Science Behind the Pay Plan - Page 6
When compressed programs first appeared, they generally paid 15% and 45% on the first two levels. Infinity bonuses started on the third level. Marketers were blocked too easily in these early models and there was not enough incentive to build deep. Later models offer more guaranteed levels with fewer blockages. Now that compressed pay plans have been around four to five years, challenges have surfaced. A majority of companies that are using the compressed pay plans have overreacted to the traditional, flawed pay plans. Companies that have gone too far in the compressed pay plan "paradigm switch" are experiencing slow growth and similar attrition problems that the traditional pay plans have experienced. These companies are having difficulty attracting a great number of experienced networkers who can bring to the company a wealth of wisdom and leadership. Many of these companies have over-invested in the pay plans. This creates a shortage of funds, not allowing for investment in product research and development, state-of-the-art service, competent leadership at all levels of corporate management, and effective support systems. The end result is inferior products, a lack of innovative products, poor service, inadequate inventories, and the creation of a financial scenario that sometimes threatens the company's survival. Our company offers a more moderately compressed program with potential for deep penetration. It contains a better balance, allowing both the lower skilled marketer and the highly experienced leader to benefit more evenly.
Observe this principle at work. As I shared earlier in this synopsis, product focused companies, such as New Vision, Mannatech, Morinda, Life Plus and Cell Tech, each grew to a distributor base of approximately 500,000+ within a period of 2 to 3 years. Each of these programs has a very poor pay plan, averaging less than a 10% per level payout. Heritage Health, LifeForce, and Changes, which represent "exaggerated" compressed pay plans, are growing at 1/10 the rate. LifeForce has, at one time or another, had 80,000 distributors. In the spring of 1999 they had approximately $700,000 in monthly sales. If each active distributor purchased from $50-$100 per month, that would translate to be only 10,000-14,000 total distributors in the company. The attrition rate is high.
Although these companies pay more money up front than traditional companies, they have similar attrition rates. Why? These programs place an imbalanced emphasis on income, which leads to exaggerated expectations and excess attrition. They cannot attract, nor hold onto, the product user and other important tiers of participants that form a solid foundation for networkers to succeed. As I have shared in this synopsis, theoretically, the majority of participants in this industry cannot and will not earn a profit because of the geometric requirements for each individual to earn income. In the right program, many of these participants will eventually become product users. In a program that offers overpriced "me too" products, that can be purchased at a local discount store at lower prices, they will drop out. These types of programs attract an imbalance of networkers who are only "income-minded" and have not developed the patience, the understanding, or the skills (or even the willingness to develop the skills) in order to succeed in network marketing. These networkers are looking for a pay plan or certain feature to make the difference in their success. Programs that attract these types of marketers may produce short-range success for a few, but so far have not shown the ability to maintain that success.
Product focused distributors will generally stay in a program longer as they learn the "ropes" to success. Building a successful business requires a process of personal growth, the maturing of strategy that is "program specific," cultivating the prospect market, developing and test marketing various marketing tools that have a long-term benefit to the specific program, and the development of a support structure that is tailored to the needs of your specific program. All of these factors are important to "real success" (success that is going to last). There is a current trend to shop for a program that is going to "take off" for you. Sometimes the factors that create a short-term growth wave are the very factors that destroy the "wave" later. History proves this concept to be true. During my career of more than three decades, not one program or downline organization that has been built on the "money focus" approach has succeeded. I am in the industry full-time to earn a very lucrative income, but I have earned this income by developing a solid organization founded on sound business principles of being "product and service" oriented. There must be enough time allowed for a "tier structure" to develop in your particular organization.
Aligning your strategy with the principles of being product and service focused is a key to lasting success. Finding a true product and service focused program can be difficult. There are three types of these companies. The first type of product focused company is one that directs the attention of the distributors to the product, because they realize it gives their program an image of legitimacy. The leaders believe that money is the real focus but realize that they may be perceived as being a "money game," so they superficially promote a quality line of products or service. There is a wide range of "money focused" programs in the industry, ranging from gifting plans, cycling plans, and one-time purchase programs to opportunities that resemble a "true" product focused program. These types of programs do not have strong residual income potential and only produce short-term growth.
A second type of product focused program places emphasis on the product and service, but does not provide effective features within the program that support the success of that type of program. Product focus does not only refer to emphasis on products. It also refers to marketing strategy that provides marketing features, along with the products and service that support tier structured growth. The majority of the time, this type of program is using "sizzle" product propaganda to cover up a poor pay plan. This type of program may experience initial growth only to level off as distributors experience the dynamics of the program.
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