This is the second installment in the series Understanding MLM Compensation . Today I want to discuss the pros and cons of stairstep and breakaway MLM compensation plans.
Advantages of the Stairstep and breakaway MLM plan
Historically stairstep plans have offered the best earnings potential. The breakaway component of these plans allows a person to build bigger teams and earn compensation from deeper generational levels. For example in a unilevel plan that is 6 levels deep, you would draw commissions from only 6 levels. But in a stairstep/breakaway plan, that could in theory double. If a person on your 6th level breaks away, you would be eligible for override compensation on the volume of their entire group, which could potentially be 6 levels deep as well.
Another advantage of this type of MLM compensation is the potential size of the downline. These types of plans generally have no limit on the number of people who can be recruited into your first generation line. Similarly, there is no limitation on the number of recruits that your downline distributors are allowed to recruit.
The third advantage to the stairstep/breakaway compensation plan is the historic stability. In the history of network marketing very few companies have lasted in the marketplace for a period of 7 years or more. According to a 1996 MarketWave study, 86% of those survivors were found to have stairstep/breakaway MLM pay plans. It is thought that the corporate profitability of this type of MLM compensation plan has led to the long term viability of the companies that use it.
Disadvantages off the Stairstep and breakaway MLM plan
It is no secret that the real power of leverage takes place at the deeper levels of an MLM compensation plan. Although stairstep/breakaway plans offer the greatest commission potential on the back end, they also require harder work and longer delays before those deep level commissions come in to play.
Another disadvantage in this type of plan is the use of production quotas. Most plans of this nature require a minimum amount of product be purchased every month and a certain number of recruits and recruit purchases. The higher up the stairs you ascend, the higher the production levels become. If a leg breaks away, you lose the sales volume of that leg from your overall volume, requiring you to recruit more people to keep the group volume of your personal group moving forward.
Stairstep plans tend to be geared towards the higher levels of the staircase making front end compensation may not be as generous as it is in other MLM compensation arrangements.
As with any network marketing compensation plan, stairstep/breakaway plans can be very profitable if you know your craft. The long term potential of this type of plan is very rewarding for those who have made the commitment to their business and refuse to give up.
