What You Should Know about Direct Sales Commission Structure

Posted by infotr axsys on November 26th, 2018

Direct sales companies often market and sell their products directly to consumers through individual distributors, therefore bypassing traditional retail processes. Though direct selling has been linked with door-to-door sales in the past, today, this type of product distribution is done through various other methods. Modern-day direct selling includes a variation of 1:1, relationship-based, and digital selling systems.

Organizations that practice direct sales often incorporate different selling methods to reach their consumers, and each organization also has a unique commission plan. With the assistance of MLM commission software, these companies can compensate their distributors in a way that makes the most sense to them.  Different companies choose from different types of compensation programs and pay their distributors accordingly. The majority of compensation plans fall under the following direct sales commission structure categories:

• Uni-level payment plan: This type of plan enables you to sponsor every distributor on your front line. There is no limit on how long the front line can be in this plan. This implies that you can bring in and sponsor unlimited distributors. The commissions paid through this plan are limited to a depth of three to five levels, and the percentage paid out drops according to how deep you are in the chain. The objective of this plan is to recruit a large number of frontline distributors and encourage them to do the same.
• The breakaway plan: Under this plan, once a distributor becomes successful, they can break away from the chain they came into the business through and instead create their own chain. The breakaway distributor earns a higher commission percentage. There is no limit to the number of people that can exist in the first line. Under this plan, income becomes reduced when a break occurs. Even after the breakaway, the recruiter receives a small fraction of commission generated from each breakaway distributor. Under this plan, the income is earned by recruiting several frontline consultants who are great product users or sellers.
• Forced matrix compensation plan: The consultant gets paid according to the compensation plan's width and depth. This type of structure promotes teamwork because the frontline is short. The recruits get placed under one of the existing downlines.
• Binary compensation plan: In this type of plan, there are just two first line consultants in a team. The distributors after the first two get positioned under one of the two first line consultants in the downline. This structure helps create a supportive environment for new members. The objective here is to maintain a balance in the amount of volume flowing through either side of your business. Everyone on the team focuses on achieving volume balance and a consistent higher commission. 

There are many direct sales compensation structures that a direct selling business can choose from. Different companies choose different methods for compensation based on their individual business needs. Regardless of which structure your business chooses, it’s necessary to have solid MLM commission software to help you accurately distribute compensation.