Multi-Level Marketing (MLM) is a marketing strategy that involves a hierarchical structure where salespeople earn commissions not only for their direct sales but also for the sales made by the people they recruit into the organization. There are various MLM compensation plans, each with its own structure and rules. Here are some common MLM compensation plans:
- Binary Plan: In a binary plan, each distributor recruits and sponsors two new distributors. The distributors are organized into two legs, a left leg, and a right leg. Commissions are usually paid based on the weaker leg’s performance.
- Unilevel Plan: In a unilevel plan, distributors can recruit an unlimited number of distributors on their first level. There are usually no width limits, so recruits are placed on the distributor’s first level in a straightforward manner. Commissions are often based on the sales volume of the entire organization.
- Matrix Plan: A matrix plan limits the number of distributors a distributor can sponsor on their first level, creating a forced matrix structure. For example, in a 3×7 matrix, a distributor can sponsor three distributors on their first level, and these three can sponsor three more each, and so on, for up to seven levels deep.
- Stairstep Breakaway Plan: In a stairstep breakaway plan, distributors start at the bottom and work their way up the ranks by achieving certain sales and recruitment goals. Once they reach a specific rank, they “break away” from their upline and become eligible for higher commissions.
- Party Plan: The party plan is often used for products that are sold through home parties. Distributors host parties and sell products to attendees. Commissions are earned based on the sales made at these parties.
- Forced Matrix Plan: Similar to the matrix plan, but with a fixed width for each level. For example, in a 2×2 matrix, each distributor can only have two distributors directly under them. This can create spillover, where new recruits are placed under other distributors in the matrix.
- Generation Plan: In a generation plan, distributors are organized into generations based on their relationships to the original distributor. Generations are often defined by rank, and distributors earn commissions on sales made by distributors within their generations.
- Australian Binary Plan: A variation of the binary plan where distributors are encouraged to build one stronger leg, and commissions are paid based on the weaker leg.
- Hybrid MLM Plans: Some companies use a combination of multiple MLM compensation plans to create a unique structure that suits their business model.
Creating MLM software for any of these plans involves tracking sales, commissions, downline structures, and often includes features for managing distributors, sales, and product inventory. Many software companies specialize in developing MLM software tailored to specific compensation plans and business needs. When choosing MLM software, it’s essential to consider the specific requirements of your MLM business and ensure that the software can accommodate the plan you intend to implement.
