MLM Compensation Plan Is NOT the Reason WHY But the Result Of
Many people make the mistake of placing way too much emphasis on the mlm compensation plan. They tend to think that the plan is where the money is. The truth of the matter is, the mlm compensation plan is only as meaningful as the strength of the MLM company, the products supporting it and your commitment. How much you make, for how long and how stable is it, depends on the company, its range of products, and how hard you work. The company and its products are the reasons WHY you would make the money. The mlm compensation plan is only the RESULT of the company, its products and the amount of effort you invested into it. Without the company, its products and you, the mlm compensation plan is but a theory of circles scribbled on a white piece of paper!
5Ps of MLM Network Marketing
Before we even start to look at the mlm compensation plan, we must evaluate a number of factors first. So how do we evaluate an MLM Network Marketing opportunity? Every company out there will shout that they are the best, how do we separate the wheat from the chaff? I'm here to offer some broad guidelines which you can use. It's what I call them the 5Ps of MLM Network Marketing, and they are:-
Positioning
By positioning, I refer to your personal expectations towards this business. A person seeking long-term, stable and high profits will choose a very different company from a person seeking short-term, speculative profits. Be sure to choose a company with a mlm compensation plan that is in line with what you want.
Principle
This refers to network marketing company that you work with. This is the BIGGEST risk in MLM because if the company goes bankrupt, you would have wasted a lot of time and money and gotten nothing! You will not have passive income, or a business that your children can inherit. All these can only happen if the company is still around long after you are financially retired! The mlm company faces the same challenges as other traditional businesses, so you need to analyze the mlm company, the same way as you would do due diligence before you invest in any businesses.You will need to consider carefully each and every one of the following critical factors:-
1) Financial Stability Is the company conservatively financed, debt-free and cash rich? Do they have a good credit rating with Dun & Bradstreet? I have seen many mlm companies gone under because they were expanding too fast but under-capitalized, and their growth literally killed them.
2) Organisational Structure Who are in the management? What is their mission? How is the management structured to support the company and grow it? Does the management have a proven track record for turning bad situations around?
3) Culture From my past experience, mlm companies with great corporate cultures tend to attract great leaders in various fields to open up their minds and join network marketing. People feel proud to be part of something great. I have seen people of high social status (multi-millionaires, big businessman, ambassadors, doctors....the rich and famous) join mlm, not because of the money, but because of being able to do good and help less fortunate people in the world through the charitable initatives of the mlm company. And you really love to have these kind of people in your team because they help to elevate the image and status of your team! Corporate culture is what makes good companies great! What is your mlm company doing to better the world (save hungry children, save trees, build schools, find cure for incurable diseases...)?
4) Experience How many years has the mlm company been around? I prefer companies that have been around for more than 10 years. WHY? Because the economic reality of new start-ups is that only 1 in 100 new businesses is around after 10 years. So how do I know I didn't join the other 99 mlm companies that close shop? Simple. Join the one that is more than 10 years old. Because it will take that many years of experience before the mlm company is stable and is able to grow from strength to strength.
Wouldn't the market be already saturated by then? This is an economic myth that is propagated by people who are not in business! Let us look for answers outside the at MLM industry: - Christianity and Buddism have been around for thousands of years but not everyone is a Christian or Buddist- Coca Cola is around for more than 100 years, yet not everyone drinks coke- There are already so many engineers, lawyers, doctors etc, and still universities are churning out more!
The whole theory about saturation rests on the assumption of a static unchanging market. The assumption is wrong because new products are constantly invented, creating new markets, new distributors and new profits. Nobody has a laptop 30 years ago, nobody has a mobile phone 20 years ago, nobody has a digital camera 10 years ago, nobody has a blog with Google Adsense 5 years ago, nobody has an Xbox 360 3 years ago.....you get the idea. New products = New markets. The day the market saturates is the day the human race has stop innovating.
The point is to find an experience mlm company of more than 10 years that constantly innovate and roll-out new products!
5) Transparency With all the hype going on in the mlm network marketing industry, transparency is of utmost important because you want to find out if the company is telling the truth. This can occur through monthly meetings with executive level distributors and quarterly meetings with high-pin leaders. Of course, the ideal would be for the MLM company to be a public listed company because you can look through its annual report and find out what is the cost of products (the higher the better the quality), how much commission is really paid out (we'll talk more on this below), how much money is spent on R&D (ensures continual roll-out of innovative new products) and many more insights.
6) Growth Potential There are only 2 ways for businesses to grow. One is mentioned above: by innovating and rolling out new products. The second method is through geographical expansion. You want an mlm company that is more than 10 years, but has still many huge markets (like China and India) that it has yet expand into. You want to find a Blue Chip-type mlm company with a growth story: the mlm-equivalents of McDonalds, Coca-cola, Gillette and the likes.
Product
To sustain continual passive income in mlm network marketing, the product plays an important part of the puzzle. There are 3 factors to consider when evaluating products:-
1) Many Star Products to Sponsor Builders There should be more than just one single star product in the entire range of products. Each star product should have a unique opportunity story that helps you sponsor new business builders. Each star product is a sponsoring platform by itself to target different people with different needs. Many star products will provide you with many different weapons, each with its unique strengths and weaknesses, to penetrate the market from different angles.
2) Wide Range of Products to Service Customers Some people may need to remove wrinkles, some may need to grow hair, some may need to lose weight while others want to relieve their painful arthritis joints. This will have a large impact later on your mlm profits, because after you build up a large consumer network, you would want to move as many different kind of products through the same network to generate more income for you! It's like building a highway once, but charging a toll-fee on all the different types of traffic like cars, trucks, buses, motorcycles going through it!
3) Repeat Consumable You want a product that customers use everyday and re-order every month. Because only with repeat orders, will you have a steady stream of income month after month. Remember, you want to plant fruit trees that bear fruit year after year with minimal maintenance effort. You don't want to plant cabbages that you have to keep planting and harvesting and planting and harvesting.....
The key question to ask is "Will consumers continuously use your products, even if they are not building the network marketing business?"
Plan
Now that we have covered the Positioning, Principle and Products (you, the mlm company and its products), it is more meaningful to discuss the mlm compensation plan. The key in evaluating a mlm compensation plan is reasonable payout. The mlm compensation plan cannot pay out too high and also it shouldn't be too low.
Generally, a mlm compensation plan that pays out between 40%-60% of revenue is reasonable. Why? Because if mlm compensation plan pays out less than 40%, it's probably not adequately rewarding your effort. On the other hand, if it is more than 60%, the product may be overpriced.
MLM Network Marketing save on advertising expenses and the middle man, hence MLM products should be CHEAPER and its quality HIGHER than those found in retail outlets. If it is more expensive, the product might as well be sold through traditional distribution channels because the average cost of distributing products through wholesalers-resellers-retailers is only about 60%.
Also, if the mlm compensation plan pays out more than 60%, the mlm company may be spending way too little on making the product (which affects quality) and R&D (which affects new products roll-out and future competitiveness). All these will come back to haunt you as high rejection rates, customer complaints, low customer retention and ...no passive income.
Proven System
We have discussed this previously: an
Online Marketing System
and a
High-Touch Training System.
Without an effective online Marketing System and an efficient High-Touch Training System, it would take a super-human effort to qualify for the maximum possible bonus in the mlm compensation plan. A proven system is so important, because of the education, tools, support and procedures it provides in building a huge successful international network marketing organisation. In fact, choosing to join a proven system and team is more important than choosing the mlm company itself. A proven system is probably the single most important factor that determines your success in the mlm network marketing business.
Next I will share with you my secret of success. I'll give you a glimpse of my choice of Online Marketing System and High-Touch Training System and how you can also use it to create your success story in MLM network marketing. On to Fact 7 of the 7 Hard Facts of InterNETwork Marketing.
Committed to Your Freedom,
Willy Lim, "Bridging InterNET to NETwork Marketing"
