Exposure to the Industry
In the Network Marketing industry, there are a few factors to consider when considering which company to build a long-term business.
Product background
The team (Upline, Sidelines, even the company staff)
First off: It has been said in the past – your UPLINE chooses the first company you join.
It still is the case today for many who are either unexposed and their friends or relatives who join an Network Marketing first approaches them.
The unexposed might oblige their upline and if they are not careful, will cause a very bad first impression on the industry.
Today, you don’t need to be picked by someone else. You can choose first. Do a good survey based on the guidelines above. As a matter of fact, you don’t even need to join the first person who invited you in a company. You have a choice to select someone else to be your upline within the SAME company.
Products are very crucial in Network Marketing. Just because one company says our product is the ‘best’ doesn’t mean that it is. Just like any other business, people seriously building an Network Marketing will only say good things about their own product. They will even give fantastic and even outrageous testimonials about how the product can help them.
Many are very sincere and well -meaning, but the rule of thumb to remember is – yes, you say the product is the best, but that is also because you haven’t tried any others because you are in this business!
I firmly believe that most Network Marketing products are of exceptional quality. That is because the product must work then only can the distributor give good testimonials due to the nature of the distributor doing direct sales (dealing directly with the prospect/customer). There are companies that DISCOURAGE their people from using products from a competitor Network Marketing (some even ask you to stop buying from the supermarket and buy from your ‘own business’ instead).
Beware: some even go as far as to talk down about the products of other Network Marketing companies. Most people, in their zealous zeal to recruit others, may use this tactic. This is often perceived as rather unprofessional.
Bear in mind: in Network Marketing, if you talk bad about other Network Marketing companies or their products, you are talking bad about the entire industry as a WHOLE (you mean to say that only your company, product, compensation plan, team is the best in the world and the rest of all the other companies are of inferior quality? Man… I don’t want to be in this industry.) Can you imagine if every network marketer is doing this? No wonder the industry has a bad name!
The plan is very important. It shows how much work you need to do to get paid this much. All marketing plans have their own advantages and disadvantages. Different companies offer different margins for their products. The key to remember in margin comparison, if the company pays the distributor too low, you might not survive; if the margin is too exorbitantly high, you might earn a lot, but your retail customers will suffer the costs and the business might not be long-term.
Before I share with you a few more popular types of marketing plans to give you an idea about what company will offer what, I wish to highlight two things in every plan: DEMOTION and MAINTAINANCE
DEMOTION means dropping from one Network Marketing position to a lower one (usually resulting in a loss of future potential income) or your remainder quota required to reach a certain target is increased (the volume achieved in the past do now count towards the grand total anymore) Demotion is an important factor to consider in every marketing plan as someone who suffers demotion suffers a sudden loss in income and potential y be very embarrassing to others.
MAINTENANCE (sometimes called autoship) is the minimum amount of sales volume (usual y every month) a distributor or serious business builder has to buy-either his own personal volume or combined with group sales in order to maintain his rank, be eligible for bonuses, overriding commission or sometimes even maintain his distributorship. Having maintenance or no maintainance all has its pros and cons. I will highlight 3 scenarios to give a clearer picture.
A) MANDATORY MAINTENANCE
Some companies require you to purchase products every single month. This is good if you have built a large organization and it ensures you have guaranteed income every month. Not good if you are forced to maintain and you are not making money in your business. If you are in love with the product and don’t mind paying for it every month then it is fine. But this can cause a person who is not seriously building or is still struggling with his business some pressure and it is one of the main causes of drop out in Network Marketing.
If the maintenance is too expensive, people might shun the company. However, the upline with a lot of people in his group can build a large stable income this way. Some companies may not require you to maintain at the early stages and increase the maintenance after you achieve a certain rank.
B) NO MAINTENANCE
This is very good for people who have just started their business or for people who is just casual y ‘trying out’ an Network Marketing. There is no pressure and a person can be in an Network Marketing for years, but still at the same rank.
The bad news is that it might not be good for the long-term (because no maintence means no downlines need to buy anything) unless your group is in love with the product or if you and your downlines have built a solid customer base and the demand of the product is there.
C) OPTIONAL MAINTENANCE
This is also very good for people who just started or the casual type. They will only ask you to buy a certain volume of products when you want to override your commission from the company. This is also very good in the sense that you are not pressured to pay maintenance and you only pay when you are making money.
There is one problem with this, however. Among the serious business builders, if the downlines are not producing any sales-even having a large organization will not pay you well (if not at all just like a zero maintenance company, no downline sales means those in the middle will not maintain, causing a chain reaction all the way to the uplines at the top). This is a hollow organization where your rank/title means nothing without income.
Next, I will go in detail about the more popular types of plans…
1) The Stairstep
2) The Unilevel
3) The Binary
4) The Breakaway
5) The Matrix
6) The Australian Two Up
7) The Hybrid
1) The Stairstep
The Stairstep or step and ladder plan is a simple plan that has requirements that you must meet to get up the “Stairs of Success” Every step is a promotion usually based on achieving a certain volume and each promotion or rank gives you a larger cut.
Demotion in stairstep plans to ensure a distributor’s group commits to a certain volume every month. It gives a particular rank a guaranteed income. Demotion in this case means that you must either maintain a certain volume every month (or quarter or fiscal year) in order to maintain that rank. Let us say for example, Anthony achieves a sales volume of $200,000 in his entire team (for a certain timeframe) and that promotes him from Leader to Champion, certain companies require him to keep up that same sales volume the next time or else he will be demoted back to a Leader. In certain plans, there is no demotion in rank, so the group sales are accumulated for reaching the next level.
Maintenance here plays a key factor how building a solid group will look like. If there are low repeat sales for the product being marketed, expect the minimum entry fee to be higher than the average Network Marketing organization. This is because low repeat sales means less maintenance-hence the majority of the income comes from recruiting new blood. If nobody does maintenance in a Stairstep plan, having a high rank doesn’t earn you money, so don’t be a fool if someone tells you that the ‘minimum’ income for a ‘grand emperor’ is $100,000 a month – it all depends on the volume generated. On the contrary, plans with maintenance involved do guarantee an income or else you will not be in that rank.
This type of plan is one of the oldest and longest plans around. The advantage of climbing the ladder gives major incentives for distributors to work harder and fight for the target. The larger your group the more you override even up to infinity levels as long as your downline is of a lower rank than you. There is also a fair system involved. Let's say if your downline works harder than you and sponsors more people, he can actual y have a rank higher than you and that is when breakaway in certain plans come into play (discussed in the breakaway plan below).
The disadvantage is, however, once a downline reaches a certain rank (lets say you need 3 directly sponsored Leaders to qualify as a Champions), one of them becomes a Leader while you focus on making the remaining 2 groups to become Leaders, the first leader might be neglected in the process. The other disadvantage is, if the downline is too far deep in the organization (let's say your downline’s downline al the way down 10 generations), some distributors may neglect helping them because the monetary incentive is too small .
2) The Unilevel
The Unilevel is a simple “Number of levels” that the company will pay you, and usually there is no promotion or rank. You make money by getting a certain override off of the volume, and usually there is a requirement of volume to qualify for a check.
The advantage here is you don’t have work your butt off during certain seasons to fight for that rank. You can sponsor as many people as you can and your income comes from a large volume of people in your organization. For example, you can personally sponsor 5 people, and these 5 will look for 5. After 4 generations you will have 5 to the power of 4 in your organization (780 people) and the calculation of your sales volume will give you a straight-forward income.
The disadvantage, however, is there is no incentive for developing many different groups (called legs). In spite of conditions in a plan imposed by the company (that you have to sponsor a minimum number of legs) some Unilevel people tend to let the ‘strong’ downlines do all the work, waiting for their downlines to sponsor MORE people than themselves, which is a poor reflection of leadership.
In the Unilevel, there is no demotion (the only demotion is leaving the company) and maintenance plays a key part in the long-term income.
3) The Binary
The Binary is an interesting design for a Comp Plan. It usually has 2 “legs” that you can have “Business centers” in, and you have a volume requirement to get paid on each leg.
There is what is called “balancing”. In the Binary…you must balance the volume from each both A and B group to make sure you maximize your commissions. In the illustration above, the A group is the strong leg (or the giant leg) while the B group is called the weak leg (or the profit leg). A has more people than B (assume they all produce the same volume per person). B needs to find 2 more people in order for U to ‘balance’ hence maximizing U’s income.
U sponsors 2 friends. In a binary, the company limits each distributor to have a MAXIMUM of 2 people. A and B were previously recruited by U. U needs to ‘balance’ his group by helping B find 2 people. But let us assume that B is not actively building the business at the moment, so what does U do? He finds and sponsors 2 people HIMSELF and places both of them under B and they become B1 and B2. This is called SPILLOVER.
The advantage of spill over is that when everyone works as a team, the tree will fill very fast as all uplines and downlines work together to balance each other’s networks. It is also immune to the problems in Unilevel or Stairstep plans with downlines being too deep in the organization. A Binary can be balanced depending on which side the downline is in and not how deep.
The disadvantage, is however, that this plan is particularly attractive to lazy people who don’t do any work and expect free handouts from their uplines. Imagine what will happen if everyone waits for their upline to place people under them? It doesn’t develop strength.
4) The Breakaway
This plan has been said to have become somewhat unpopular in the industry, as you could lose the business you build, once it gets to a certain level of success, and it “breaks away” to no longer be a part of what you get paid on. It usually appears in Stairstep. Let's use the example above in the Stairstep illustration.
If I am a Champion and my downline builds his organization faster than I, and qualifies as an Emperor before me, two things might happen.
Depending on the company’s pay structure, I will not be eligible to receive overriding commissions from my downline Emperor’s group. Hence the ‘breakaway’ his bonuses will be ‘passed up’ to MY upline Emperor or Grand Emperor. In some cases, the ENTIRE group breaks away to join MY upline so, even if I do qualify as an Emperor later on, I will not receive bonuses from his group! Selfish people might even involve in SABOTAGE attempting to slow down his downline from Breaking away or overtaking him.
Today, more and more companies are acknowledging the Breakaway problem and will start awarding leadership development bonuses (such as a fixed bonus percentage over that entire group-even those they have broken away). This system worked out well in the past though, because it gets people working harder to prevent the Breakaway from happening.
In Network Marketing (just like in life), companies reward PEOPLE who work hard to build their groups. If a downline works harder than his upline, he should get paid more – hence it is more fair to them. So in this case, if an upline doesn’t work hard enough, he shouldn’t blame the company if the downline Breaks away.
5) The Matrix
The Matrix-or sometimes called a FORCED MATRIX is like a pre-order tree. A computer-driven plan puts new recruits into your group by computer, where they go in the next available slot. Usually this plan is combined with some form of a Binary (sometimes 3 by 9 or 5 by 25 matrix depending on the maximum ‘width’ allowed), and it does work well if there are a lot of people that are recruited and WORKING TOGETHER
TO FILL THE MATRIX. When you recruit someone, the computer searches down for the next open slot, and positions them there. There are some plans that allow you to override the commission of those that you personally sponsor even though they are not positioned directly under you within the tree.
D sponsors a new friend. That new friend doesn’t get slotted under D but rather fills the last position which is the dotted line under C. Once the slots fill up to a certain level, the distributor gets paid a lump sum.
Once again, the advantage here is that every single distributor in the tree all work together to fill the matrix and the duplication result is fantastic! Imagine if everyone finds 2 and everyone does the same thing, the matrix will be filled very fast. This means that even if you don’t look for ANYONE to join the company, you will get paid when the tree reaches a certain level.
The biggest and most obvious disadvantage is everybody waiting for everyone to fill the tree thinking that they will get their money when others fill it. This kind of thinking is EXTREMELY WRONG and will ruin the company. Furthermore, unless there is a cut-off system in the marketing plan, (for example, after the sixth level the person at the highest position will have to reinvest again at the bottom of the tree), the guy who ‘came first’ will get all the commissions and hasn't done anything. By placing a cut-off point, everyone who reinvests again will fin the tree faster and the deeper you go down the tree, the more people are needed to fill each level.
6) The Australian Two-Up
This marketing plan is very unique. Basically, the two people you recruit are ‘given’ to your upline sponsor and the rest of the recruits are yours. Here is an illustration: U
Assume that for each person you recruit, you are eligible to earn $100. U sponsors Q1, Q2, A and B. You earn ONLY on A and B but not on Q1 and Q2 as those sales go to your UPLINE SPONSOR. Q1 and Q2 are your qualifying sales. Basically by finding Q1
and Q2, you become qualified to earn from A and B and subsequently C, D, E infinitum.
A recruits A1, A2 and Z. The sales of A1 and A2 goes up to U and the sales of Z goes up to A. As long as U keeps Q1 and Q2 going, he is eligible to earn as wide as he wants and as deep as he wants! (A1 and A2 is now part of U’s group. This will multiply by 2
each time it goes deeper enabling him to earn income up to Infinity levels!) The biggest disadvantage of this plan is that sometimes people are selfish and will only leave U with ‘weak’ distributors (for example, Q1 and Q2 are slow learners) while capitalizing on the stronger ones in A and B (leaving the strong ones for themselves).
Some might even purchase dummy accounts (known as ‘cats and dogs’ or ‘potatoes’) This leaves their upline with non-moving legs and creates a hollow organization. Some companies deal with this problem by giving bonuses or special overriding mechanisms where one can get special bonuses for building them, or even removing the ‘qualified’ status in the event Q1 or Q2 drops out.
7) The Hybrid
A Hybrid is a combination of any of the above features. An example would be a Forced Matrix with Unilevel benefits (ensuring that those who actually WORK to fill the tree get no's paid more), or an Australian Two-Up with Stairstep advancement (to offset the disadvantages of distributors being too deep in an organization) Many companies are combining the advantages of multiple plans to help distributors maximize their income.
REALITY CHECK: Regardless of how good any plan may sound, NONE OF THESE PLANS WILL MAKE YOU MONEY IF YOU DON’T SPONSOR ANYONE AND DEVELOP THEM.
Only YOU can make the plan work-for without you, the plan is useless, or a waste of your money and time.
DO NOT get too complicated explaining Compensation plans. Keep it simple for your prospects and make sure they understand that they CAN MAKE MONEY with it if they work your business plan.
The 3 General Areas to make money in any Network Marketing plan.
1) The First area is Retail Profit.
You must show the prospect that they can earn a retail profit with your products and services. The margin can be anything from 10% to 50%.
2) The Second Area is Team Overrides.
This is where, just like a Real Estate Broker, or Insurance Agent, you get to develop your own sales team. ‘Sales Managers’ get paid a certain percentage of override from them, just like the Real Estate and Insurance Agents do. Your goal is to help your people duplicate the process. People don’t understand that all they do is help your team in order to succeed. If they achieve success first, then only you will succeed.
3) The Third Area is Leadership Bonuses.
This is where you help develop Successful leaders in your group, and you get an additional bonus or override from your group. You get rewarded by helping others develop their leadership potential. Once your leaders are in place, your Network Marketing business will go on autopilot.