Science Behind the Pay Plan - Page 3
It is important for a network marketing organization to contain a balance of tier participants as well as a balance of the different types of individuals. You can control this balance by selecting the right program, with the right features, and by promoting these features correctly. A great number of networkers waste a tremendous amount of time promoting programs and features that will defeat them in the long run. You can overly promote a positive feature and create the wrong expectations in your distributors. For example, you may overly promote a system that could have been a support to the efforts of the marketer. By over-emphasizing the system, the marketer fails to develop his skills because he depends on the system or support to create success for him. You can overpromote a pay plan to the point that the marketer has unrealistic financial expectations. The marketer may drop out because of these expectations, whereas, he may have stayed in the program and achieved success if the program was promoted correctly.
The right program promoted correctly will naturally build a strong organization. First, the program should have organizers, strategists, and foundational members. These individuals influence overall company direction and strategy. Secondly, there must be senior and junior leaders who are the "movers and shakers." These leaders provide "in the field" leadership and motivation. Next come the moderately experienced networkers and part-timers that represent a broad range of income requirements from a few hundred dollars to a few thousand dollars per month. This tier of marketers will actually do the majority of the sponsoring. Each will only enroll a few new distributors, but as a group the numbers are significant. Other tiers will include product users, hobby enthusiasts, and customers who are involved just for quality products or the social aspect. This group will be the product user base for the income earners and should be the largest segment. The product user base, individuals who are either low or non-income earners, must constitute at least 75% of your organization or eventually excess attrition will occur. This is based on the principle explained in illustration A. Only when your organization contains all of these tiers do you have a secure residual income.
It doesn't matter how lucrative the pay plan is, there must be a majority of individuals in the marketing structure that are primarily product users. In examining illustration A, you can understand the need for this. These product users can be customers or members who are primarily in the program to purchase the product at wholesale. A viable program must be able to attract product users in order to create long-term compensation for the networker. The dynamics of a pay plan will not have a profound effect on attracting or retaining these product users because they are primarily product-minded and not focused on income. Actually, a program that is promoted primarily for the pay plan will have a difficult time attracting product users. When the money is the main issue, earning expectations are higher. For the 80-90% who will be at the bottom of the matrix, these expectations will result in discouragement and attrition. When a balance of features are promoted, "casual" part-time distributors that may not, for a number of reasons, be "destined" to earn much income will stay as product users. The product line and service will be the key factors in attracting and retaining product users. Also, the quality of service and a simple, "problem free" ordering system will accommodate the retention of these product users. Designing the appropriate product and service strategies is vital to a tier structured organization.
All of the "giants" in the industry have been built according to the "tier structured" philosophy. That is why they have survived in spite of poor pay plans. Amway has 3 million distributors worldwide. With one of the worst pay plans in the industry, they have maintained a distributor base of 2-3 million distributors for several years. How? There are many tiers of participants. Shaklee, Forever Living, NuSkin, and HerbaLife are all billion-dollar companies, and each has developed on a tier structure of participants. Until you understand this concept, you will not be able to develop strategy that will produce long-term results. Companies that have primarily promoted the pay plan as the main commodity do not understand the basic principles upon which network marketing is based. This is why they are not doing so well in the arena of competition. The pay plan is important, but it is only one of several factors involved in producing maximum compensation and retention.
The purpose of pyramiding laws is to protect innocent distributors from the consequences of the mathematical realities involved in geometric growth. Legislators realize that you cannot build a secure networking business on only networkers who are each expecting to earn an income. Legislators call this structure a "house of cards," which will collapse under its own weight. That is why there must be end users who are not involved for an income. Just as in a conventional business, where you have general managers, department managers, staff members, foremen, common laborers, and customers, in network marketing you must have various tiers of marketers and product users. Network marketing will not function effectively any other way. Eventually, individuals at the bottom of the pyramid will drop out initiating the unwinding process that will work its way up to the upper levels of the structure.
As I shared earlier, the equation for success contains several factors. The percentage of distributors who will achieve success in any particular program is determined by these factors. A few of these factors include the security of the company, the paradigm of the company leaders toward their distributors and the industry, effective marketing and compensation strategies, the product philosophy, the potential of the products to retain product users, the support tools in place that accommodate the "grassroots" networker (who may have limited experience and time), the type of training available and, of course, the degree of personal effort invested by the networker (this can be influenced by what you promote). The strategic balance of these factors will determine the amount of compensation produced by a program.
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