It is common knowledge that MLM works on the concept of time leverage. A work to be done by you in 100 days can be completed in one day if you have 100 people under you ( in a chain ) doing one days work. You earn a % of incentive for the work done by each of these 100 people.
Though it is given various names like Network marketing, freelance marketing, chain marketing (money chain in a negative sense), the basic principle is that a happy consumer brings in more customers for which he is getting an incentive. The net work plan or income schemes vary from company to company.
The more reputed companies in MLM in India and abroad are, Amway, Modicare, Oriflamme, Tupperware, Quantum, RMP, Goodways, Placement Services etc. All these companies have web based information system where a member can monitor the growth of his down line memberships, incomes accrued etc. The visible part of the network is a distribution center (for product based MLM) and weekly meetings of members and prospective members to explain the business plan, demonstrate products, recognize the achievers etc.
Increasing agency margins on products
Average margins on first premium for policies like ELSS have gone up in the range of 30 to 40%. This has given the leverage for structuring the insurance sale through MLM. Though a conventional LIC agent is reluctant ( forbidden by IRDA ) to pass on any 5 of his commission to the client, MLM companies , in anticipation of bulk business and cross selling opportunities part with or reinvest a major % of their insurance commission to the members of the network ( as per a business plan ). This huge incentive makes the investment in insurance very attractive for a member, especially those who are in the tax brackets and must invest in tax saving instruments.
Compensation plans
Companies have devised a variety of MLM compensation plans over the decades.
• Unilevel or Stairstep Breakaway plans are the oldest and most popular. They feature two types of distributors -- managers and non-managers -- and three types of pay:
o Baseshop overrides are overrides of managers from their subordinate non-managers,
collectively called a baseshop. This is the same as any other sales organization.
o Generational overrides are overrides of managers from the baseshop of managers
who were previously their subordinate. Most plans compensate at least three generations
of such managers.
o Executive bonuses are commissions for managers who exceed a sales quota. For
example, 2% of the total company sales revenue may go to a bonus pool that is shared
monthly pro rata to managers who exceed $10,000 in that month.
• Matrix plans limit the width of each level in a distributor's group, forcing strong
distributors to pile ("spillover") their recruits over people who did not sponsor them.
• Binary plans limit the width of each level to two legs. Commissions are based on
"cycles," where a distributor is paid a fixed amount whenever both legs achieve a certain
number of sales units each. Commissions are paid incrementally when the sales volume in
each leg matches.
• Elevator or Matrix schemes feature a board or a list on which each distributor pays
in one or more product units to participate. When a certain number of units have been
paid in, the structure splits and the earlier participant receives consideration. The Matrix
scheme article discusses the legality of this plan.
Though it is given various names like Network marketing, freelance marketing, chain marketing (money chain in a negative sense), the basic principle is that a happy consumer brings in more customers for which he is getting an incentive. The net work plan or income schemes vary from company to company.
The more reputed companies in MLM in India and abroad are, Amway, Modicare, Oriflamme, Tupperware, Quantum, RMP, Goodways, Placement Services etc. All these companies have web based information system where a member can monitor the growth of his down line memberships, incomes accrued etc. The visible part of the network is a distribution center (for product based MLM) and weekly meetings of members and prospective members to explain the business plan, demonstrate products, recognize the achievers etc.
Increasing agency margins on products
Average margins on first premium for policies like ELSS have gone up in the range of 30 to 40%. This has given the leverage for structuring the insurance sale through MLM. Though a conventional LIC agent is reluctant ( forbidden by IRDA ) to pass on any 5 of his commission to the client, MLM companies , in anticipation of bulk business and cross selling opportunities part with or reinvest a major % of their insurance commission to the members of the network ( as per a business plan ). This huge incentive makes the investment in insurance very attractive for a member, especially those who are in the tax brackets and must invest in tax saving instruments.
Compensation plans
Companies have devised a variety of MLM compensation plans over the decades.
• Unilevel or Stairstep Breakaway plans are the oldest and most popular. They feature two types of distributors -- managers and non-managers -- and three types of pay:
o Baseshop overrides are overrides of managers from their subordinate non-managers,
collectively called a baseshop. This is the same as any other sales organization.
o Generational overrides are overrides of managers from the baseshop of managers
who were previously their subordinate. Most plans compensate at least three generations
of such managers.
o Executive bonuses are commissions for managers who exceed a sales quota. For
example, 2% of the total company sales revenue may go to a bonus pool that is shared
monthly pro rata to managers who exceed $10,000 in that month.
• Matrix plans limit the width of each level in a distributor's group, forcing strong
distributors to pile ("spillover") their recruits over people who did not sponsor them.
• Binary plans limit the width of each level to two legs. Commissions are based on
"cycles," where a distributor is paid a fixed amount whenever both legs achieve a certain
number of sales units each. Commissions are paid incrementally when the sales volume in
each leg matches.
• Elevator or Matrix schemes feature a board or a list on which each distributor pays
in one or more product units to participate. When a certain number of units have been
paid in, the structure splits and the earlier participant receives consideration. The Matrix
scheme article discusses the legality of this plan.