BEST MLM MATRIX PLAN
A Brief Guide
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Criteria for the Best MLM Matrix Plan
If you’re looking for the best MLM matrix plan, the place to start is to ask: “What are the criteria for a great compensation system?” Here some of the keys to look for:
- Motivates the behaviors that will drive growth
- Sustainable and affordable for the company
- Seen as generous and fair by distributors
- Easy to explain
The first of these criteria is the most important. This is the true purpose of comp plans: to encourage the precise activities that will encourage sales and recruitment. This is why most comp plans have some complexity: the appropriate behaviors change as distributors rise through the ranks, shifting their focus from selling to teaching and leading.
Sustainability is essential: your comp plan must be carefully calibrated to ensure that you do not find yourself paying out more than the company can afford. Sustainability also means that distributors continue to have faith in the compensation system and trust in its fairness.
This leads to the next point. The most successful companies in direct selling are seen as generous in their commissions and bonus plans. Even more important, distributors feel the plan is fair. That means the biggest rewards go to those who make the greatest effective efforts. We’ll be looking at this point in particular when we consider the best MLM matrix plan.
“Easy to explain” is important but this can be a trap. The most complex plans can be easy to explain if you avoid trying to teach people more than what they need to know. You don’t need an engineering degree to drive a car!. In presenting any comp plan — and this includes the best MLM matrix plans — you should only teach distributors what they need to do to get rewarded at each level. More than that and the training becomes distracting and confusing, which weakens faith in the plan.
What Is a Matrix Plan?
In all direct selling compensation plans, distributors are rewarded for the sales of products and for the sales made by people they recruit into their organization. When it comes to recruitment, the “frontline” comprises the people directly and personally recruited by the distributor. When those in the frontline recruit distributors, these form a second tier, and when they recruit people, that forms the third tier. And so forth.
Normally, compensation plans allow distributors to recruit an unlimited number of frontline people. This is where matrix plans are different. They only allow a set number of frontline distributors: that may be two, three, four, or five. Once those slots are filled, any new recruits are placed in the second tier: a spillover effect. That means the frontline distributors benefit from having people placed under them. They get paid on sales made by people in the second tier, even if they didn’t personally recruit them.
Matrix plans have a certain number of levels on which distributors get paid. For example, a plan may be 2 x 12, meaning two people on each line, and with payouts coming from sales all the way down to the 12th level. Of course, there are more distributors on each line: in a 2 x 12, each of the first 2 generates their front line of 2, making a second tier of 4, and so forth.
Note that additional levels can be added below the bottom level (the 12th in our example), but the distributor at the top won’t be paid on them.
The matrix plan can be a very attractive recruiting tool. It’s exciting to say to potential distributors: “You’ll have people placed under you, and you’ll be paid on their sales, even if you didn’t recruit them. In other words, the upline helps build the downline.”
The other key benefit of the matrix plan is that it’s very easy to explain. Given that this compensation system comes in many different formats, the question remains: What is the best MLM matrix plan?
The Forced Matrix
In a normal matrix plan, gaps may appear in the downline organization where some distributors are less active. What does this mean for the distributor at the top of an organization? Over time, most sponsoring activity will occur beneath the bottom level of the plan, meaning the distributor won’t be paid on that activity. This can be very frustrating: to see a huge organization grow under you, and not receive any financial benefit.
One solution is the forced matrix. In this version of the plan, every level must be filled before distributors spill down to the next level. Is the forced matrix the best MLM matrix plan? Not necessarily! The real-world effect is that to fill the matrix, distributors must do most of the sponsoring themselves: they don’t get to benefit from the team effort which is one of the hallmarks of a good direct selling opportunity.
Even the best MLM matrix plan has its downsides. Here’s the key problem with this type of plan: it doesn’t necessarily motivate the best activities for growth. In the case of the forced matrix in particular, distributors may be paid for doing nothing. This creates resentment among those who are doing the work of selling product, which is the only activity that creates revenue. Without a forced matrix, there’s the danger of the opposite problem: doing a lot of work without getting paid, in other words, building a huge organization most of which fails to pay the distributor who created it.
So, is there a solution that can work?
The Best MLM Matrix Plan
The best MLM Matrix plan isn’t necessarily found by comparing different matrix configurations. What makes a real difference are the other features built into the plan. Matrix plans can be greatly enhanced by introducing the principle of compression: this means that when a distributor at a certain level fails to qualify for remuneration, those under that distributor are temporarily rolled up so they are treated as if they were direct to the one above the “missing” distributor.
Another proprietary technique that has been designed by Sheffield is called “expansion”. This allows highly productive distributors to “re-enter” a matrix that has been filled and get paid on many levels lower than would normally be accessible. In some situations, a matrix plan can be further enhanced with generational bonuses and an additional company-wide bonus pool for the most productive leaders.
The reason this combined approach is the best MLM matrix plan is that you can encourage different positive behaviors at different levels of the organization — the most important function of the compensation system.
That said, the choice of plan, as we’ve noted, depends on the product or service the company is selling. This is another important criterion to consider when you’re on the lookout for a good compensation solution. Matrix plans tend to be good for subscription-type products, especially in affiliate-type programs which are designed more for part-time customer-referral activity. Here, the best MLM matrix plan may have less levels, and its simplicity becomes a real asset in communicating the benefits of your business model to everyday consumers.
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How Sheffield Can Help: Your All-Round MLM Experts
The Sheffield Group is recognized as the foremost authority on MLM compensation plans. With over 30 years’ experience, this team has launched or advised over 1,000 direct selling companies on their comp plans and related issues.
Sheffield can help you find the best MLM matrix plan for your business, if that’s the appropriate solution, or guide you to a more fitting solution if not. In addition, Sheffield will provide specific guidance, and introduce the best resources, for covering all the key aspects of your launch: product, marketing, distributors, operations, and finance.
Take a look at the scope of services and resources the Sheffield Group can offer your company:
SHEFFIELD’S IN-HOUSE CAPABILITIES
- Concept and Product Review
- Compensation Strategy
- Marketing Strategy
- Sales Pathways
- Product Positioning
- Distributor Recruitment Strategies
- Financial Modeling
- Culture Development
SHEFFIELD’S EXPERT NETWORK
- MLM Software
- Branding and Design
- Website and App Development
- Online Positioning and Marketing
- Social Media
- Executive Recruitment
- MLM Law
Your Next Step
Looking for the best MLM matrix plan? Before you get locked into a solution that may or may not serve you, contact the Sheffield Group for a free initial consultation. To make an appointment, simply call us, or click the Message link below.