HOW PAYMENTS ARE CALCULATED IN BINARY MLM PLAN?
A Binary MLM plan is the most commonly used compensation strategy by MLM companies. Because of its simple and easy-to-use structure, this plan helps in earning more profits as well as the compensation.
In this blog, we discuss what a Binary Plan is, how commissions are calculated, and binary compensation bonuses.
What is a Binary MLM Compensation Plan and how does it work?
A Binary MLM plan is an often used compensation strategy by popular MLM companies. It works based on two legs. By adding two legs [sub trees] under every distributor, a binary tree is formed. New members are joined after them and get spilled over to the downlines. This process continues to unlimited levels.
The new members sponsored by a distributor automatically go under any of the legs. This process is called spillover. The spillover preferences may be different in each MLM company.
Spillover preferences used by the companies include:
- Extreme left or extreme right spilling
- Weaker side spilling
- Balanced spilling
- Multiple position spilling
Commission calculation methods
Commissions in Binary MLM
- Weak leg commission calculation: The commissions are calculated based on the leg with weaker sales volume.
Example: The downline of distributor X are A, B, C, D, and E. Here, A, C, and D are in the left leg whereas B and E are in his right leg. The left leg made an SV [sales volume] of 500 and the right leg of 1100 SV.
SV is less on the left leg hence, it is the weak leg, and the right leg with higher SV is the strong leg
Calculations are made on weak legs i.e, 500 SV. So if the bonus is 10% then it will be 10% of 500 SV which is equal to $50.
The rest of 600 SV is on the right leg after the bonus calculation is carried forward to the next binary plan.
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2. Sales ratio-based commissions: Some companies set commission payout criteria based on sales ratio. The most common sales ratios in the binary scheme are,
- 1:1 sales ratio: Commissions paid when the sales volume of the left and right leg matches a 1:1 ratio.
- 1:2 or 2:1 ratio: Commissions paid when the left and the right leg achieve 1:2 or 2:1 sales volume.
- 2:3 or 3:2 ratio: Commissions paid when the left and the right leg achieve 2:3 or 3:2 sales volume.
Compensation in Binary MLM Plan
Compensations are gained based on distributor performance or by achieving the goal set by the company.
Pairing bonus: Distributors get a bonus when they are qualified in achieving balanced sales volume in each leg.
Matching bonus: The sponsor gets a bonus achieved by the downline members.
Direct referral bonus: Bonus received when new members are sponsored into the binary tree.
Return Of Investment: Distributors acquire a fixed amount of investment they made in the binary business.
Custom bonus: Most MLM companies enhance their own custom bonuses to attract more people into the network.
ADVANTAGES OF BINARY MLM COMPENSATION PLAN
- The simplest compensation plan and easy to understand
- A binary MLM plan can add an infinite number of people
- A binary plan provides rapid business growth opportunities
- Teamwork prevails above anything in binary MLM compensation plan
- Benefit from both upline and downline members
- A binary MLM plan is hybrid
Conclusion
A binary MLM plan is one of the most used tools in network marketing. It is the simplest plan compared to all other MLM compensation plans. So, if you have all the elements to build an MLM software, then go ahead with the binary compensation plan and become successful.
Author Bio
Lakshmi Aravind is a content writer and editor based in Bangalore, India. She has over 10 years of experience in the publishing industry, and her work has appeared in a variety of publications. In addition to her writing experience, Lakshmi also has a Masters degree in marketing from the Symbiosis Institute of Business Management (SIBM) Bengaluru). When she is not busy writing or editing, Lakshmi enjoys reading non-fiction books, exploring new restaurants, and spending time with his family.
