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Part I: There are four primary varieties of binary compensation plans.
The most common and oldest variety has minimal requirements and generally focuses on "everyone getting two people". This type of compensation plan may include a matching bonus but it is not generally a strong matching bonus and the payout potential of the pure binary overpowers the matching bonus considerably.
a. Pros
This is very simple for the common person to grasp and generally the common person believes they can get two people.
b. Cons
The reward for getting more than two people is reduced. This can have a large impact on a company since most companies are built primarily by "leaders", people capable of bringing in dozens or even hundreds of people. This compensation plan tends to reward bringing in more than two people at significantly reduced rates.
c. Growth challenges
Because you are paying out to theoretical unlimited depth, this type of compensation plan almost always will need to have a cap introduced fairly early on. As a result, the phrase, "I would have loved to have joined that company early when you could still make money" is often heard. This is because when the company first starts they can pay out a certain amount and then as time rolls on they generally pay out less and less. Generally a mature company using this style binary will pay less than half on each set of volume that it did originally.
d. Successful Example
After the first few binary companies using variety one ran into severe problems, another type of binary started being created. The key difference with this compensation plan is that they impose daily or weekly cycle caps at varying levels based on a number of criteria. In other words, rather than paying to infinite depth, they pay only a certain maximum number of cycles or payments per person and increase that maximum based on enrollment and volume criteria.
a. Pros:
This can be a stable compensation plan from the very beginning because you can mathematically predict the levels and caps necessary to prevent the compensation plan from paying too much on any given volume. Additionally, this compensation plan rewards those that sponsor several much more effectively.
b. Cons
This compensation plan is much more difficult to explain in a meeting and generally forces and automatic separation between those that are able to sponsor several and those that can only sponsor two. Generally with this plan if you only sponsor two or even a slightly higher number your earnings are capped at a very low level. In Monavie for example with four personally enrolled active members you are still capped at $1,500 per week.
c. Growth challenges
This generally has less initial zing due to the fact that the initial set of payments for beginning distributors is really low. However, the significant advantage given to those that will sponsor several and build large teams allows for the growth to be possible as long as you can get good leaders in place.
d. Successful Examples
A newer version of the binary plan focuses on keeping the compensation plan simple while still rewarding hard work. This plan caps every node in the binary at a certain level, generally $1,000 or $2,000 per week. When someone reaches that level with their initial node they are given a new node on their weaker leg of their current node. This new node then has the same ability to earn $1,000 or $2,000 per week. Each new node requires sponsoring another on its left and right. Essentially, you have the ease of the original plan "go out and get your two." With the reward for leadership of the second plan since in order to make higher amounts you need to maintain several nodes.
a. Pros:
The level of payout for the entry level distributor is by far the highest in this plan because you are paying to a much more limited depth across the board. This means that in a meeting when comparing your plan to another plan, you can show "with our plan 5,000 volume on your weak leg pays you $1,000, with their plan it earns you only $500. You earn double!" This makes it much easier for entry level distributors to believe they can earn $1,000 per week or month which is generally the initial goal.
b. Cons
To earn a substantial amount, you need to maintain dozens of nodes which means that compensation plan heavily weights raw recruiting rather than recruiting other leaders. With this plan it doesn't significantly help you when you bring on another leader because once your node is maxed the excess volume is all flushed.
c. Growth challenges
Because the plan does not foster the idea of helping your downline become leaders it generally is less effective than the second type in creating strong leaders. Strong leaders are often the key to success in any company.
d. Successful Examples
The final variety is essentially a combination of elements of the other three primary varieties. There are numerous examples of the combinations, such as giving the ability for your nodes to earn more than the standard cap when you achieve certain leadership levels.
a. Pros:
With the more custom plan you can focus on the elements your leaders believe to be the most important.
b. Cons
These plans tend to be nearly impossible to explain during a "napkin presentation". Additionally, people tend to not fully understand them which can lead to dissatisfaction among the distributors.
c. Growth challenges
There are far fewer examples of successful companies running these type of customized plans. Primarily because once you start customizing what seems like a good idea at the time turns out to be a stumbling block in the future. My recommendation for customized plans is always to customize two or three elements and keep it simple for the other elements.
d. Successful Examples
