Multi-Level Marketing or MLM offers everyone an opportunity to make money on the side or as mainstream income. With different types of network marketing companies are operating around the world, MLM is indeed becoming very popular among people of all walks of life.
If you’re planning on entering the MLM industry as direct seller, you should be aware of the 5 best MLM compensation plans. These will help you select the best company to become a direct marketer and earn more money with the same level of efforts.
Best MLM Compensation Plans
Most MLM companies in the world have their own plans. However, they come under these five categories that I’m listing or are mix of any of these. And these five types of MLM plans can generally be found worldwide.
1. Ponzi or Pyramid Scheme
A Ponzi or Pyramid MLM plan is also known as Generation MLM plan.The Ponzi or Pyramid scheme is most popular in America, India and many other countries.
Unfortunately, nobody speaks about Ponzi or Pyramid schemes because of its association with large scams. Instead, people know it by various other names. In fact, a Ponzi scheme was the first ever type of MLM plan in the world.
There’re two types of Pyramid schemes. The one that deals with financial products, real estate and other things is strictly banned under local laws. However, a Pyramid scheme to sell healthcare products, cosmetics, household goods and other consumer items.
A Ponzi or Pyramid scheme is very simple to understand. Once you become an MLM associate for any organization, the first thing you’ll need to do is enroll two or three more persons to work with you. And these persons will in turn enroll two or three people and so on
As newer recruits go on enrolling more people, the ‘base’ of the pyramid becomes larger.
How do you get paid through a Pyramid scheme? For legit companies, you get a small commission on the sales your recruits record during a month or year. And they get commissions from the company for people they enroll.
This system is legit because you’re getting only a small commission that’s linked to sales of products. And the number of people from whose sale you’ll get commissions is only two or three.
2. Binary MLM Plans
A Binary plan is also very simple but best MLM compensation plan. It’s somewhat similar to a Ponzi but different in one major aspect. While your income from a Pyramid scheme depends on two or three people you recruit, the Binary MLM plan actually allows you to benefit from people your recruits enroll.
For example, if you cut an apple into half and then into further bits, it’s possible to give a slice to every person. The same applies to Binary MLM plans. Everyone gets a slice of the apple.
IN MLM terms, it means that you work as the distributor. And everyone you enroll also register more people, a small part of the profit gets divided equally. This ensures everyone is happy and people strive towards becoming distributors themselves.
3. X- Up Plan/ Step-Up Plan/ Australian Plan
This plan is yet another very popular compensation MLM plan. The X-Up Plan is also known as Step-Up Plan or simply as Australian Plan. That’s because it was first used in 1980s by an American MLM company to comply with laws of Australia.
The X-Up plan is similar to the above Binary Plan. Here too, every person you register gets a share of sales from one another, including people they recruit. In simplest words, it works with you as the distributor and people you recruit as wholesalers. And the people your wholesalers recruit work as retailers.
Similar to how the retail chain works, you get profits for every sale made till the last person in your distributor network. And as wholesalers and retailers in your network graduate as distributors, your profits also increase. This is very commonly used by nutritional supplements and healthcare product MLM companies.
4. Stair Step Breakaway Compensation Plan
One of the first types of MLM plans, the Stair Step Breakaway model came into existence in USA in early 1900s. It’s a plan where nobody feels the burden of doing MLM business and hence, strive for higher sales and better profits. The best part of Stair Step is that it can’t be used for scams. Instead, it’s the most useful plan for legit companies selling products. It works on the simple principle of putting extra efforts to get more profits.
And these profits also help you move higher in the MLM network while getting higher sales for the company. The higher your sales, the better your income. In the Stair Step Breakaway plan, every MLM works only to develop business. Those who earn higher “breakaway” and become part of another group within the company that’s aiming for much higher income.
5. Linear or Mono-line MLM Plan
As the term itself suggests, this MLM plan works on a single line or linear way. It means you’ll work as a standalone MLM marketer promoting products and services to people. And if somebody shows interest, you’ll enlist them also as MLM marketer.
The higher the number of people you recruit, the greater discounts you get on the product from the MLM firm. This means, your income doesn’t really depend upon their efforts. You’re a standalone marketer whose profit margins rise due to enlisting more people.
Best MLM Compensation Plan
The above details obviously raise a question. Which is the best MLM Compensation Plan? Which ones to look for if you’re planning to enter network marketing.
The answer is very simple. Government issues licenses to MLM companies only after all their credentials including MLM plans are found compliant with government laws. Hence, all these above plans are good.
There’s no significant difference in your income levels, regardless of whichever Compensation Plan a firm offers. That’s because MLM business depends purely upon your efforts and reach in the community. Therefore, look at how much money you can gain realistically from an MLM business instead of looking much into the types of plans.
Pritam Nagrale, a digital marketer and Generative AI enthusiast, embarked on his journey with affiliate marketing in 2004. With over 14 years of blogging, he has turned his passion into a fortune, profoundly impacting the digital landscape. Through his expertise, Pritam has guided thousands to monetize online and achieve their dreams, establishing himself as a beacon for aspiring digital entrepreneurs.