A Brief Review of Network Marketing Compensation Plans

Perhaps the most popular type of network marketing plan, it has several components. Distributors are either managers or non-managers. Distributors are compensated via overrides and possibly bonuses.

Override commissions can come from the non-managers and managers in a particular manager’s organization. Think in terms of overrides that a manager receives from his non-managers as commissions that a sales manager would receive in any sales organization.

The overrides a manager receives on the managers in his organization are often referred to as “generational overrides.” Typically, most network marketing companies will compensate down to at least three generations of managers.

Bonuses are what the term implies. If a manager exceeds specific sales volumes, then he receives a certain percent commission on that volume. Often the volume attributed to the bonus cannot come from those in the distributor’s organization that have reached a certain rank in the organization. Thus the term “breakaway.”

As the term implies, this type of plan forces an organizational structure in the form of a matrix. A distributor can only have a specific number of people on his first line. If he personally recruits any additional people, he must sign those new distributors up under people on his first level. Commissions are paid on sales volume down a certain lelvel within the distributor's matrix.

Each distributor has only two legs on each level. When both legs achieve a specific volume in sales, the distributor is paid a fixed amount. When the sales volume in each leg is the same, commissions are paid based on an incremental plan.

Probably one of the better types of plans, but also the most complex, the hybrid plan attempts to compensate new distributors as soon as possible while rewarding distributors who build strong organizations. Note that in network marketing a strong organization is one that generates a lot of sales volume.

A hybrid plan has two plans. One plan will pay commission on sales volume generated by the distributors in one’s organization. Most hybrid plans will pay a commission on sales generated at least 7 levels down.

The other plan will be a bonus structure based upon the performance of distributors in one’s down line who are actively building organizations under the distributor.

As you can see, a hybrid plan can be very lucrative and typically one receives two different checks a month – one for sales volume generated by down line distributors and one for bonuses received for the business builders in one’s organization.