People generally go into business to make money and those who say they are not interested in the money aspect of the game are really just fooling themselves. Therefore compensation plans are very important to any business endeavor as this will be the primary reason to sign on to the company or business. The following are some of the ideal elements that should be part of a good compensation plan.
The Basics
- Determining the accepted market rate of the times is one way of designing a complete and compatible compensation plan. This should start at the very beginning of the lean product cost right up to the cost eventually paid for by the buying customer. The compensation plan should reflect these costs hidden or otherwise.
- Align the compensation plan to the work load undertaken which is relative to the market rate of the time. These should take into account any progressive improvement of sales and performances.
The ideal behind any compensation plan should be that it works as a good ongoing motivator. Goals should be reached because of the prime reason of wanting to be compensated as promised. Therefore understanding the value of a good compensation plan will then contribute to successful sales records.
Though fairly rare, there is also the issue of over compensation. When over compensation occurs, those who benefit from it will no longer find the need to put in 100% effort as there would in actual fact be no need for it. This will also affect those who actually work towards the compensation only to find that it is not adequately designed.
For the internet marketing style businesses there are several avenues of being able to garner revenue through good compensation tools. These may come in the form of retail profits, quick start bonuses, retail bonuses and others.
Unilevel network marketing compensation plan
Unilevel compensation plans have been used for many different kinds of businesses around the world. The network marketing compensation plan also uses the Unilevel style setup and it has over time proven to be quite popular.
Unilevel
In simplistic terms the Unilevel compensation plans works as an incentive to sign up as many different people into the business and getting them to duplicate this action for them. This will effectively create the position of frontline participants, whereupon a commission is generated from the sales made by these people.
As there is no limit set on how many individuals can sign on to be front liners for a particular company this style is encouraged to be duplicated as much as possible, to garner the desired revenue earned. However the commissions generated tend to be smaller when compared to other types of compensation plans.
This minimal amount is usually generated from the amount of frontline sign ups that are active in promoting the business or product which is ideal for those looking to earn money as an added side income.
This type of plan however does pose some difficulties as the ability to convince people to sign on may come from a rather limited pool of people who will also be vying to duplicate this process within the same said pool of people. Generally the more frontline distributors are recruited to join the more the commissioned earned and if there is a good training program in place where experienced network marketers can tap into to encourage the new recruits to be equally effective the results can be limitless.
Using internet tools to help generate the interest in new signups such as internet leads and developing lead generation systems also contributes positively to this Unilevel style. There are also some companies that have tweaked this basic program slightly to allow for further commissions to be paid through partial teamwork achievements.
Stairstep breakaway network marketing compensation plan
In some ways the stair step plan is similar to that of the Unilevel plan. Following the same basic idea it differs slightly in the way the commissions are calculated and in effect is probably much more lucrative for the individual looking to side income and residual income possibilities.
Stairstep
The members are encouraged to sponsor an unlimited amount of frontline people also commonly known as or referred to as distributors. These distributors are then encouraged to further sponsor other and also start marketing the products or services of the company. The sales generated will then create the compensation plans whereby the commissions are paid based on them.
Therefore the higher the sales amounts the higher the commissions paid and even for the main sponsor there is the ability to earn a percentage from these distributors’ sales. Basically denoting the term stairs which is as the volume continues to increase so does the corresponding percentage of compensation incentives paid.
As for the breakaway term part of the compensation plan there are a few other aspects to consider. When a particular individual is able to generate an impressive amount of sponsors and sales alike then there would be a breakaway effect whereby the said individual will split from the original group to start another on its own.
This does in some way impact the original sponsors generated commissioned as it no longer is based on the group that broke away thus causing quite a dent in the original earning s derived. However some percentage of commission is still paid even after the breakaway occurs.
These now come in the form of overriding commissions and bonuses. Generally this is not a style that is considered laid back and less demanding simply because the income generated would be directly linked to the amount of activity within the group and also the rate of new members joining.
Excerpted from the book The Perfect Compensation Plan.
This excerpt has been edited and condensed for clarity.
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