31 March 2008

Why Binary Compensation Plans Suck

Understand why most people struggle in binary compensation plans

There is a an appeal to thebinary 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.

The links below will give you more details and information. If you are looking to join a network marketing with this type of prosperity plan, please click here.

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