FAQ About Multi-Level Marketing (MLMs)

MLM (Multi-Level Marketing) compensation plans determine how distributors are rewarded for their sales efforts and the sales generated by their downline team. Compensation plans in MLM can be complex and vary from one company to another, but here are some common elements and concepts found in MLM compensation plans:

• Retail Commissions: Distributors earn commissions on the retail sales they personally generate. They typically purchase products from the MLM company at a discounted wholesale price and sell them to customers at the suggested retail price. The difference between the wholesale and retail price represents the distributor's commission.
• Downline Commissions: MLM compensation plans often include commissions on the sales generated by a distributor's downline team. Downline refers to the distributors recruited by the original distributor, as well as those recruited by the subsequent levels in the MLM organization.
• Levels or Ranks: MLM compensation plans may have various levels or ranks that distributors can achieve based on their sales volume and team building efforts. As distributors progress through the ranks, they become eligible for additional bonuses, overrides, or higher commission rates.
• Group Volume and Qualifications: MLM compensation plans often have requirements for distributors to achieve certain sales volumes or meet specific qualifications to earn commissions on their downline sales. These requirements encourage distributors to build and maintain active teams and generate consistent sales volume.
• Overrides and Bonuses: Overrides are additional commissions that distributors can earn based on the sales volume of their downline team. Bonuses may be awarded for achieving specific milestones, such as reaching a certain rank, maintaining a certain sales volume, or meeting team growth targets. These overrides and bonuses incentivize team building and provide additional income opportunities.
• Breakaway and Compression: Some MLM compensation plans incorporate breakaway and compression features. A breakaway occurs when a distributor in the downline reaches a specific rank, triggering the breakaway from the original distributor's team. Compression is a mechanism to ensure that distributors earn commissions on their downline sales even if certain distributors are inactive or do not meet the qualification requirements.
• Training and Leadership Development: MLM compensation plans may include incentives and bonuses for training, mentoring, and developing leaders within the organization. These incentives encourage distributors to support and nurture their downline team members, fostering a culture of growth and collaboration.