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MLM Network Marketing Compensation Plans

Direct Sales Compensation plans, MLM Compensation plans or Network Marketing compensation plans vary from between mlm network marketing companies. Unfortunately, most of these plans are not easily initially understood by the distributors, and they are often not easy to explain for the company trainers. Be patient when learning, and do your best to understand it, if you do not understand everything at the 100% level in the beginning it is normal. Realize that it most likely took an amazing amount of time, energy, money, and effort to design it for you.

Compensation plans are usually designed by professional marketing companies that create the software, systems, and all of the elaborate mathematical equations that each compensation plan need to have in it for it to work on a large scale.

To understand it better, it is up to you to ask questions when evaluating any company's pay plan. The following information is for informational purposes only, and does not necessarily reflect the exact type of mlm compensation plan your company may have.

Over the most recent 50+ years in Network Marketing History, companies have devised a variety of MLM compensation plans. Here we will give you a very brief overview of the major types, and links to Wikipedia for more detailed descriptions, what you will find at Wikipedia is not our research, and is NOT updated by us, take it only as free educational information. It is your responsibility to study your company and ask the proper questions to help you understand your compensation plan accordingly.

Unilevel or Stairstep Breakaway plans are the oldest and most popular.

Some feature two types of distributors; managers and non-managers; and usually three types of pay:

- Base shop overrides are overrides of managers from their subordinate non-managers, collectively called a base shop. This is the same as any other sales organization.

- Generational overrides are overrides of managers from the base shop of managers who were previously their subordinate. Most plans compensate at least three generations of such managers.

- Executive bonuses are commissions for managers who exceed a sales quota. For example, 2% of the total company sales revenue may go to a bonus pool that is shared monthly pro rata to managers who exceed $10,000 in that month.


Matrix plans limit the width of each level in a distributor's group, forcing strong distributors to pile ("spillover") their recruits over people who did not sponsor them.


Binary plans limit the width of each level to two legs. Commissions are based on "cycles," where a distributor is paid a fixed amount whenever both legs achieve a certain number of sales units each. Commissions are paid incrementally when the sales volume in each leg matches.


Elevator or Matrix schemes feature a board or a list on which each distributor pays in one or more product units to participate. When a certain number of units have been paid in, the structure splits and the earlier participant receives consideration.


Some of the information above was copied or paraphrased from Wikipedia on Nov. 5th 2007, due to the constantly changing updates to Wikipedia, the content may now be slightly different; http://en.wikipedia.org/wiki/Multi-level_marketing