Binary Network Marketing Pros and Cons Explained

An Expert Perspective

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The Good and the Bad of Binary Compensation Plans

Binary compensation plans are popular with many people in the direct selling industry, but not everyone is in favor. So it would be helpful to have binary network marketing pros and cons explained. That’s the purpose of this short article.

First it’s important to understand the criteria for a good compensation plan.

  • The plan motivates actions that drive product sales and distributor recruitment.
  • The plan is affordable and can be sustained over time.
  • The plan is seen as providing a good income in a fair way.
  • The plan is easy to explain.

The first criterion is the most important. The real function of a compensation system is to stimulate the activities that lead to growing sales and distributor recruitment. This is why many plans can appear quite complex: the actions you are trying to encourage will be different according to where distributors are positioned in their organization. As they advance in the ranks they will change their focus from selling products to recruiting distributors and eventually to leading organizations.

Affordability is very important: if your plan pays out too much you risk sabotaging your business. It’s also critical that your plan is seen as fair to everyone and gives ample rewards according to the efforts and accomplishments of distributors.  

“Easy to explain” is a good criterion but doesn’t imply that the plan has to be simple in its structure. You don’t need to be a software engineer to use a computer. What matters is that you find a way to explain the plan that everyone can understand. This means you only want to teach the key points of the system.

What Is a Binary Plan?

Before we can get binary network marketing pros and cons explained, we need to clarify what a binary plan is.

All direct selling compensation plans reward distributors for selling products to customers. Rewards are also paid for sales that result from the activity of distributors that they have added to their organization. This principle can extend down several levels.  The people directly recruited by a distributor are known as the “frontline”. When frontline distributors recruit new distributors, these create a second tier, and when they add new distributors, that results in the third tier, etc.

In many compensation systems , there is no limit to how many people distributors can recruit in their frontline. This is one of the ways that binary plans differ. Only two people are allowed in the frontline. Further additions are placed beneath these two, results in two “legs” which are sometimes called the “power leg” and the “inside leg”. Commissions are usually only paid on the power leg.  Or rather, pay is based on matching the volume of the “power leg” with the available volume in the other “inside” leg. The distributor’s own activity will grow both legs, but so will the activities of those positioned above and below the distributor.

Binary Network Marketing: Pros

One of the major pros of the binary plan is its simplicity. That makes it easy to explain without much effort. New or prospective distributors quickly understand how the whole system works. Distributors find one feature of the binary plan especially attractive: that they can be paid to unlimited depth. In most other systems (for example, unilevel or stair-step plans) bonus payments cease six or seven levels down. Binary plans often cause rapid growth. That’s very exciting for distributors and of course it appeals to companies, too.

At this point, you may be thinking the case for a binary plan is very strong. However, our objective here is to have binary network marketing pros AND cons explained. So let’s look at the negatives.

Binary Network Marketing: Cons

Even the best binary compensation plans have their downsides. Although there have been some highly successful companies with binary systems, on the whole binaries tend to cause more enterprises to fail than other compensation systems. This is the other side of rapid growth. Organizations swell very fast, but the system doesn’t create lasting satisfaction for the distributors, and everything begins to collapse.

Binary systems often cause people to focus on more making money than providing value in the products and services they are selling. In today’s consumer culture, this can cause a lot of negative feeling that will hurt the company’s brand long term. In addition, regulators are far stricter in requiring that direct selling companies focus on their business of serving customers rather than just recruiting more and more distributors.  Being perceived as a pyramid scheme, which is a hazard with a badly managed binary system, can lead to catastrophic business and legal consequences.

Something else that can go wrong with binary systems is that to protect itself, the company may set a limit on how much distributors can be paid. This is because the company risks overpaying bonuses on a plan with unlimited depth. Ambitious distributors will naturally tend to be disheartened, and worse, if their earning opportunities are capped.

Another problem that can arise is that each upline distributor gets focused on building his or her power leg. They don’t support people beneath them in building their “inside” leg.  When the two legs don’t match, the income results are disappointing. The net result is that binaries tend to have a high churn of distributors, which over time is bad for business.

To Sum Up: Binary Network Marketing Pros and Cons Explained

Binary plans will always have a place in the direct selling industry, but in most cases the cons outweigh the pros.  What can make a difference is creating artful adaptations that offset the negatives. With skill, you can combine a binary with a unilevel system or check-match incentives. The goal is to combine the benefits of fast growth that can be stimulated by a binary system with the stability that more traditional systems provide. Sheffield excels at this kind of hybrid customization and it’s an approach we are likely to recommend if you choose to adopt a binary system.

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How Sheffield Can Help

The Sheffield Group is known throughout the direct selling industry as the leading authority on MLM compensation plans. Over the past 30+years the Sheffield team have launched or advised more than 1,000 direct selling companies. They’ve helped their clients select the optimum compensation strategy and then provided customized solutions that match their unique needs. Sheffield is ideally positioned to help you have binary network marketing pros and cons explained.

Beyond that, Sheffield will offer detailed advice, and introduce the best resources, addressing all the important areas your company needs to consider: product, marketing, distributors, operations, and finance. Take a look at the scope of services and resources the Sheffield Group can offer your company:


  • Concept and Product Review
  • Compensation Strategy
  • Marketing Strategy
  • Sales Pathways
  • Product Positioning
  • Distributor Recruitment Strategies
  • Financial Modeling
  • Culture Development


  • MLM Software
  • Branding and Design
  • Website and App Development
  • Online Positioning and Marketing
  • Social Media
  • Executive Recruitment
  • MLM Law

Your Next Step

Still seeking to get binary network marketing pros and cons explained? Ask the experts! Contact the Sheffield Group for a free initial consultation. To make an appointment, simply call us, or click the Message link below.

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