Understanding Multi-Level Commissions and Their Role in a Successful Company
By Mark L Rawlins
In an industry growing by leaps and bounds, the multi-level commission plan remains a mystery to distributors and leaders alike. In this book, Mark Rawlins, an industry consultant and software provider for over twenty years, unmasks the commission plan and explains the underlying concepts that make every plan work. The book is a useful resource for anyone in the direct sales industry – from distributors, to corporate executives, to someone thinking of starting a new company. It explains the three major components of a multi-level sales plan: commissions, rules, and structure. The first of its kind, this book discusses the history of commission plans, how plans affect and are affected by distributor behavior, and commission plan design. Rawlins breaks down the standard plans used in the industry and discusses the pros and cons of each. This book is a ground-breaking must-read for anyone who wants to understand the ins and outs of the multi-level commission plan.
By A Customer
The author, , has emerged as an industry expert in implementing a vast array of commission plans for many successful network marketing companies. Unlike someone who designs commission plans, the majority of his twenty years is, "taking a plan that has already been designed and making it work." This book gives anyone who wants to understand how commissions work, a good foundation on the basics of commission plans. It's just as important for network marketing distributors to understand these concepts, as it is for executives.
Network marketing commission plans are difficult to set up. More than that - they're difficult to understand. This book breaks through the confusion and brings to light the essentials of commission plans - its commissions, its rules, and its structures. It also describes why commissions are so important, and the ramifications that affect payout and distributor behavior. Once a company figures out how to recruit, the biggest challenge is finding ways to maintain distributor loyalty. Certain commission plan elements can enhance that loyalty. This book provides the reader with a clear understanding of how different aspects of various commission plans can affect a company's performance.
The book is organized into three sections - comprising of eleven chapters. In the first section, "What You Need to Know First", it reviews the background of network marketing. In chapter one, you learn the history of the industry and what has changed through the years. Chapter two looks at distributors, why they join companies, and why they do what they do. The last chapter of this section is a little different from the rest of the book in that it describes how to design a commission plan. There are some interesting calculation payout exercises in Appendix D that complement this chapter as well.
The goal of section two, "The Building Blocks", is to help you understand the components that make up every commission plan. Here's a brief synopsis of the chapters within this section.
Chapter 4: Commissions. Here you become aware of the strengths and weaknesses of each commission type and how you can use each type of commission to achieve a specific objective in commission plan design. Commissions alone do not define the commission plan, but they're certainly of great importance to your distributors. Details of these commission types are examined in this chapter.
Chapter 5: Rules. Rules define the qualifications a distributor must meet in order to be paid commissions on downline activity. They also specify the criteria for earning other awards or benefits from the company.
- Do you expect a new distributor to purchase a sales kit on signup?
- Do you require them to purchase a demonstration kit?
- How many months can a distributor be unqualified before losing the distributorship or be reduced in rank?
- Does the company require a distributor to take certain training classes before moving up in rank?
- How much must a distributor sell each month to remain qualified at the current rank?
- What are the most common qualifications?
Chapter 6: Structure. The term "structure" refers to the overall organization of a distributor's downline that must be in place to receive certain commission payments. This chapter discusses the rationale for having a specific set of rules in a commission plan that determines where people must be placed in the organization. Herein lies an exploration of the following questions:
- How do distributors build downlines?
- What will the downline look like as the company grows?
- How effective will the organization be in terms of motivation, payout, distributions, and so on?
Chapter 7: Miscellaneous commissions. These are commissions that companies use to supplement the "big four" commissions that make up the majority of commission plans. These commissions are matching commissions, automobile commissions, fast start commissions, and incentives.
Chapter 8: Operational issues. Here you will become acquainted with the operational issues that all network marketing companies must address. They may not deal directly with the nuts and bolts of the company's commission plan, but the decisions the company makes regarding these have a direct impact on the company's commission plan.
The last section of the book, Mark does an excellent job at, "Putting Everything Together." Chapter nine is a review of the different commission plans that have been used, along with an overview of each plan's strengths and weaknesses. In chapter ten, you learn how a company can create a commission earnings emphasis and which plans lend them to each emphasis. It also talks about which plans work well to pay sales commissions and sales management commission, and how a company can target earnings to each of the five distributor types. Finally, in chapter eleven, you learn what Mark predicts about where commission plans are going in the next few years.