Industry Trends in MLM and Direct Selling.
Tuesday, April 3, 2018

As an MLM Consultant, I have had the privilege of working with many companies, at many stages of growth.  During conversations and conferences, for about 20 years, I would make notes in a private journal… which I have neglected to do, for over a year now.

They were simple notes, to give me some indication from potential start-ups to existing companies, as to discussions related to certain compensation plans or business model trends.

As an MLM Software Provider, we are continually working to advance MLM Software and it’s feature sets, as new features, functions or technologies are desired by the field.  Often features, and function requests are related to changing trends in compensation plans, bonuses, and/or acceptable practices in the industry.

While I have not kept specific counts, over the past year or so, the changes in trends are still noticeable.
… This leads me to the following information, which I am seeing, and will attempt to pen down.
 

Recruiting

Not so much ‘traditional’ trend, but a needed adjustment to MLM Business Models…
For years, MLM Companies would seek to recruit as many as they can. They would often begin with Leaders, who would negotiate positions, bonuses, etc., that they may come in and go crazy recruiting for the company.  A common business model would include an Optional Joining Kit, which would have a Fast Start Bonus… Paying a kind of Finders Fee to the Sponsor of the New Recruit.

Yes, I stated the above, as many of you have seen over the years.  Still today, we have folks call in, that were leaders in those days and try to assemble a similar business model.

‘The Slap in the Face’… This type of activity… a focus on recruiting, and an added incentivization for recruiting, via the Fast Start Bonus promotes, well… and Endless Chain of Recruiting.
Guess what’s a Big Red Flag for is a ‘non-so-legit’ MLM Company… if it promotes an Endless Chain of Recruiting!

So, today, MLM Software may still have the ability to add a Fast Start Bonus on Joining products, but it should not be used for this purpose.  Now, outside of Recruiting and Joining, assigning a Fast Start Bonus, to promote the regular sale of products, can be a creative way of using an old Bonus Method of MLM Software for Selling Out some old Inventory.

Ok, so Fast Start Bonuses are not seen during Joining… ‘much’ any more.

Over the past 24 months, I can confirm a slow trend of reduced requests for such bonuses, as those coming to the table for MLM Software or Compensation Plan design, seem to be more aware that this bonus is no longer practical for use in the MLM or Direct Selling Industry.
 

Compensation Plan Trends UniLevels

UniLevels, for years, were more popular than other conversations of other models, however there tended to be strong negative conversations over UniLevel Business Models, referring to it as the Old UniLevel… you know, the one that pays very little 15 levels deep, etc. 

While there were volumes of conversations where UniLevels were spoken of in a Negative Tone, UniLevels continued to be more popular than other models.

Many people love it, many have negative views of it. What was it that created such division?  I believe it was the competing views of do you want to get Rich Fast or Slow… compared to do you want Spill from Others or to have to do ALL the work.

Negative: It is designed for you to do all your own work… no spill! Requiring me to do the work… it is a slow build.  In fact, in my first MLM, back in the 80’s, it took me 2 years to earn a $14 check… Yes, it was a UniLevel.  But, the slow build to success was often a result of poor training and direction by an upline and/or company and not the compensation plan.

Positive: More people understand a compensation plan explanation of a UniLevel, thus few have misconceptions or false expectations, thus fewer complaints when commissions are calculated and fewer angry complaints to the Better Business Bureau. Slower growth also means a company can better manage the product supply chain.

So, from a company stand point, the UniLevel is a Solid Model.  Now, if you design 10, 15 or 20 levels deep, you are basically splitting nickels way-way too many times.  UniLevels focused on only 1, 2 or 3 levels tend to direct more commissions and bonuses to those more directly involved in the sales.  Hey, pay folks well for selling your company’s products today, and they will tend to sell again tomorrow!

As an MLM Software Provider, we have developed 10’s of thousands of possible combinations of Commissions and Bonuses associated with a UniLevel Compensation Plan. Thus, we can be very creative in developing a solid and sustainable compensation plan.

To my surprise, I was on a call with a client, that had an MLM Attorney on the line. The company was working on a unique model, more of a Franchise model(not a model for most companies).  My task was to provide the document write up and specifications for the desired business model, that they may then get bids on MLM Software.  Near the end of the call, the clients asked the MLM Attorney if he had any parting words or thoughts.  The attorney stated “Customers are Good for Business”. Silence filled the line for a moment, as the clients tried to interpret what he was saying. He then repeated, and expanded, in a way that I found myself greatly appreciating his view, as it aligns spot-on with my own.  Basically, he was saying that while designing a business model, understand that Sales to Customers/Consumers are very important… Customers are Good for Business.  If you align your thoughts to this statement, you will steer away from an endless chain of recruiting and provide that the company is seeking and expanding a base of true Customers. To that end, your genealogy will likely be earning good commissions from sales outside of the genealogy, which is more preferred.
 

Break Aways

Break Away Business Models are those which have individuals reaching certain ranks, then their portion of the genealogy is basically broken away from the upline, effecting commissions in many ways.

Through the years, there has been a healthy number of companies that have a Break Away Model, but over time, they seemed to fall out of favor.  In fact, for the past 5 years, fewer than 2 calls per year would be of clients/prospects seeking MLM Software for a Break Away Model.

The reasons for following away of this model are obvious, from three angles.
  1. First.. ‘fear of loss’, members seen to be discouraged when a group on the downline breaks away. This tends to stamp out the flames of excitement, slowing growth. 
  2. Second.. members tend to not understand the compensation model or if they are close to reaching particular ranks. The reason has to do with the fact that GSV values could appear there for you, but if persons reach break away in your downline, your GSV could be reduced, reducing your qualifications for rank.
  3. Third.. members like to see Live Sales Data from in their Back Office. MLM Software would need to do full-company commission calculations, from the bottom of the tree, up, every time a member loads their Distributor Back Office or refreshes it. You see, Ranks need to be determined throughout the downline to deduct and determine YOUR GSV, to determine Your Rank.  So a Break away model, generally, does not led itself to Live Data for Members, as other models do.  This can provide a gap in understanding or expectations of qualifications.
So, as stated, over the past 5 years, I’ve had fewer than 2 calls per year which discussed a Break Away Model.  That’s a serious falling away.

Interestingly, the pendulum is swinging back. While I expect it to be short-lived, over the past 6 months, we had over a half dozen clients or prospects which have proposed or have Break Away compensation models.  That is a trend reversal which I did not expect would occur.  Due to the 3 points above, I do expect this phase of interest in Break Away models will pass, but I have been wrong before.
 

Binary Compensation Models

Here is one that has faded out over the past 2 years. The Binary Compensation Plan is a progressive genealogy of each membership having 2 positions immediately beneath.  Binary Compensation Plans typically fall into 2 flavors… Steps and Cycle or Weak Leg/Side.  Steps and Cycles often had Binary Creep(Over-Payment), requiring those experienced with compensation plans to engineer various caps and restrictions to protect the company. Weak Leg/Side models are more reliable in not having Binary Creep.  But, those that would see themselves as ‘leaders’ would attempt to manipulate as people joined, placing people under others… manually.

MLM Software for Binary Models, in perfect, should conduct spill to the extreme left and extreme right… to lesser leg, keeping a constant attempt at balancing.  It also causes those in the downline to only have spill on one leg, thus requiring them to work as well, to put someone in the other leg. There’s nothing worse in MLM, then to have a compensation plan with Spill, lead people to believe they can join and their sponsor will do all the work.  So letting the MLM Software handle the spill, by design will cause others to have to do some work.  When ‘leaders’ place people manually, they always mess things up.

So, interest in Binary Compensation Plans for new clients dropped off the map, with rare requests, maybe 6 per year.  Yet, it is April 2018, and I’ve fielded over 15 conversations this year around Binary Compensation Plans, between those that came to us with Binary Comp Plans in other MLM Software Systems, that could not calculated right, to new companies.
 
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