Binary/Unilevel Hybrid Compensation Plan by Rob Sperry
Anyone who has studied binary compensation plans probably has heard a wide variety of opinions. That’s no different than with any compensation plan. There are strengths and weaknesses in every plan. Most companies pay out about the same 35% to 45%. When they say they payout 50% plus, they are basing it on a percentage of commissionable volume, which comes to between 35% and 45% when based on total revenue. The goal of this article is not to describe how the plan works specifically but more to discuss the strengths and weaknesses. My goal is to not tear down any other compensation plan but to point out some of the strengths of the binary/unilevel. Just about every company feels their plan is the best and that the other plans aren’t even close. There are definitely many different positive ways to skin the cat or in other words there are a bunch of different comp plans that are great. Too often our industry has gotten caught up on building whatever they are a part of and tearing down whatever they are not apart of. The keys to every compensation plan are where the money is allocated and what compensation plan is the best fit. Although I personally am of the belief that the better the compensation plan the more people it will fit.
Many studies conducted in the network marketing industry have shown that the average distributor sponsors 2-3 new distributors into their business. This is important to understand because 90% or more of the people in this industry are part-timers. What is also critical to understand is that what works in the network marketing industry is what duplicates. These findings mean that it would be very difficult for 90% or more of the distributors to be successful using some of the older compensation models that require distributors to recruit at least 6 or more frontline distributors to see a return. The other aspect to consider is with a down economy, most Americans have massive debt; it is even harder for a new distributor to commit to full-time. That being the case the industry has evolved to where a compensation plan has to accommodate the part-time network marketer. If the part time distributors are taken care of then those who aspire to make big money have as much or more of an opportunity to do so because they will naturally create more duplicable volume.
Mathematicians as well as company owners and top distributors saw these studies and the Binary plan was born in the 1990’s. This was created to give everybody a fair chance of success. Because the Binary Compensation Structure only allows the sponsoring of 2 frontline distributors it meant that network marketers who recruited even less than average still had the potential to achieve financial freedom using this compensation model. Additionally the binary compensation plan was developed such that if a new recruit is really struggling to build their downline it is in the interest of their upline distributors to give them as much help as they can. In other words the goal was to create MORE teamwork. Everyone wants a residual income but most of the time the outsider looking in doesn’t believe that to be possible. The binary compensation plan gives the average person (part-timer) a greater chance of making a residual income. Those who are interested in making the big bucks also increase their chances of doing so as they now have a compensation plan that will help the masses. As I alluded to above the best way to become successful is to help a lot of people have some success.
Before I go into some more of the strengths of the binary/unilevel hybrid compensation plan I wanted to cover a little bit more of the history as well as some of the pitfalls. Unfortunately in the early 1990’s there were several companies that gave binaries a bad rap. Those companies’ problems weren’t the compensation plan. It was the fact that they were frontloading as well
as solely promoting a compensation plan without making the products an important part of the foundation. Read the following article that gives some great insight on the history of the binary compensation plan: http://www.marketwaveinc.com/viewarticle.asp?id=32. Also notice that the author says this “Personally, I have no great affinity towards the conventional binary plan (although I’m a huge fan of the binary/unilevel hybrid concept).”
I agree 100% with the author. I am not a huge fan of the conventional binary programs. The new binary/unilevel hybrid concept has caught on fire in the industry. It has taken the simple aspects of the binary, with just two legs to build, that everyone likes, and adds a unilevel recruiting aspect. The biggest issue with the binary compensation plan is that it is so simple that sometimes distributors aren’t as incentivized to recruit. The newer binary/unilevel hybrid programs have corrected that problem with personal enrollment trees. In short there is the binary downline as normal but there is also a secondary downline that the company keeps track of made up of people who are personally recruited. As they become leaders and as those leaders produce leaders the recruiter gets paid accordingly. Again I want to reiterate the biggest downfall of the binary is that it is promoted as easy! Yes it is much simpler. Yes I believe the part timer can succeed much more easily but as always it is still hard work and should be promoted as such. Otherwise it is a disservice to the recruiter and more importantly to their downline organization. There is no such thing as easy.
Another great point is made by the author of the above link “Companies today that employ binary or binary-hybrid plans, such as Usana, Monavie, Vemma, Mannatech and Market America, are all considered safe, legal companies and, with a combined history of over 50 years, have had no legal challenges specifically to their method of compensation. The legality of a network marketing opportunity has little to do with the design of their compensation structure and everything to do with the motivation for buying their products. History has shown us, over and over, that this applies to all companies equally regardless of their type of compensation plan.” Bigger companies that rip on the binary compensation plan either don’t fully understand them or use the bad examples from the early 90’s as scare tactics. I find these scare tactics very distasteful. Don’t you think there is a reason why newer companies don’t use the old compensation plans? Those that have older compensation plans may tout how many new successful distributors they have which you would expect from a huge company. That isn’t enough to justify that their compensation plan is a great one. Each company will inevitable have different strengths that drive their business. For some it may be their leadership while others it may be their product. Obviously the goal for each company is to strive to have the best of each. All companies I have studied believe they are different and they do indeed have the best product, leadership, systems and compensation plan. That is normal and will never change.
THE ADVANTAGES OF THE BINARY/UNILEVEL HYBRID
1. Urgency equals wealth. This was one of the first principles I was taught when I started in the network marketing industry. We all work off of deadlines. We had or have deadlines in school, work and just about everything in life. The binary compensation plan has a weekly deadline which at the beginning can be a little stressful. However, the stress is self inflicted as an individual may work as much or as little as they want. Weekly deadlines create more urgency/focus which creates more wealth. It also creates more long term stability.
2. The next component to the weekly deadlines is that commissions are paid weekly in the binary compensation plan. No other compensation plan does that. They may pay small bonuses for new sign ups but they don’t pay weekly commissions from the volume of the distributor’s entire organization. The world has turned into a world of instant gratification. Weekly commission checks help the new distributor survive financially as well as give them the much needed confidence that the business is real in a timely fashion.
3. Teamwork! When a distributor is new, it is scary to build a business that they know very little about. The more teamwork and support they receive, the better. When the compensation plan only allows sponsoring two people on the frontline, that helps the sponsor to focus on helping their downline. It narrows their focus. In the binary compensation plan, payment is not based on a certain number of levels deep. Distributors are paid until their volume reaches the cap. (Note that once the cap is reached, the distributor is given another position with more income potential.) This concept is brilliant as it incentivizes everyone to help everyone. Compensation plans drive human behavior. When the plan rewards people financially to build their depth based on volume, not levels, more people win. No one wants anyone to roll out of this plan as that doesn’t help anyone. Isn’t that how it should be? Shouldn’t the compensation plan help everyone to succeed? That comment makes sense to
those who have some extensive experience with other compensation plans.
4. To help avoid people rolling out of the binary compensation plan there are no huge minimum volumes required. Most binary compensation plans require a monthly order of around $100 to $200 to be auto-shipped for commissions to be paid to a distributor on the volume on their organization. This enables the masses the opportunity to do the business part time.
5. Simplicity and Targeted Rewards.
• a Binary is very simple to explain and understand
• immediate income with each enrollment
• target specific behavior by paying bonuses
• high end pools that reward successful leaders
CAN YOU MAKE BIG MONEY?
http://www.businessforhome.org/. At least 20 of the top 100 network marketing earners are from companies with some form of binary compensation plan. And almost all of those companies with the exception of one or two are from the late 90’s and on. That is pretty remarkable considering these earners are competing with many top earners who have had decades longer to grow their organizations. Is there big money to be made in the binary plans?
My goal is not to rip on any other compensation plan. Every plan has its strengths and weaknesses. My goal is to point out how the newer binary/hybrid unilevel plans are very beneficial. I have heard leaders and companies say that the compensation plan doesn’t matter much. I disagree. One of the top earners in the industry recently said this about compensation plans, “if it isn’t the most important thing then it is right up there.” I completely agree with that statement. Of course there are many other considerations such as “What are the products?”,Who are the owners?” and ”What’s the track record of the company?”, but make no mistake, not all compensation plans are created equal. Overall pay out means something but the real value is in the details. The industry is evolving as are the compensation plans. There isn’t one true perfect compensation plan. There are many that are great. All have there strong points and weak points. I guess the question is what are you looking for?