MLM COMPENSATION PLANS

In MLM or direct selling, your company’s success lies in the hands of your independent distributors. They are your volunteer sales force, and keeping them motivated is your top priority. Money is not the only the reward that motivates distributors: recognition, belonging to a community and making a worthwhile difference are also important. But financial reward is the foundation, and getting this right is one of the keys to success for a new or growing MLM.

The True Purpose of Your Compensation Plan

A common mistake is to see MLM compensation like the payment given to employees — a simple reward for work done. This is not how direct selling works. Your MLM compensation plan as a very specific purpose: to motivate the behaviors that will maximize sales long term. The challenge here is that the ideal behaviors change as a distributor rises through the organization. That means your compensation plan must be calibrated to encourage different activities for different people. How well this is done can make a critical difference to the long-term success of your company. Weakness in the design, which fails to motivate optimum behaviors, leads to weakness in sales. Conversely, excellence in MLM compensation plan design is one of the primary drivers of revenue growth.

Hoping for a “Simple” MLM Compensation Plan?

MLM compensation plans cannot be simple, or to quote the famous adage: they should be as simple as possible, but no simpler. Company founders unfamiliar with direct selling often say: “We want a simple comp plan.” But would they say to a car dealer, “I want my car to have a simple engine”? Of course not. Everyone understands that the modern car engine is a complex piece of machinery. That doesn’t mean driving has become more complex. On the contrary, in many ways it means the opposite.

Simplicity is important, not in the design of the plan, but its explanation. To use the car analogy, you want your distributors to push the start button and step on the accelerator, without further thought about how the “engine” of compensation works.

A new distributor doesn’t need to know the details of your comp plan and will be simply overwhelmed if you try to present them. The distributor needs to know the answer to a different question: “What actions must I take to make money fast?” This is where your communication to distributors need to focus. If they consistently take the right actions, they will find the money arriving in their mail box. Financial reward reinforces the action and encourages them to repeat it. This is how the MLM compensation plan is supposed to work.

The Sheffield Group is expert not only in designing MLM compensation plans, but in providing tools and advice that help distributors understand just as much as they need to know to be successful.