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Critical Compensation Features in a MLM-Network Marketing System

Mon, 13 Nov 2017 18:33:00 GMT

Evaluating compensation systems for a Multi-Level (MLM)

When evaluating compensation systems for a Multi-Level (MLM) and/or Network Marketing organization you should research the following issues:

Is the compensation system reliable (how long has the system existed—how many millions/billions of dollars have been paid using this system?
Is the system flexible (can the compensation plan be modified quickly without significant coding)?
Can the system properly reward multiple groups (personal producers/writing agents, team builders/override commissions, new associates with small teams, experienced leaders/builders with massive teams)?
Is the system web-based (can you access/edit the data from any device with Internet connectivity)?
Is the system secure (will your data be properly protected)?
Is the commission statement clear and easy to understand?
Are the executive reports accurate, fast, and reliable?

Let’s answer each of the above questions point by point:

Is the compensation system reliable (how long has the system existed—how many millions/billions of dollars have been paid using this system?
Fining a company who has successfully built and managed compensation systems over a period of many years is critical. Perhaps even more important is the number of people that have been paid and the amount of commissions that have been calculated. The best companies have been around for many years and have successfully paid hundreds of thousands of agents billions of dollars.

Is the system flexible (can the compensation plan be modified quickly without significant coding)?
You want a compensation system that can pay your compensation plan—not just select from a list of generic options. Look for a “rules based” system that can be changed quickly and without coding by the software developers. The most successful systems allow agents to be paid for goods and services sold as a level, generational, and pool payment.
- Level Payments (personal business). Levels allow you to create one or many (15+) levels that distinguish your best performers from your newest agents. Each level may be assigned a different compensation payout for the goods and services paid. For example, a new “Jr Associate” level may earn a 50% commission on products and services sold. A more experienced salesperson might be paid at the “Sales Director” level at 80% commission for personal sales.
- Level Payments (override commissions). If there is a broker/agent type of relationship between salespeople, it is necessary to pay the “broker” a percent of the commission earned by an agent that actually made the sale—this is called an “override commission”. To earn an override commission, the broker must typically be at a level higher than the writing agent. For example, assume that a new “Jr Associate” with a 50% contract made her first sale. This Jr Associate may have been trained and supervised by a “Sales Director” at an 80% contract. The Sales director would be paid 30% (80% Sales Director contract minus 50% Jr Associate Contract). This 30% payment for supervision and training is known in the industry as the “spread”. This spread disappears when the Jr Associate is promoted to a Sales Director level and the original supervising Sales Director would no longer earn a level/override commission on the sales of this “downline’ agent.
- Generations. Generations are the way that supervising agents who have trained a downline agent continue to earn a commission even after the agents they trained/supervised are promoted to the same or even higher level. Example, assume that Betsy, a Sales Director, trains and supervises Kevin, a Jr Associate. On sales written by Kevin, Betsy earns an override commission which is the spread between her contract level (80%) and Kevin’s contract level (50%). Kevin is a hard worker and is eventually promoted to the Sales Director level. Any future business written by Kevin at the Sales Director level would not create an override payment to Betsy because they are both at an 80% contract. With a compensation system that allows for the payment of generations, in addition to levels, Betsy would continue to be paid.
  
  After reaching a supervisory level, an agent can qualify for generational commissions. This is a critical feature because it gives Betsy an incentive to continue to train and supervise Kevin. For example, in a traditional real estate broker-agent relationship, the broker has no incentive to promote a real estate agent to the broker position because the broker would cease to earn commissions on the sale of homes by the agent. If the agent hopes to become a broker, he or she would need to leave and join a new agency looking for a broker. With generational payments, the broker continues to be paid on commissions earned by an agent promoted to the same broker contract. These payments are referred to as generational payments because they apply for multiple generations.
  
  Assume Betsy trains Kevin and Kevin trains Lisa. When Kevin reaches a supervisory level, he is a first generation to Betsy. When Lisa reaches a supervisory level, she is first generation to Kevin and second generation to Betsy. If Lisa makes a sale, Kevin earns a first-generation override and Betsy earns a second-generation override. Remember that neither Betsy or Kevin earns a “level commission” on a sale by Lisa because they are all the same level and there is no spread.
- Pools. Pools are typically funded by a small commission off of every sale in the organization. There may be one or many pools. To earn a commission from a pool, an agent must qualify by meeting pool requirements. Pools are typically used to reward agents for outstanding behavior that may be tied to number of sales, quality of business, and training and compliance. Pools offer an organization tremendous flexibility to reward peak performers.

Can the system properly reward multiple groups (personal producers/writing agents, team builders/override commissions, new associates with small teams, experienced leaders/builders with massive teams)?
Many compensation systems and plans do an adequate job of compensating a certain group of agents:

New Agents
Experienced Agents
Top sellers
Top recruiters
Etc.

It is difficult to find a plan that can successfully reward the most senior builders/producers as well as the newest associate. By giving the flexibility to pay multiple levels, generations, and pools (see above), any group of agents can be properly rewarded for their efforts. Find a company that has worked with many different organizations so that you can receive advice on how to setup your comp plan to reward and recognize those team members important to your organization.

Is the system web-based (can you access/edit the data from any device with Internet connectivity)?
Today it is absolutely essential that you and your sales organization can access and enter critical data from any device anywhere you have Internet Connectivity. Make sure that every feature of the system is web-based.

Is the system secure (will your data be properly protected)?
If your system is web-based (and it should be), you must make sure that the system provider utilizes the best security to protect your team data. Look for providers that host their system with the Amazon or Microsoft Cloud. Only the industry leaders can afford the very best tools to protect your data. Amazon and Microsoft are among two of the very best cloud providers.

Is the commission statement clear and easy to understand?
If your sales team cannot see every commission transaction they will assume they were not correctly paid. Look for a commission system that provides charts and reports that have both summary and detailed commission data. This will save your organization hundreds of hours on the phone answering commission questions.

Are the executive reports accurate, fast, and reliable?
You can’t run an organization if you are blind to the details and trends. Look for a system that provides summary and detailed reports and charts to see agency and commission data on individuals and teams. Look for a reporting system that can summarize data as well as well as the ability to drill down the last detail. Get a demo to see their charting and reporting features.

Is Network Marketing a Pyramid Scheme?

Fri, 20 Oct 2017 19:40:00 GMT

You've just been introduced to an opportunity selling product for a multi-level marketing (MLM), Network Marketing, or direct selling company. A friend or family member cautions you that this “opportunity” may be a “pyramid scheme”. Have you stumbled across a scam or a legitimate why to earn extra money? What is pyramid scheme?

The network marketing/MLM industry is, with few exceptions, both legitimate and legal. A legitimate network marketing or multi-level marketing (MLM) business is no more a “Pyramid Scheme” than the federal government or a fortune 500 corporation.

Almost all government, corporate, and non-profit organizations share a pyramid type structure with a single leader (CEO/President) at the top with multiple vice presidents or other officers one level down, followed by mid-level managers underneath, and then salaried and hourly employees at the lowest level of the pyramid. The “shape” or an organization does not make it legal or legitimate.

There is one giant give-away to determine if an organization is an illegal pyramid scheme. An illegal pyramid scheme exists when money is paid as a commission--not for selling products or services--but for bringing others into the organization for a fee. If you earn money by getting people to join the organization, it is a scam and you should run away! If you earn money by selling a legitimate product or service, it is not a pyramid scheme.

How does a typical pyramid scheme operate?

Each new member that joins a pyramid scheme pays a fee which is distributed to those who previously joined the scam organization.
When new members stop joining, the pyramid collapses.
There is no sale of legitimate products or services in an illegal pyramid scheme.

In a legitimate network marketing or multi-level marketing (MLM) organization, commissions are only earned when a product or service is sold.

Network Marketing Organizations

Successful network marketing organizations sell legitimate products and services.

Such as:

Personal care products
Health care and dietary products
Financial services (insurance, annuities, and securities)
Candles, children’s toys, kitchen products and almost every other imaginable product or service.

Does every one of the thousands of network marketing and MLM companies offer legitimate products and opportunities? Of course not! Is the network marketing industry by definition crooked or illegal? Again, of course not!

MLM or Network Marketing Opportunities

If you’re exploring a MLM or Network Marketing opportunity, do your homework and ask the following questions:

Does the company offer a valuable product or service at a fair price?
Have you or would you purchase the product or service offered by the company you are investigating?
Is the compensation plan based upon the sales of products and services and not on bringing others into the organization?

If the answer to these two questions is “yes” it is likely that the opportunity is legitimate. Another important issue to watch out for is a requirement that you purchase a large amount of inventory to sell at later date. Be cautious of any company where new associates must purchase inventory.

If you are willing to work hard and follow the system that has made others successful in the network marketing/MLM business and you use and believe in the product or service, you too can experience financial reward and recognition for your efforts either as a part-time opportunity or as your career. Don’t be afraid to give network marketing a serious look!

The Power of Campaigns to Recruit, Build and Sell

Fri, 20 Oct 2017 18:00:00 GMT

One of the most powerful and effective ways to build teams and make sales is an automated campaign tool. A campaign is a coordinated series of operations designed to achieve an important goal. In this context we’re discussing a campaign tool to assist you in both growing your team and sales. As a member of a MLM or Network Marketing team, your primary goals are to build your organization (recruit), train your organization (build), and to sell products. A robust campaign tool makes these tasks predictable and simple.

Campaign Tools

Let's dive into how campaign tools work. Campaigns are automated actions that take place upon a specific event called a trigger. The trigger can be an event such as a new recruit joining your team, a first commission earned and paid, or the completion of required training. Typically, there are four general types of campaigns: recognition, training, recruiting, and sales.

Recognition Campaign

Let's take a look at a "recognition campaign" in TKT’s PayMaster System. Suppose that Lizzy is a member of your team. Using a campaign tool, you have created a campaign to recognize team members that make their first sale. The trigger for this campaign is a team member’s first sale. In the TKT PayMaster system, the system "recognizes" when Lizzy makes her first sale. Using this sales data, the system automatically sends an email or text to Lizzy with a link to a document, certificate, or even a pre-recorded video from a company executive that congratulates her on her first sale.

Other events that could trigger a recognition campaign include:

Joining your organization
Completing a prospect list
Completing a training sale
Recruiting a new team member
Qualifying for a promotion
Earning a first ";override" commission

Here are other campaign examples:

John is "saved" as a Top 25 Prospect in an online prospecting tool. The system automatically sends as email to John with an approved message and a link to a video on your company opportunity.
Susan joins the company. She is immediately sent a "Next Steps" training campaign via email with a link to a video on how to complete a Top 25 Prospect List.
Lori passes her insurance exam. She will be the recipient of a recognition campaign. The campaign is an automated email with a link to a certificate and/or a congratulations video. In addition, Lori appears on the "Fast Start" Leader’s Bulletin which recognizes new associates.

Campaign reporting tools are available to both agents and home office leaders to track the success of campaigns and associates.

These reports provide data such as:

Who was sent a campaign?
Who opened the campaign?
Who registered for a webinar or a live event?
What was the follow up?

The purpose of campaigns is to automate a "Call to Action" and/or Recognition.

The goal of a prospecting campaign is to motivate the prospect to register to attend a webinar or live event.
The goal of a training campaign is to give the new associate the knowledge, tools, and motivation to take the next step to success.
The goal of a recognition campaign is to congratulate the new associate on the timely completion of an important step to achieving success in the organization.
The goal of a client campaign is to educate clients on products and services offered by your organization. This will result in more sales and better persistency.

By properly utilizing campaigns, your organization will:

Convert more prospects to coded associates
Convert more coded associates to licensed/trained agents (if licensing and/or training is required)
Convert more licensed/trained agents into successful sales people
Improve persistency and/or decrease churn.