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3 Things People Get Wrong About MLM Compensation

/ 11.3.2020 / Distributors, News, Organizations

People become representatives for multi-level marketing (MLM) companies for a variety of reasons. Some are looking to fulfill their entrepreneurial dreams without significant startup costs. Others are customers of a product who become passionate advocates for a brand. Still others’ main objective is a desire to make a little extra money on the side. The combination of an independent sales force and a wide range of motivations means MLM companies must get their compensation plans right in order to incentivize sales and inspire long-term success. 

The MLM sales model is unique, with culture and community often mattering almost as much as monetary compensation. Sixty-one percent of MLM representatives say the flexibility to fit work into their lifestyle is what drives them. And 61 percent also cite the opportunity to advocate for the product as a primary motivator. That’s not to say competitive MLM compensation isn’t critical. It is. Fifty-four percent of MLM representatives say they stay with a company because of the opportunity to generate long-term supplemental income.

So how do MLM compensation programs meet such diverse definitions of representative success? By having a deep understanding of what motivates their independent sales representatives and building a compensation program that rewards them. The understanding starts by recognizing – and debunking – three common misperceptions about MLM compensation. 

Misperception #1: One size fits all.

Just like the wide range of representative motivations, each MLM is different. One of the biggest mistakes an MLM company can make is to copy another MLM’s compensation plan. 

Instead, each company should define and design a compensation plan that’s tailored for their particular business and product offering. While it’s okay to borrow elements from other successful MLMs, every element won’t be an exact fit. Along with the type of product or service your company offers, consider which sales channels you’ll rely on, such as party plans, social selling, and e-commerce. Factor in your company’s plans for growth, and structure the plan to reward specific behaviors that support your long-term goals. 

Typically, MLM compensation plans include two main components – payments earned for sales and bonus payments that reward representatives for downline sales as well as milestone achievements. Designing and executing an effective MLM compensation plan is a strategic balancing act between incentivizing your sales team and not paying out too much (or too little!) so that your company can grow and compete. 

Related: MLM Compensation: How to Build the Best Plan for Your Business

Misperception #2: Money is everything. 

Whether representatives are pursuing their MLM careers full-time or as a side gig, competitive compensation is critical, but other recognition matters, too. Effective MLM compensation plans take the non-monetary component of the plan seriously. 

Build in opportunities for representatives to earn ranks and titles as they achieve defined milestones and generate the results that align with your company’s strategic goals and objectives. These milestones can recognize different levels of sales volume, new customer acquisition, or new representative recruitment. The secret is to create parameters that ensure the ranks are meaningful and motivational without being too difficult or easy to achieve. 

Training is another form of non-monetary reward that makes an impact on representative sales success and retention. Along with the baseline training programs your company provides to all representatives, create specialized sales training incentives that representatives can earn. These types of rewards are highly valued. Seven in ten people say that access to training programs influences their decision to stay with a company. Keep in mind – a 10 percent increase in rep retention results in estimated revenue growth for the MLM company of 49 percent over ten years.

Plus, don’t forget about the little – and essentially free – ways to reward your reps. Personal congratulatory notes or shout-outs during team meetings can spark both loyalty and continued sales success.

Related: MLM Sales Success: How to Motivate and Reward Your Reps

Misperception #3: Good things come to those who wait.

Perhaps the biggest driver of sales is the ability to be immediately rewarded. In other words, make a sale; get paid. For MLM representatives who are highly motivated to earn supplemental income, there’s no better way to spark additional sales. And, for new representatives, it can be transformational. In an industry that sees half of new representatives quit within their first year, MLM representatives who make a sale within 14 days of joining a company stay with that company for an average of six years.

Choose MLM software that makes it easy for your representatives to access what they earn from retail sales. For example, with Wayroo as your MLM software, reps have real-time access to payments. The representative chooses when they want to get paid by initiating a request for payment to their payout card, which they can then use for shopping wherever VISA and Mastercard are accepted, transfer money to their bank account, or purchase additional wholesale inventory. 

cha ching cro ad q4 2020 easier for reps to get paid

To learn more about what Wayroo’s MLM software solution can do for your business, contact us for a demo today. And download our new infographicCha-ching! How well does your MLM payments process measure up? – for more insights about how to succeed in today’s MLM industry.

Scott Christensen

Chief Product Officer at Retail Success

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