As we have discussed earlier that Multi Level Marketing is simply
a business model for moving products and services from
production to the consumer using a network of independent distributors with a multi level commission payout plan.
Since distributors can recruit other distributors and establish
teams that work together, the pay out plan is a bit complex too.
In any MLM company the basic key to drive the MLM marketing
force in the required direction to produce the best results is the
compensation plan. Commission plans or compensation plans
are how MLM companies reward a distributor’s production that
drives the distribu-tion channel to maximize profits.
BASIC COMPENSATION STRATEGY
It is essential to highlight that every company is different and
each has different commission plans, some of which appear
complex or complicated too. However the underlying
compensation strategy has the following basic components.
Retail Commission: As the name implies retail commission
10 CALVIN CLARKE
is the commission allocated to motivate the marketer to
generate sales. It is the commission that a marketer will be
paid on the number of sales he makes to his customers.
Sponsor Commission: The next component of an MLM
compensation plan is the commission that is paid to a
marketer for the sales generated by its downline hence it
requires the marketer to focus on persuading and
generating other sales rep for sales promotion. Companies
who want to expand their marketing and distribution efforts
usually pay better commissions to motivate their marketer
to bring more sales reps to the company. Training
Commission: Few companies also pay their marketers to
train the sales reps down the line. These marketers
basically act as leaders and have adequate experience,
knowledge and skills to train the new staff.
In addition to the above components it is also important to
mention that MLM is all about leveraged income that is a sales
repre-sentative not only earn commissions on his own sales but
he also earns commission on the sales generated by the people
he has intro-duced, trained and recruit as sales rep. Also it is
imperative for marketers to beware of the tactics some times
unethically used by a few MLM companies by developing
complex compensation plans. In the up coming chapters we will
discuss MLM scams and frauds and means to avoid them
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