When it comes to MLM companies, the sales are made a little bit differently. Individual representatives sell the product using direct marketing, and then they are compensated for their sales. The goal is almost always to compensate associates in a way that will keep them striving more sales, and at the same time won’t detract significantly from the bottom line of the mother company. This results in MLM companies spending years perfecting their plans, and tweaking them. If you are looking to embark on an MLM venture then you can expect to alter your reward plans numerous times.

The most basic plan is to simply offer cash for each of the products sold. Some smaller MLM companies will rely on the associate to take out his or her commission amount and turn in the rest of the money along with the order forms for the orders. However, you will rarely see this with the larger companies like Tupperware and Avon. The larger companies will have the customer send the order directly to the parent company, usually indicating somehow who the representative was that got them interested in the product. The money will go to the referrers account.

One way to save money when rewarding representatives is to offer then discounted items from the parent company’s own stock if they choose to spend their accumulated funds on that. This allows them to buy the products that they are selling, at a much cheaper rate. It saves money for the company by having them spend their commissions on company products – it’s like a salesperson turning around and spending their paycheck on their own product. Some companies even force their associates to redeem their commission for these kinds of rewards, but oftentimes these are not appealing enough to gain support.

The payout cutoff is also an important factor that will separate the enthusiastic sellers from the ones who are looking to make a quick buck (while saving you money at the same time). For example, if the representative has to earn $500 before any funds are released, you will find that a good number of people will only make a few sales before giving up. These sales really add up, and no commission is ever paid on them – this means that they are pure profit for the mother company. It also inspires legitimate sellers to sell more in order to make the cutoff.

If you are tweaking a rewards system to get it right, you will usually only be greeted with disgruntled associates if you lower the rewards for sales. Therefore when you start an MLM business you should start with fairly low rewards and keep a desired profit in mind. If you are exceeding this profit, then you can begin to be more generous with the rewards. The higher rewards you give out, the higher sales rates you will get – this is almost a proven fact. However, the higher the rewards get the lower your profits will be. Keep this in mind and try to find the perfect balance.

Brian Hackett, CEO
MLMNetworker