 |
|
|
|
|
|
          |
|
 |
 |
 |
 |
|||
|
Compensation Lies Forget all of the outrageous product claims that can be heard when you release hordes of over zealous, under trained sales people loose on a community with the vision of easy money clouding their judgment. Well, OK. Don't forget that. That is actually rather scary all on it's own. Just forget it for now because we are going to address the largest category of MLM lies, Compensation Plan Lies. In the bid for the souls of unsuspecting distributors many MLM companies and even more Dream Weavers have developed some rather sophisticated tactics to get you to believe things that are simply not true. Namely, that anyone can make fistfuls of money working a loosely defined business plan in anyone of a thousand different MLMs. If this were true everyone would know at least one of these MLM success stories. For about 5 years now when people would ask me what I do I would answer "You ever hear of those people who were just trudging along trying to make ends meet when suddenly the got involved in Network Marketing and in a short time were living their dream lifestyle?" People would chuckle and reply with something like "Yeah, right." and I would then say "Well, I'm one of those stories." Most people thought I was joking, others were dumbfounded, they didn't believe it was possible. I never once heard "Oh really? Yeah I have another friend who lives in .... who does that too." Lies about the compensation plans are literally the currency of the MLM dream machine which keeps it running from year to year (our greed is what greases the wheels). One of the biggest illusions is the Potential Pay out trick. You will hear the Dream Weavers and even the Spell Casters boasting about the #1 rated plan in the industry, of the most lucrative compensation plan in MLM while they spew numbers ranging from about 65% to 80% being on the table just waiting for you to pick it up. The fact is that no MLM company pays out the full potential of the pay plan. They simply can't, even if they wanted too. Lets assume a company has a pay plan with 5 levels of unilateral compensation and 5 generations of generational over rides. Who is the company going to give the remaining commissions to of a guy who is two levels deep in the company? There simply isn't anyone to pay. This is known as breakage. If the company had a potential payout of 75% with 10% on each level of the Uni part and 5% for each generation they would have kept the remaining 55% in our example. Most other times the breakage is much more sinister. Companies will throw up all kinds of hurdles to block all but a few distributors from achieving the full potential of the plan. The trick for the company is to let just enough distributors hit the big time to perpetuate the lie while keeping the average associate well away from the end of the rainbow. These hurdles take many forms like requiring an associate to sponsor many front line distributors (I have seen plans that require an associate to sponsor over 50 front line distributors) or requiring x number of your front line sponsors to attain y status in the program before you can move further up the ranks. This is different than just requiring x number of people in different legs from attaining y status, placing the added hurdle of physical position in your organization all but insures that you will not be able to make it. Other qualifications can include, but are not limited to, having excessive personal or group volume requirements, having requirements that certain percentages of your sales come from specific legs or zones of your organization. It is one thing to offer incentives to develop leaders within your organization, it is quite another thing to create barriers to reaping the benefits of massive volume because you have not been able to move others through the ranks. When you are looking at the various qualifications of any plan ask yourself this question; "Is this qualification a carrot or a stick designed to keep me down?" For example a carrot would be an additional generational bonus for developing a leader in your downline who is at your same level. A stick would be either requiring you to have increased personal or group volume in order to get that bonus or a requirement that that leader be a personally sponsored distributor on your first level. Another point to remember when looking at the carrot vs. stick question is to be able to remove your brain from the equation after you have made your decision. The best way to do this is with a calculator. You may not have the reasoning skills required to properly judge the merits or detriments of a specific qualification. An impartial judge would be a stone cold statistic about how many people actually achieve the status or bonus you are contemplating.. The other unspoken trick that goes hand in hand with the potential pay out is the Bonus Volume tactic. Most MLMs have some kind of phrase like Business Volume (BV), Bonus Volume (BV), Actual Pay Out (APO), Point Volume PV), Product Volume (PV), etc. to represent the specific dollar amount for any given product that commissions are actually paid on. While confusing there is actually some merit to this system, especially for MLMs who offer you the opportunity to do business Internationally. The up side of the BV factor is it allows ethical companies to level the playing field across international boundaries for the opportunity by allowing them to adjust the commissionable volume of any given product to reflect differences in exchange rates. So a product that carries a BV of $25 and costs $35 in America may carry a BV of $20 and cost $45 in Japan. This ability to adjust prices and commissionable volumes up and down in various international markets allows a company to maintain a more consistent commission to action ratio which is ultimately more fair to all distributors worldwide. Another legitimate function of the BV factor can be to use it to drive down commissions in order to keep wholesale prices lower. While this is often used simply to keep money from distributors a reasonable percentage of BV to actual wholesale prices of 75-95% can actual be very good for the MLM company, distributors and the end consumer alike. In the highest payout bidding war for distributors many companies have thrown true market value to end consumers completely out the window. The result is decreased sales, lower retention rates and more run ins with regulatory agencies claiming the only reason anyone is buying the overpriced products in the first place is to participate in the "money game" or so called business opportunity. BV numbers lower than 60% of the actual wholesale prices are almost always suspect, but this is not a hard and fast rule. You must compare the wholesale prices to similar products available through different channels of distribution to the BV and also put this ratio into the context of the compensation plan you are considering. For example a company 75% BV on a product that is priced the same at similar products in mail order or even health food stores that has a traditional binary compensation plan will never hold a candle to the same example in a compressed pay plan. By the same token a company with a 95% BV on a products that have wholesale prices well above any other channel of distribution will not fair as well as a company that has a 75% BV with lower wholesale prices. Just incase you are not totally confused yet let me share the following example with you to show you how this actually works in the real world. I spent several years telling people that they made 5% on the first two levels on the Unilateral side of a company with a hybrid pay plan, when in actually what they made was 5% of half of the APO, which for this company ran about 40% of wholesale. So if someone on their first or second level made a $100 wholesale purchase they got $1 from the Unilevel half of the plan not $5 like you would think. So now your thinking "Oh that wicked company" right? Well turns out that this publicly traded company has to file reports with the SEC. They are one of the highest paying MLM companies in the world returning just over 40% back to the field. Unfortunately due to traditional compensation structures only a handful of us collected the lions share of these monies compared to the rank and file distributors who got just about squat. But, at 40% back to the distributors, they were head and shoulders above the other giants in MLM who pay out from 15 - 30% back to their distributors. So as you can see the figuring out of compensation plans is very tricky indeed. Your best bet if you are considering joining a MLM company or are in one now is to sit down and honestly look at several key points and then probably pray for guidance. These key factors are:
Sorry I don't have any clear answers for you on this one. I will spend days looking over a compensation plan to find the strengths and flaws. I am lucky though, I have a decade of experience and a keen mind for math. I know what things work and why. More importantly I know why other things don't work even though they look good on paper or they sound soooo sweet when a Dream Weaver is on a roll. I am hopeful that if you read my views on all of the different types of compensation plans that you will have a better idea on how to keep yourself from getting ripped off by the various scam artists who pass themselves off as leaders of the MLM industry.
|
|||||||
 |
|
 |
|||||
|
Copyright 2000 www.TommyJ.com
This site has been
optimized for both 800x600 & 640x480 screen resolutions.
|
