Three Types of Direct Sales Compensation Models

Compensation is the payment or profit given to someone in exchange for a work or sales done to a certain company or business. It could be in a form of salary, incentives, commissions or percentage, benefits and so on. In direct sales industry compensation models are set up as single level or multi level compensation. In single-level compensation plan representatives are paid solely on one’s sales while in multi-level compensation plan they earn commission on both their sales and of those they bring into the company. Direct sales business needs the right compensation model in order to work, MLM software companies offer these plans with a suitable MLM software pricing created for specific clients. There are a lot of variations of compensation plans out in the market and each one of them also has its different MLM software pricing depending on the model and the software company that created it. Each of these compensation plans are extracted from different major types of compensation models.

Let’s discuss 3 types of compensation models. First is the Unilevel or single-level plan this is also associated with the so called stair step break away plan, here the recruits or representatives does not grow or advance in position other than as distributors, so basically they just earn according to their performance without any promotion or advancement. However a breakaway plan is still considered unilevel but with the flexibility to encourage and motivate distributors to perform well in order to advance in rank after meeting a certain goal. Next is the grid or matrix plan the representatives here is limited only to a certain number of recruits. There is practically an automatic filling of spots; usually it works well with companies whose products are used personally by the distributors than being sold to other people. Lastly we have the so called binary or multi-level plan the distributor here is allowed to occupy one or more business centers each limited to two down line legs. Compensation here is based on group volume rather than percentage of sales of multiple levels of distributors. Meaning payment is volume driven and not level driven. Sales are being balanced in both legs to qualify for commissions, which in turn are paid at certain points when target levels of group sales are met. Here group cooperation is encouraged it requires team work because payout is on group volume and requires balance in each leg to be eligible for payout.

Choosing the right compensation model and software that has the ideal MLM software pricing offered by different software vendors is an important factor to consider guaranteeing success in the direct sales industry.