When you decide to go into network marketing, what do you look for?
What do you want?
Do you want
Knowing your intention is important. It can decide whether network marketing will work for you or break you. If your intention is to make money, you should seriously consider in making an adequate and reasonable assessment of the various compensation plans in town before going into it.
You might ask, "How do I go about it?" This short report tries to give you some ideas on what you might want to look out for. In other words, you will need to set some criteria before jumping into the network marketing bandwagon.
Making proper assessment helps you to ensure that you get more returns on the little efforts that you will put in. Assessment is akin to planning. Planning ensures higher degree of success.
Types of compensation plans
The types of compensation plans that a network marketing company adopts can determine how much money you can make and the game plan you should adopt. Some compensation plans look easy but don't give you the money that you want. Some plans emphasise on high short term gain but sacrifice long term financial stability. Some take care of the top leaders only, leaving little for the lower rung distributors.
Currently in circulation, there are about 6 types of compensation plans. The oldest being the Break-away Plan. Others are the Unilevel Plan, Matrix Plan, Binary Plan, Australian two-up and Hybrid Plan. As the names suggest, hybrid plans normally combine the features of the other plans to get a new one. Hybrid plans normally try to overcome certain weaknesses in the other plans.
You need to study the strengths and weaknesses of each of these plans and decide for yourself whether it works for you. Again, examine your intentions - ask yourself these questions.
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Do you look for short term money or long term residual income?
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Do you want to sell or do you want to be a consumer?
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Do you want to work hard or work smart?
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Do you want a balance plan or a plan that rewards the leaders more?
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Do you care for your people or the top leaders?
Monthly personal volume maintenance
Most network marketing companies have a personal volume maintenance requirement. Personal volume maintenance requires that you complete a certain level of consumption or sales per month personally in order for you to obtain a rebate from your own account or a commission over-ride from your downlines' purchases.
A personal volume maintenance may range anywhere from none to 450, or even 1,000 or 2,000 points! The requirement may be stated in points or volume points. The question that you should enquire is how much is the personal volume maintenance worth in dollar value?
Assuming that you are required to do a personal maintenance of 100 points. How much is that in dollar value? Let say that each point is $1.50, that will means the dollar value for your personal maintenance shall be $150.
When you know your personal volume maintenance in points and in dollar value, you should be able to:
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determine whether you will be able to do the maintenance personally in relation to your income or you might have to do some sales to meet the shortfall. Assuming that your income is $1,000 per month. How much percentage is that over your income? What if the maintenance is $300 per month? Can you afford it?
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pre-select your prospects. You might be able to maintain a consumption of, say, $300 per month. Can your prospects be able to do so? How much the personal maintenance is can dictate whether your prospects will be poor, middle class or rich.
Accumulation of Volume Points
Accumulation of points refers to the points that you and your downline have collected that can be accumulated and carried forward. This feature is especially important for a compensation plan that emphasises on rank, title or position. A higher rank will mean higher commission percentage and also higher commission percentage over-ride. Let us look at two scenarios:
#1 : One compensation plan allows accumulation of points, which allows you to accumulate points to 1,000 in order to become a Supervisor and earn a commission percentage of 10%. That happens, only if you and only you alone personally has 100 points a month. In 10 months you shall be able to reached the rank of Supervisor and enjoy 10% rebate on your own purchases.
#2 : Another compensation plan does not allow accumulation of points. In the same example above, you will never reach the rank of Supervisor unless you get some people into your organisation or that you collect 1,000 points in one single month.
Total Pay-out Rate
Total pay-out rate is the total percentage that a network marketing company will pay in commission to distributors of the company from the total volume points done. Your understanding of the total percentage and where it is set in a compensation plan will provide some guide to your intention. Questions you should ask about the percentages:
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What is the total pay-out rate that the compensation will pay to the distributors?
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How much of that total pay-out rate is front-end and how much is at the back-end?
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What does it mean to have higher front-end percentages versus the back-end percentages?
Assuming that a compensation plan has a total pay-out rate of 50% versus another that has a total pay-out rate of 30%. This means that one plan is paying 50% commission for every volume point done as compared to another that pays 30% commission for every volume point. Which plan will you want to work on?
What if two compensation plans that you are making an assessment of has 50% total pay-out rate? What will you do?
You need to differentiate, then, how much is at the front-end and back-end. For this purpose, front-end refers to the total commission percentage that will be attributed or given to you as a distributor before becoming a leader or executive.
On the other hand, back-end refers to commission percentage that will be attributed to a leader. Assuming that a plan has 20% front-end and 30% back-end and another has 30% front-end and 20% back-end. Which will you pick?
In addition to the total pay-out rate, you might also want to know what the effective pay-rate is.
