False Profits? How Network Marketing Compensation Plans REALLY work

Commenter: “Of course it works when you’re at the top… The fodder below you are having their profits siphoned up.” …

WOW …

That statement sums up much of the criticism and confusion about the industry, so today I want to talk about how Network Marketing compensation plans REALLY work…

First, the idea that “the people at the top” are the ones making all the money is not true.  In any company, the top 1% earners are all over the place. In fact, the top producer in a company could be 90 levels deep.

I have 32 people in my downline who make more money than me, and I think that’s amazing.  

Why?  Because they’re paid on production.  They produce more than me, so shouldn’t they be paid more?  In a network marketing business, everybody gets the same compensation plan.  What could be more fair than that? If you and your team produce, you win. If you don’t, you don’t.

But let’s talk about where those “profits” are going…

Think about this…

• Nike pays Kevin Durant $300 million to endorse Nike

• Pepsi pays Beyonce $50 million to endorse Pepsi
  

That money comes from their advertising budget, which might be 50% of their overall budget.

In network marketing, instead of paying celebrities and athletes, the company chooses to spend their ad budget on those reps who drive the most sales volume.

In either case, money is flowing to the person helping to sell the product.

But there’s one difference…

In network marketing, when a rep sells a product, their retail profit does NOT come from the advertising budget.  Reps are independent, so their profit is outside of that.

There is however a bonus commission that’s paid to upline reps in exchange for recruiting and training that rep who just sold the product.  That money is paid directly from corporate through their advertising budget. It has nothing to do with stealing or siphoning the rep’s profit.

Hopefully this clears up a lot of the confusion that’s out there.  Does this make sense? Leave a comment below and let me know what you think.

-TS