starting to receive a small residual income.
Then you get lucky and enroll Sam on your right leg. Sam has been in the network marketing industry for 25 years. You are excited. Sam's business takes off like gangbusters!! In a few months you have over $100,000 worth of volume on your right leg. Your left leg is still doing OK, but you only have $12,000 worth of volume there. If your company pays out 8% of your lessor leg, then you will receive 8% if $12,000. $960. Since your company does not have to pay you anything on your right leg, they keep that money.
You have done a great job enrolling Sam on your team. You are not getting paid on ANYTHING that Sam does. Your company is making a lot of money from your hard work and you are not benefiting from it. And it gets worse. Sam is really good at this business and eventually your right leg has one million dollars worth of volume in it. Even if you've developed your left leg and are up to $100,000 in volume, guess what? You still will not get a dime of the money that Sam is generating. You only get paid on the left leg, the shorter leg.
In my opinion, binary plans sound great. They are easy to understand. They make people feel like they are working as part of a team. It's all good until your hard work ends up benefitting the company instead of benefitting you .
There is a better way to go. Compensation plans have developed a great deal since the beginning of network marketing, about 70 years ago. The latest type of compensation plan is called a Hybrid Unilevel Plan. In this plan you are paid for any volume that happens underneath you. Old fashioned unilevel plans often paid down only 9 levels or 10 levels. In some of the new hybrid plans, distributors end up getting paid down to the bottom. It could be 37 levels or 52. The computer calculates every purchase of product made by every person in below you...whether you have one, two, three or more legs. As you move up the line people are paid as deep as they have qualified for. As you move up in the ranking you are paid on more levels. Everything is dynamically compressed from the bottom up.
This type of dynamically compressed unilevel plan is the cutting edge of network marketing compensation plans. Add to it other bonuses for beginners, plus matching bonuses and rank bonuses and the sky is the limit. This type of plan is inherently more fair to its distributors that any other plan in the industry today, particularly in comparison to binaries.
There is also another type of plan that is just being introduced in the industry. It is an old fashioned Unilevel, where you can enroll people infinitly wide. But behind the scenes is a computer run matrix--a residual income generator--that is powerful machine forcing residual income to happen in a manner never possible with a basic unilevel. In a plan like this, done correctly, there are no legs to balance, no volume requirements or hoops to jump through. You may qualify to be paid down 9 generations in the Unilevel, but because of the hidden matrix, your depth is actually unlimited. So you end with unlimited width and unlimited depth. Quite a beautiful thing.
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Comments
Oh, my gosh. Thank you for putting it so simply! I am fortunate enough to be in a company with the new compressed compensation plan, thankfully! And it is really good to explain to others why they can be headed for a tough road. Thanks!
Well, you did a good job explaining one type of Binary plan. Fortunately, that Binary is not that popular. The most successful binaries are ones with Unilevel Matching Bonuses. I.e. You sponsor someone that makes $100.00, you get $100.00 as well. That means that you could feasibly be a person with only one leg, but if you did so happen to sponsor someone that is the top money earner in the company, you would get a check match, with only one leg. Not to shabby, huh?
Also, you have to remember that MLM is about "work" and "sponsoring". All those "whiners" that say they are on their sponsors "weak" leg should just quit. Basically, you joined to "build" a network, not have one built for you. Just think, if you were in a totally Unilevel organization, no one would ever be spilled below you, what would you do then? Complain more?
The Binary is by far the best
Glenn K. Ashcraft
Glenn.Ashcraft@sbcglobal.net
Actually Glenn, I don't whine, I work. I am presently in a company with a comp plan that is NOT a Binary, yet with only three legs needed to max out the plan, there is a lot of "spill" below everyone. AND, we get paid on every single person below us in our organization, regardless of which leg they are on and how long or short the leg is. In addition, we have matching bonuses as you mentioned above, plus dynamic compression (which warrants its own discussion), fast start bonuses of 40% and profit sharing, even for newbies. I've never seen anything that compensates people so well at all levels of business building. This company put the FUN and the MONEY back in network marketing.
Healthyfreemom
This continues to be a very well read and highly rated hub for a good reason. People are struggling with binaries. They are working their butts off and only getting paid on one leg. Learn what to look for before you get sucked into the hype of a new company. Receive a Free subscription to Health Freedom Secrets Newsletter at http://healthyfreedomsecrets.com
Interesting article and comments. Glenn makes some good points, however. There are many types of binary plans, and ultimately, people that do the best with any opportunity are recruiting new customers and business builders on an ongoing basis. You can't simply rely on help from above.
One nice thing about binary is explained by expanding on your example in the article. If you appear to have a "power" leg, it's good to put a Sam on your "focus" leg. If Sam was already on your "power" leg, then you could be one more Sam away from really cranking (placing Sam II on your "focus" leg).
The opportunity I am involved in doesn't ignore your volume on the larger leg. In fact, two-thirds of the volume requirements for team bonus is taken from that leg. Plus the fact that you can earn a matching bonus on your personally sponsored associates,whichever leg they are on, once certain criteria are met.
Anyway, good discussion. There are arguments for and against almost any comp plan. To each his own I suppose. Of course, it helps to be passionate about your business/products/industry/etc as well.
Good luck to all!
Steve Johnson
stevejohnson@financialfreedomleader.com
thank's so much for great explaining.
but i could not understaand the www.quest.net is a unilevel or binary? do you know it? and how is the quest.net in US?
tnx
bezad
Jim
Not really too broad, as the headline causes this hub to get many hits and great placement in google searches. I do disagree with you, even with the carry over, weekly pay, weak leg motivation, etc...I want to get paid on ALL activity that I do and that me downline does. That is the type of comp plan that I look for and they are out there and they work. Try http://perfectmlmbydesign.com/?dthiub
The comp plan I am involved in is considered a hybrid binary, You are paid your cycle bonuses once you have a 200 point balance doesn't matter what level produces the 200 points, once the left leg has 200 and the right has 200 you cycle a bonus, there is no flushing but there is a $50,000.00 cycle bonus cap per week. So if your left leg produced 10000 points and your right leg produced 8000 points you cycled 40 times with a balance of 2000 waiting on the left leg until your right leg generates more points.
I have found this type to be the best of both (binary and unilevel) rolled into one
Very good explanation hfmom. Interesting that your hub attracted so many who felt advertising their own opportunity was invited. Usually, comments on a specific hub are merely to complement, commend or respond to what was written with even advertising one's own similar hub being considered 'less than kosher'. It reminds me of why, despite over 30 years in the industry, I've backed off from being a walking billboard :(
Thus: thank you for sharing your expertise dear Lady :)
Interesting hub! I however find binary system that you explain a lot different from what I am into right now. There is no issue with paying on your weak leg in this particular plan.As a matter of fact the plan is done in such a way that regardless of what your weak or strong leg is, whenever you have sales in the ration 2:1 either right to left or vice versa on your team sales you earn a cycle pay. It is so interesting that, despite my busy schedules as a practising doctor, I earn money because on leg is already built for me by my upline and strong downline in that leg while the second just keeps earning by my effort and that of my downline on that leg.
I will be noble enough not to promote my link here but you can get across to me to know more about it if you care.
Mayorking,
It sound like you found a good one!! Just from your comment it appears that your binary is a type of hybrid. All the better. Good luck to you in your endeavor. Thanks for taking the time to comment.
I do think your article drives home the importance of studying each company's compensation plan "in and of itself" instead of just accepting the "fact" that it's the latest and greatest comp plan that all reps are flocking to.
Just as "not all compensation plans are created equal", so it's true that "not all binary plans are created equal". And several of those who have commented have testimonies that support the fact that NOT ALL binary compensation plans suck.
I too have partnered with a company that has a binary that I find to be very fair. It pays cycles with 2/3rd of the volume coming from the stronger leg. We also have a weekly holdover of volume (up to 30,000 weekly). Other bonuses are in place to compensate reps fairly including a Matching Cycle Bonus on all personally sponsored reps on both legs.
Great job of starting the discussion and making us all aware that we need to be able to explain what makes our compensation plans attractive and different from others. Besides having a product that you can be proud to represent, a strong compensation is the next biggest factor when choosing a company in my opinion.
Best Face Forward,
Thank your insight and your comment. Not all binaries are created equal, and there have been some better ones that have come out since I wrote this hub almost 1.5 years ago. For me though, I want a plan where I get paid on ALL my volume, not just a part..even if it's a big part. Good luck in all that you do.
Thanks for the insight!
This all very interesting. i have never worked a binary plan and a new company i am considering has such a pay plan and wow there sure is a lot of potential down side...
I am in a binary plan where you never lose your volume as long as you have an active distributor in that leg. If you have an active in your right leg you never lose the volume in that leg. Same goes with the left leg. My comp plan pays 25%-100% matching bonuses on all personal sponsored.
To top it off there are no hoops to jump through to get the bonuses. You only need 6-7 personal sponsored to qualify for 100% matching bonuses and the volume. Thats pretty much it. I am having more success with this plan than anything else before because everyones volume continues to carry over every month. Both my legs are growing because of a unique marketing system that I use. You really need to check the comp plans carefully...Thanks for the good info...
lorenhale10@yahoo.com
I am brand new to this but found a ground level product/plan that has a binary plan and and personal enrollement plan with no limit on the number of people.There are also up to 100% check matches on the first level. Does this sound good? It is an awesome new product Evolv? Have you heard about it? www.drinkandevolv.com. Help!
Elizabeth..I'd be happy to talk with you in more depth about your question. The short answer is that if the binary only pays you on the volume in your shorter leg, then in my opinion, it's not a good plan. There are others who would disagree. 100% check matches are great..as long as you are matching something. In many plans, the match is often only on a $5 or %.75 cents and thus it sounds better than it is. If the people in your organization can really make good money..then the check matches become worth something. The match is on their checks.
As for the company...are you sure that marketing another "health beverage" even if it's water, is going to allow you to get to your financial goals? I can't answer that question for you. I do know that the healthy beverage market is quite flooded..and that in the present economy people are cutting back on items that they categorize as "luxury" rather than "necessity or habit". Is the Evov product that much better than regular or filtered water, that people are actually going to purchase it for the long term? Again..I don't know the answer..but those are a few of the questions you need to be researching.
I hope that helps. If you'd like to speak in person, there is a link at the top of this hub to connect to me. I return all emails promptly and will also call you if you include your phone number.
UPDATE:
Since I have last posted 3 months ago my company updated their Comp Plan.
They will now carry over all volume if you are on autoship with a 100pv monthly purchase, this is about a $120.00 in products which Im assuming is about average for most mlms. Your volume is never flushed.
Is this a good thing or negative thing?
They also doubled the daily cycles allowed which will double the daily payout on the pay plan.
Is this good or bad?
They are a 100% debt free and my connection says they are very stable so Im not concerned about the stability of the company. I have just never known any company that makes it better for the distributor.
Is this good or bad?
Any comments?
Thanks,
Loren
Wade Balsdon says:
2 years ago
Yeah, I agree bianry sucks. My one leg is very strong and the other is weak. The strong one is as a result of my upline however my leg is not growing at all. Really not cool.