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Matrix vs. Binary - Compensation Plan Peview. Network Marketing

by Jeff Hughes⁽¹²⁾

Binary vs. Matrix MLM Comp Plan Comparison

BINARY COMPENSATION PLAN-

A Binary Plan is similar to the Matrix plan if you look at it like a 2 X Infinity Forced Matrix. In a Binary you have 2 Legs that you are building. You earn a commission on the entire volume of your weakest Leg. So in order to get a good payout on a Binary you need to continually balance the two legs. Most leaders will suggest placing 20 distributors on each side to get it started.

For many of you that have experience in this type of plan will notice that about 70% to 80% of the people in your group (especially if you have a big builder above or below you) are making little to no money. You will have one very large leg that keeps moving because the new distributors want to be apart of the larger leg with momentum. The next trick is trying to get a big builder involved, they typically won't go that far down in depth and they also want to see the momentum.

Now it's time to break this down by the math. After considering the 70% +/- of the people in your downline that are struggling, add up all the people in your group and divide that by how much money you are making each month. The average amount per distributor that we have seen is about $2, Sounds like a lot of work for very little payout to me. That is one of the reasons why I no longer work with a Binary plan.

Most builders that I know and have spoken with that care about the well being of their downline are no longer working with the Binary plan.

Another problem that many people talk about with the Binary plan is that after they have been around for a few years they end up paying out too much to the top level distributors for the company to handle. As more people join and keep earning more money it generates more matching pay points and bonuses. There have been a great amount of Binary based companies that have gone out of business because they did not carefully watch and control their MLM compensation commission payouts. The end result of this is the company is ether forced to shut down operations or they go public and loose the MLM part of the company.

MATRIX COMPENSATION PLAN-

A Matrix plan is typically based on a 3x9 or a 3x12 pay scale where you have 3 people on your front line and it will pay down 9 or 12 levels. These are just 2 of the most common types but they come in all different sizes. Here is a quick example of how many people layout in your Matrix:

Level one = 3, level 2 = 9, level 3 = 27, level 4 = 81, level 5 = 243 and so on.
One advantage with the Matrix is that everyone in the group is forced to help everyone out in building a business, after a distributor has the front line filled then the next distributor must fall under the front line people. This is what we call "spillover" and it can be a great building tool as long as you don't have distributors waiting for this to happen. Spillover is a great way to create massive momentum for the entire group.

Most people will tell you that you will never bring a big leader into a Matrix plan, but I believe that the great leaders that care for their distributors typically like the Matrix plan because it is the easiest way to create money for the entire group and in turn will keep all of your distributors happy and makes for long lasting relationships that are very profitable.

Let's get back to the math. Here is where I like the Matrix, add up all the people in your traditional matrix and it will always be multiplied by the amount of commission your company pays. For example, if your company offers you $6 in commission and you have 1000 distributors in your business then you are making $6000 a month, 4500 distributors at $8 commission is bringing you $63,200 a month and a lot of momentum!

The pay plan is a very important part of a company but it must also be backed up by a good product that can be used and have a big market with good future market value. You also want to look at financial backing, is the company dept free? Or are they running on credit cards??

That just about covers the basics. Just remember to do your research to find the pay plan suits you best.

Article submitted Thursday, November 04, 2010 & read 309 times.

Professional Network Marketer with nearly 10 years experience in the industry. Recently was named one of the MLM top 500 "Movers and Shakers" by Businessforhome.org. Extensive sales and business background. This stems from personal and professional experience.

Having strong belief that in order to be successful in the direct sales industry you must be involved with the right group of people. As they say "two heads are better than one", well imagine if you're in business with multiple leaders that have created 6 and 7 figure incomes from this industry He thinks the odds of you succeeding just got better!

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» left by Ken from Dallas, Texas (56 days 12 hours ago.)

Wow! You have a lot to learn about compensation plans! (Most of your comments about binary plans would have applied to the original binary plans 20 years ago, but not to today's binary plan. Example: your comment about having to equally balance your 2 legs. First, you have to have balanced legs in a typical unilevel or stairstep plan, i.e., where the leg produces x amount of volume or has someone reach a certain level of achievement in order for the leg to be qualified-the big difference is that in unilevel and stairstep plans to make a big check you're typically going to have to build at least 3-5 legs or more, depending on the company, whereas in a binary plan you're only building 2 legs.

Furthermore, there are a variety of binary plans today, in particular the 1/3-2/3 binary plan, which is the one I recommend as most people are always going to have one leg grow bigger and faster than the other, regardless of the pay plan involved. As a result, your legs don't have to be equally balanced in order to earn income.)

The facts are that binary plans do not fail more often than any other type of plan-98% of all NEW MLM companies are going to fail,regardless of the pay plan. Today, there are numerous companies with a binary plan that have been in business 5-10-15 years or more, among them USANA, Market America, Mona Vie, Organo Gold, AGEL, and VEMMA, just to name a few.

Second, historically, there have been far more companies with a unilevel or stairstep plan fail than those with a binary, if for no other reason, unilevel and stairstep plans have been around for up to 50 years or more while binary plans only came into existence around 20 years ago. By the way, virtually no company with a binary plan goes out of business today because of "binary creep." Plans are capped to prevent that from happening.

By the way, in binary many plans, which have a fixed percentage payout, the company will payout 50% every week back to the field, whereas in unilevel, stairstep, and matrix plans, which have theoretical payouts with a lot of "breakage," the actual payout to the field runs from the low 30% range (Amway-32%) to the mid/high 30's to low 40% range (NuSkin, Herbalife, etc.), so binary plans will typically pay out a higher percentage to the field than the more traditional unilevel and stairstep plans.

Finally, over the past 20 years, the majority of the companies that have experienced the greatest growth, the most success, and where distributors have earned the biggest incomes have been companies with a binary pay plan.

More importantly, historically speaking, matrix plans have NEVER worked! Since the mid 1980's several thousand companies have launched with a matrix play plan of some variation, and only company, just one, Melaleuca, has experienced any long term, substantial success!

No experienced or knowledgeable network marketing leader would get involved with an opportunity that has a matrix pay plan!

Furthermore, matrix pay plans are considered gimmicky by regulators, they are most often associated with money games, and there is considerably far more "breakage" (lost commissions)in a matrix pay plan than what is found in other, more popular pay plan models, hence the reason why companies that launch with a matrix pay plan make numerous changes to the plan the first year or two.

Spillover in a matrix? Huh? As you go down each level, less spillover occurs for a particular distributor, not more! It's basic math! (If you want potential spillover, work a binary plan!)

Finally, around 20% at best earn commission checks, regardless of the pay plan! Statistically, there's not much of a difference between the different types of plans-it all goes back to the 80/20 rule...20% of the people do 80% or more of the production.

I could get into a much more detailed analysis of all of the above, but it would take a small book to cover it all. Suffice to say, my partner and I have a combined 65 years of MLM experience, have built some of the fastest growing, largest, and most successful groups in the industry over the past 4 decades, have extensive knowledge in the area of comp plans, and are on the Business For Home list of top 100 earners in the world in MLM.
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