Creating an MLM Compensation Plan

by Andrew Lovelace - Posted 4 years ago

What you should keep in mind when creating a custom compensation plan:

1. Consult with a professional.

Have your plan reviewed by an experienced MLM developer. They can help find potential issues you might not have considered when creating your plan. 

Creating an amazing compensation plan is a combination of math genius and marketing acumen. Make sure you’re taking both aspects into consideration when creating your plan. Then go over it with someone who has developed custom compensation plans before. Note any pitfalls or areas for improvement and tweak your plan accordingly. This will save you a lot of time and headaches down the road.

2. Keep it simple.

As mentioned above, one possible downside to a custom compensation plan is that it is unfamiliar. You’ll need to spend time explaining it to new members. Keeping your plan simple will alleviate this problem, making it easy to explain and easy for new members to immediately see the benefits.
Don’t create too many rules or exceptions in your plan. Let’s consider the example of Ariix above. One of the reasons their plan was so successful was because of its simplicity. In marketing, we talk a lot about the Unique Selling Point (USP). You’re selling your company, and your compensation plan, to new recruits. It should be easy to immediately communicate the USP of your plan to potential new members. Arixx does this well. “Unlimited Width. Unlimited Depth.”

Keeping your custom plan simple will make it much easier to show your USP to potential new members.

3. Create a plan that fits your company.

It might be tempting to copy a successful plan from another company. After all, why reinvent the wheel? But it is important to remember that what works for one type of company might not be best suited to yours.

A few important factors to keep in mind when designing your compensation plan:

  • Your company type: MLM or Direct Sales (party plan)
  • Your product type: Virtual or consumable. Product or service. 
  • Costs: Customer acquisition costs, profit margins, Product cost
  • International or National
  • Shipping and fulfillment
  • Distributor tools and training
  • The structure of your company, the type of product you have, costs involved with acquiring customers (for the distributor) and profits (for you), where you are marketing and logistics of selling Internationally, and the amount of tools and training you offer distributors will all play a role in determining what kind of plan will work for your business. 

You don’t want to offer too much of your profits and not be able to afford the training and marketing tools for your distributors; you also don’t want to pay out too little when the customer acquisition cost is high on higher priced products or products with a longer sales cycle.

Creating a plan specifically for your company is crucial to your success, and the success of your members.

When it comes to MLM compensation plans, there are many options. Choosing the best plan is crucial for your business’ success. 

Do you have a great idea for a compensation plan, or just want to talk about your options? We’ve got the experts and they’d love to speak with you. 
Contact us now.