MLM Binary Compensation Plans
A binary compensation plan entails an ingenious marketing technique used by firms in marketing. They use this system to market products and services. Such organizational system is used by multi-level marketing firms (MLM). The concept is a relatively simple one, when a new member is introduced into the organization they are assigned to a binary tree. The binary tree contains members who are affiliated to one another. New members join the plan and are placed under the introducer’s chain. The binary tree structure is meant to grow by every new member subsequently introducing another new member into the system.
In the binary compensation plan, a subtree is usually known as a power leg. The subsequent subtree is referred to as a profit leg. The system, as the name suggests contains a dual network built by a team of two individuals. The maximum number of associates that an individual can have on their frontline is two. If this individual, whom I will refer to as the introducer, subscribes other additional distributors into the network, then these new affiliates will be placed under the network but as members of the frontline team of the introducer’s frontline team. The system, therefore, grows and replicates itself in this fashion.
The binary compensation system is meant to profit its members at all levels through efforts of the affiliates’ team members. The chain must continue to grow with new members joining to ensure profitability in all levels. The system is preferred in network marketing as a result of the ease in building a team and a successful chain. A supportive environment is automatically created in which members help other members of their team to build their own teams. This is due to the binary nature of the system, which ensures that all associates achieve success especially in cases where their introducers are hard working and continue to register new affiliates into the system. New members are automatically placed in the profit leg of the introducer, which is the power leg of the introducer’s team members. The team approach is what makes a binary compensation plan very attractive among individuals because there is sufficient support since all team members’ work in unison and synchrony to achieve the same goal and objective.
The compensation plan and formula varies from one company to the next. The basic rule, however, that an individual intending to join a binary compensation plan system is balance. An individual should ensure that they balance the number of individuals on the right and left of their power leg and ensure that this balance is maintained throughout their profit legs. Take for instance, a binary compensation plan where an individual has 700 members on their right and 500 members on their left; the individual gets paid for the 500 individuals as the system uses the highest common factor principle. Additional volumes of 300 will then be lost. Changes have, however, been made in the system recently to ensure that a member gets paid for the efforts and volumes generated in the system; this means that the individual in the above theoretical plan will be paid the commission on the 300 volumes though this will be carried forward. Such change favors those who take on the binary system as a part-time alternative of generating income.
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