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MLM Compensation Plan Sweet Spot They Say, Generational Bonus?
The Generational or Infinity component can show up disguised as quite a few different bonus types depending on the core MLM Compensation plan chosen. A few are common to all three major commission plan types.
The MLM Generational or Infinity Component’s that are common to MLM Binary, MLM Matrix and MLM Unilevel compensation plans are often called by the names, Infinity Bonuses, Matching Bonuses, Check Match Bonuses, and Leadership Bonus Pools.
Infinity bonuses and Leadership bonus pools are usually structured as bonus pools and refer to the same thing. They are often stated like 1% of PV will be shared amongst all the members who reach a particular rank. Often companies will attach 1% to 3 or so different ranks. The higher the rank the more infinity bonuses you partake in. This gives a huge incentive to keep working and keep ranking up to capture the bonus.
The danger of these bonuses for a small company is they can help members assess the health of the company. If only 3 people qualify and they know they are the only ones who qualified, they can do the math to see what sales are. As long as sales going up, no harm done. Then minute you have a sales retraction, even if it is for good reason like it is the summer time, or the Christmas season when MLM Companies traditionally see less enrollments and rely on Autoship volume alone, you can incite a panic. MLM is all about belief, be careful that your commission plan does not give the MLM Members a reason to lose belief.
A great way to stop the reverse engineering of your MLM Company sales is to base the Leadership pool on volume in a quarter, and do not show the calculation or pay it until the start of the following quarter. This accomplishes 2 things. Nobody will be able to figure out in a timely fashion if sales have gone up or down, and a whole quarter has passed since the number they are seeing so it is pretty irrelevant with regards to MLM Company health. The other advantage is it will help retention as nobody will want to miss their auto-ship for fear of missing out on a big infinity bonus.
Matching bonuses can help achieve a generational bonus more in an MLM Matrix, or a Placement Unilevel, or an MLM Binary, vs. a straight Unilevel. The reasoning for this is a Matching Bonus normally means you can earn a % match on the straight Binary, Matrix, or Unilevel commissions your personals have earned. In a binary or a matrix where your personal enrolled member may not be on your front line and in fact could be numerous levels below you, this has the effect of “Flattening” your organization for the purpose of an infinity style pay.
The reason it isn’t so applicable to a NON Placement MLM Uni-level, is they are already flat in that you put all your new members on your front line. A Placement Uni-Level allows you to place members under other members like a matrix does.
The key to making matching bonuses behave generationally is to allow them to be more than 1 level deep. So if you had a 3 level deep Matching bonus based on the personal sponsor tree, you would essentially be saying a member can earn say 20% of the Matrix/Binary/Uni-Level commissions of everybody they personally enrolled, and say 10% of any members their personals enrolled, and say 10% of anybody their personals personals enrolled. In a matrix this means you could easily be earning a matching bonus on members below your matrix pay line. Hence, the use of the term generational.
Matching bonuses then tend to have another variation that employs something called Dynamic Compression to make them even more exciting, IF the company can afford the hit to the overall MLM Commission Payout.
Dynamic Compression means, if somebody you personally enrolled does not earn any money to get a matching bonus on, yet they did enroll someone below them who DID earn a paycheck, rather than earning Level 1 matching bonus on them, you would earn level 1 as they would flow through the empty position created by your personal enrollee who didn’t capture the matching bonus. We will not get into a lot of detail on this method in this article, we mention it here more for you to get a taste of it and to educate so you can talk knowledgeably with your MLM Commission Plan Designers.
The Check Match bonus is very similar to the Matching Bonus in fact often Matching bonuses are called check match bonuses in error. A true check match bonus would mean you pay a % of the personally enrolled total pay check. If you actually did this and the paycheck included the Initial Compensation Component, Residual Compensation Component, and Generational or Infinity Compensation Component it can raise a few difficulties.
The first difficulty a true Check Match bonus would create is that you would need to significantly lower all your payouts to make up for all the money going out in this bonus. This could leave your Initial Compensation Component weak, which is not good for a new member, and it comes to pad the pocket of the leaders. This is bad both in perception and reality.
The other difficulty of a true Check Match bonus is the Check Match bonus would include any personals who earned their own Check Match bonus. You end up with an endlessly iterative commission plan to calculate that falls over once you hit 20,000 members due to the server resources required and the time it would take to complete. You can eliminate the iterative issue by simply saying it is a check match on all BUT check match bonuses. This doesn’t solve the first problem we talked about but it does solve this one.
For Unilevels there is one more very common infinity type bonus called a Title Block bonus. This is in our opinion the worst kind of bonus to do. It is the reason the simple concept of a unilevel ends up taking 30 pages of rules to stop from hurting the MLM Membership at the wrong time.
The easiest way to explain the title block bonus is with a little example.
Let’s say you are a 5 level deep uni-level, and you have ranks associated with earning depth. Say bronze earns up to level 2, Silver earns up to level 4, and gold earns up to level 5. You then have leadership ranks of Platinum, and Diamond. The issue would be, what do you give them if you can’t afford to go deeper.
A title block bonus would allow a member to earn DEEPER than 5 levels. It would be described as, when you achieve the rank of Platinum, you can earn a 2% override on your entire group down to the next qualified platinum. This sounds great but what about when all your legs have achieved a Platinum Member, your bonus would be pretty small as people below you would be capturing most of it. Oh, but you go further to say, once you reach diamond your Title block bonus goes up to 4%. This means you earn 4% of your entire group, UNLESS you are blocked by a 2% Platinum. Then you earn 4% to the Platinum, and 2% after the Platinum… Confused yet?
All good until your main legs all get a Diamond in them… Your income drops again…
So the Title Block bonus sells well, but if it is not fixed in the many ways it can be fixed, as your leaders hit the Blocking portion, they become quite frustrated.
Done wrong the Title Block can cause Leaders to actively sabotage their downlines not to rank up to the equivalent rank as them. A lot of work must be done to stop this behaviour or your days as an MLM are limited.
Any experienced Commission Plan Designer can help you put together a Unilevel with Title Block if you really want to use them that have enough other bonuses to force the member to not sabotage their teams.
That wraps up the Generational and Infinity Components overview for MLM Commission Plans, now we can finally get to the question you all must be asking by this time. “Which MLM Commission Plan Type and which components should I be using!?!”
INS can certainly help to design any MLM compensation plan compensation plan should you need help with yours. We have a generous Share in the risk plan on MLM commission plan design available to all our MLM Software clients.
Contact us today to learn more about INS MLM Software or our other MLM related services or request pricing by Clicking Here.
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