MLM (Multi Level Marketing) is a profit-based business model where the products are sold directly to the customers instead of going through the lengthy distribution channel with numerous wholesalers and retailers acting as middlemen.
MLM business model has been in use for decades. Famous brands around the world like Tupperware and Amway have created a profound impact on the markets by following this model. This led to various small, medium, and large businesses adopting the MLM model to achieve success.
With technology becoming an integral part of business, enterprises are using various software solutions to track, sync, and streamline day to day operations. Each business model uses different software based on the requirements of the industry. Similarly, enterprises that follow the MLM business model use MLM software.
Many companies in today’s market offer MLM software solutions. Even startup businesses are advised to Buy Multi Level Marketing Software so that they can have firm control over the operations and also help the agents in being more effective at the job. The software can be customized to suit the specific needs of an enterprise.
Each company offers different customizations and features. Enterprises need to first understand the challenges and targets of their business before finalizing MLM software. Research and analysis are essential to make the right decision.
One important factor to consider is compensation/ commission. Unlike employees who get a fixed amount of salary every month, the agents of an MLM business are eligible for a commission. The amount varies each month based on the number of sales they generate. The agents are paid a percentage of the products’ price as a commission. They are entitled to additional rewards when they recruit new agents, bring more subscriptions, and achieve the targets.
Deciding how to compensate the agents is crucial for the business. The first step is to arrange the agents in a network/ pattern so that their roles and titles are clear. Then, a percentage of the commission is allotted to the position. The calculations and comparisons are managed by MLM software. But for that, the business has to decide which compensation plan it wants to use. While there are around 8-10 types of compensation plans in the market, three of them are famous and widely used.
Binary Compensation Plan
- This is the simplest compensation plan in the market and is also the most preferred plan by many enterprises. It is suitable for startups and large-scale businesses alike.
- The binary plan has two branches- left and right. An agent is placed at the top, and the ones he/ she recruits are added below as two branches.
- In this plan, an agent can have only two members at each level. They the person recruits a third member, the new agent is placed under the left branch. The main agent will get a distributor bonus for all three.
- The payout is unlimited, and the success of the team/ tree of agents depends on each one of them.
Unilevel Compensation Plan
- As the name suggests, there is a single line of the agent network. Spillovers are not allowed in this plan.
- The new members recruited by the agent are added to the next level. However, there is no limit to the number of people who can be added to the same level.
- The commission on the agents’ sales is paid only until a certain depth. This prevents the enterprise from paying every agent an extra commission.
- Since there is no limit to the number of members an agent can hire, the team can be made stronger as more members join the network.
Matrix Compensation Plan
- The matrix plan is a bit complex and can be confusing as the business expands. The network is arranged in the shape of a pyramid.
- The matrix is represented as m*n (width * depth). 3*7, 5*7, 3*9, etc. are some of the commonly used matrix orders.
- If we consider the 5*7 matrix, only 5 members can be added in each level, while the network structure can have up to 7 levels.
- As new members are added to the matrix, the opportunities to earn more commission increase for the existing agents.
When enterprises Buy Multi Level Marketing Software, they are advised to ensure that the software can be integrated with eCommerce platforms, e-wallets, and payment gateways. This allows enterprises to not just calculate the commission but also to send the payments directly to the bank accounts or e-wallets of the agents.
Business enterprises can choose any compensation model as long as they are confident of implementing it for the next few years. While it is not essential, businesses do have the choice of changing the plan and revamping it if the need arises.