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Binary mlm
Overview:
Binary got its start in the late 1980s during the heyday of stairstep plans. The initial selling feature was that it was much easier to maintain qualifications than in a stairstep, and that it was much easier to understand than the other plans of the day. What could be simpler? You simply sponsored two people and built those two legs. If those two legs generated business, you received commissions. If they generated a lot of business, you made a lot of money! A major selling point was that volume never moved out of your payline, no matter how many levels deep your genealogy went. Of course, when something sounds too good to be true, it usually is, and binary mlm plans turned out to be more difficult than they seemed.
Commission types used:
Most binary mlm plans pay a pool compensation in a weekly pay plan. Distributors have two first levels, and these two legs must each generate an amount of sales volume. If they do, the distributor get his share of the pool.
In the original binary mlm plans, if each of the distributor's two downline legs generated $5,000, then the distributor received $1,500. That, of course, is the simple case. In reality, if the two legs generated more volume or if it took longer than a week, the plan became much more complex to understand. In some binary mlm plans, a distributor is allowed to have multiple centers or multiple positions in the downline, so if they had seven centers, they could potentially earn seven X $1,500 each week, or $10,500 per week.
The binary does an excellent job of paying the mid- to high-end sales compensations and the low- to mid-range sales management compensations. This is its strength, and probably the reason it has survived these many years. It does not do well on very low-end compensations or high-end commissions, but it does very well for the mid-range compensations.
In the last five years, many binary mlm plans have added enroller downlines that are not limited in width and have started paying other compensations in addition to the binary compensations. Sometimes these plans split the compensation between binary and enroller compensations. And sometimes these plans pay binary compensations on some products and enroller compensations on other products.
Binaries pay their downline commissions once a week.
Distributors have to generate downline sales volume that is "balanced" between the two downline legs. When they reach certain levels of sales volume, they receive a compensation check. They can accumulate sales volume in one week or across several weeks.
Original binary mlm companies had the computer place automatically distributors in the downline, a method that created some real problems. For example, if you have two very strong recruiters and they both end up in the same downline leg, instead of one in each, if the mistake isn't caught immediately, there's no way to fix it. This is because other distributors have been placed under those people, and so on. This can be disastrous for a distributor.
Strengths:
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1. Binary does an excellent job of paying the mid- to high-end sales compensations.
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2. Binary also does a good job in paying the low- to mid-range sales management compensations.
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3. There is a committed core of distributors who know and love the binary mlm compensation plan.
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4. Its behavior is now very well understood.
Weaknesses
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1. Many of the original binaries were built by promising distributors that their upline would build their downline. This created a welfare mentality.
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2. Most binaries have a maximum upper limit on earnings; some distributors don't realize this.
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3. Placement can be a real problem. If a distributor has only two good downline distributors, and they both mistakenly end up in one leg, it can ruin her business.
distributor builds an organization.
Now that there is a core of distributors out there that understands how the binary mlm works, companies can take advantage of its strengths and put in place measures to mitigate its weaknesses.
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